I have to call BS on this!

[ironchef]

https://www.bloomberg.com/opinion/a...ing-on-500-000-a-year-in-income-can-seem-hard

If you are too lazy to read, the gist of the article is "people with an income of 500k are doing ok" and they should have nothing to complain about (the underlying implication is that we can safely raise taxes on that stratum).

Here is a rough breakdown of the budget for one of my coworkers who roughly takes home that much. First, Uncle Sam (Federal, State, City) takes his 35-45 percent, leaving him with roughly 300 grand. Private school for his two kids is probably anywhere from 60 to 100 thousand a year (not sure where they go, but more if it's a "good place" like the Lycée Français de New York). Then you have the mortgage (let's say 60k a year) and the maintenance/taxes on the property (another 25-30) which now he can't even deduct from his taxes (unlike cocaine, a legitimate business expense that he's not even trying to deduct). Before you know it, he's left with 150k to live on and the New York City is pretty FUCKING EXPENSIVE. This is before he set a single penny aside for his retirement. He certainly does not feel rich or even well-off.

The other bit that the author is forgetting is how fleeting the success is in almost every business. There was a study that about 10% of people reach the top 1% by income at least once in their lives. If you can't set aside much in those years, it really sucks.

I think sir you way overestimated the Federal taxes he needs to pay.

Assuming he has a mortgage of ~$750K @ 4.5% rate, his itemized deduction will be approximately $33K so his adjusted Federal Gross will be ~$460K and his total Federal tax will be ~$110K, not the $200K you assumed. So, he has ~$390K to spend, not the $300K you wrote. Of course living in NYC he has to pay state tax and city tax which I don't have a clue.

 

[cdcaveman]

Taxation is theft....inflation is to....Ludwig von mises wrote much about the fluidness of "classes" and the fallacies of class conflict.. income tax is a tax on the up and comer not established wealth who mostly pays capital gains .. people who earn a paycheck get hit the hardest with taxes.. and inflation.. inflation is continuous and wage rates go up slowly and discreetly.. inflation penializes the saver to the benefit of the debter . Constantly having to roll 1031 exhchanges in real estate and compound returns pre tax is the way to exponential growth . I just bought a property where the owner in the governments eyes made money and invokes a taxable event...meanwhile with property tax he made no return over the 33 years considering a risk free investment comparison...now on top of that he has a capital gain to pay from his original basis so he definitely lost money... If they don't tax it away they will inflate it away from you... This has created a society of leveraged people hitting for the fences chasing yield... Making investment decisions they normally would not... Buying riskier assets then they normally would..... Sink it into people's heads taxation is never on the rich

People read some real economics... Ludwig von mises.....

 

[srinir]

Handle, can we see a pic of your Vibranium shield? Thanks.

Only time Handle123 went to europe is to visit Xela during his/her cancer treatment

 

[srinir]

I think sir you way overestimated the Federal taxes he needs to pay.

Assuming he has a mortgage of ~$750K @ 4.5% rate, his itemized deduction will be approximately $33K so his adjusted Federal Gross will be ~$460K and his total Federal tax will be ~$110K, not the $200K you assumed. So, he has ~$390K to spend, not the $300K you wrote. Of course living in NYC he has to pay state tax and city tax which I don't have a clue.

NY state marginal rate for that income is 6.85%, City tax is 3.88%. 750k probably buys tiny single B/R not enough for family 4. You are also forgetting pretty high monthly maintenance, higher interest rate because of Jumbo loan, property tax, sales tax. State and city tax are no longer deductible for federal tax now.

Only way to increase the take home pay is to move to burbs and send the kids to public schools.

 

[ironchef]

NY state marginal rate for that income is 6.85%, City tax is 3.88%. 750k probably buys tiny single B/R not enough for family 4. You are also forgetting pretty high monthly maintenance, higher interest rate because of Jumbo loan, property tax, sales tax. State and city tax are no longer deductible for federal tax now.

Only way to increase the take home pay is to move to burbs and send the kids to public schools.

Don't complain, we pay more state income tax in California.

We do have better weather, if you don't mind earth quake, fire, flooding and drought.

 

[srinir]

Don't complain, we pay more state income tax in California.

I no longer live there. That city is pretty unique.

 

[ironchef]

I no longer live there. That city is pretty unique.

I hope you left not because you voted with your feet. I won't leave Southern California because I love it here tax or no tax.

Have a good day.

 

[wrbtrader]

...We do have better weather, if you don't mind earth quake, fire, flooding and drought.

Hilarious

No matter where we live...mother nature will tell us she's still in control.

wrbtrader

 

[srinir]

I hope you left not because you voted with your feet. I won't leave Southern California because I love it here tax or no tax.

Have a good day.

Not for tax reasons. I have mentioned in different thread before. My kids are in private school which costs me 60k (for 2 kids together). Quality of this school is similar to public school in NY or NJ. So there was no free lunch, atleast for me.

 

[luisHK]

It's a very good education, but it's really about the connections. The list of the parents is a veritable who-is-who and the kids will have a chance to be their peers. That's worth way more than good education, iMHO.

Thanks for your feedback, just checked the tuition fees for next year at my kids' current school and it's 33500usd per head, starting from primary school, the same as in the New York Lycee Francais. It's an international school, while there are a few families staying long term, sometimes running huge businesses, most kids are transient and they won't get much connections from there, if any, plus lots of the kids are from mid executive expat families who wouldn't be able to live in the fancy areas of their home country. Kids are fine, but those are not connections worth paying a premium for. Not even convinced the education is particularly good (cool school overall). New York Lycee Francais sounds like a better deal seen in that light.
Interesting discussions about the trappings of life in expensive cities, i've lived in a few expensive districts and found much value in the european ones, usually income and opportunities are higher and quality of life good( China fails miserably in that respect, very expensive for families and poor quality of life )
The article linked in the OP is right though stressing how this family is actually increasing its net worth in a non insignificant manner through mortgage and IRA, they really don't seem struggling, although their lifestyle sounds far from luxurious (18k a year on holidays sounds cheap, cars and apartment are mid range)
Anyway, in a retiring mood, about to move to Madrid, pay half the current price for one of the most recognized schools there (15000euros is top of the range in Spain). Mosts costs supposed to be significantly lower with a decent quality of life, although the ambiance might be more conductive to farniente than hard work and risk taking - good enough for me, not so sure about the kids.

About private/international school prices, i'm not sure it is the same everywhere but over here the average yearly tuition increase is around 6% in local currency, way above inflation, worth taking this into account for those who plan to have their kids do their whole education there (not easy to switch back to state sponsored education depending on the language of education where one lives)