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This article, by University of Chicago law professor M. Todd Henderson has been making the rounds a bit, describing the likely effect of letting the Bush tax cuts for those making over $250,000 per year expire.  I felt like taking it apart.

The rhetoric in Washington about taxes is about millionaires and the super rich, but the relevant dividing line between millionaires and the middle class is pegged at family income of $250,000. (I’m not a math professor, but last time I checked $250,000 is less than $1 million.) That makes me super rich and subject to a big tax hike if the president has his way.

A strawman argument which ignores the Democrats' repeated defense of cutting taxes on income up to $250,000.

I’m the president’s neighbor in Chicago, but we’ve never met. I wish we could, because I would introduce him to my family and our lifestyle, one he believes is capable of financing the vast expansion of government he is planning. A quick look at our family budget, which I will happily share with the White House, will show him that like many Americans, we are just getting by despite seeming to be rich. We aren’t.

I, like the president before me, am a law professor at the University of Chicago Law School, and my wife, like the first lady before her, works at the University of Chicago Hospitals, where she is a doctor who treats children with cancer. Our combined income exceeds the $250,000 threshold for the super rich (but not by that much), and the president plans on raising my taxes. After all, we can afford it, and the world we are now living in has that familiar Marxian tone of those who need take and those who can afford it pay. The problem is, we can’t afford it. Here is why.

Here, the second paragraph completely contradicts the first.  To the extent Henderson and Obama had similar economic backgrounds, it stands to reason Obama is perfectly aware of the lifestyle of a Hyde Park professional couple.  And Marxian?  Obama got elected to do exactly what he's proposing.  Bill Clinton, too, got re-elected after putting into place the tax rates for the over $250K crowd to which Henderson objects.

The biggest expense for us is financing government . . . Our next biggest expense, like most people, is our mortgage. Homes near our work in Chicago aren’t cheap and we do not have friends who were willing to help us finance the deal. We chose to invest in the University community and renovate and old property, but we did so at an inopportune time.

Other than the cheap shot at Obama over the Tony Rezko deal (ignoring that Obama paid Rezko market rate), there's something especially interesting here.  Henderson, after complaining about Marxism, is now suggesting that Obama should not let certain tax rates go up as scheduled for the reason that the government's tax code should protect Henderson from his own bad real estate investments.  There is lots of good rental housing in Hyde Park; I know from experience.

We pay about $15,000 in property taxes, about half of which goes to fund public education in Chicago. Since we care the education of our three children, this means we also have to pay to send them to private school ...

This is the first acknowledgment that taxes provide necessary services.  Instead of getting into a discussion about marginal utility or multiplier effects of government spending, we get the negative implication that parents who do send their children to Chicago public schools don't care about the education of those children.  Henderson never stops to consider that the reason for increasing taxes on his post $250K income would be because these parents can't afford educational opportunities, and that by maintaining educational disparities, the wealth gap gets locked into the next generation.  But a lack of self-awareness is the hallmark of this essay, as you can no doubt see.

. . . At the end of all this, we have less than a few hundred dollars per month of discretionary income.

Speaks for itself.

If our taxes rise significantly, as they seem likely to, we can cut back on some things. The (legal) immigrant from Mexico who owns the lawn service we employ will suffer, as will the (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center, but these are only a few hundred dollars per month in total. But more importantly, what is the theory under which collecting this money in taxes and deciding in Washington how to spend it is superior to our decisions?

"Significantly," in this case seems to ignore that only the portion of the taxes on income over $250K would be increased, if President Obama gets his way.  If he's just clearing $250K, he could well wind up with a net tax cut!

As for the rhetorical question, it's important to note here that it's an argument against paying taxes at all, not an argument about the equities of subjecting a small percentage of Mr. Henderson's income to a higher marginal rate in order to fund things like unemployment insurance extensions, COBRA subsidies, national defense, or deficit reduction.

. . . If these cuts don’t work, we will sell our house – into an already spiraling market of declining asset values – and our cars, assuming someone will buy them . . .

Henderson now makes it explicit that he wants the tax code to subsidize his purchase of a house he seemingly cannot afford. And here's the kicker:

The problem with the president’s plan is that the super rich don’t pay taxes – they hide in the Cayman Islands or use fancy investment vehicles to shelter their income. We aren’t rich enough to afford this – I use Turbo Tax.  But we are rich enough to be hurt by the president’s plan. The next time the president comes home to Chicago, he has a standing invitation to come to my house (two blocks from his) and judge for himself whether the Hendersons are as rich as he thinks.

Here, I happen to agree with the first two sentences, so in the end it's sad to see someone as educated and intelligent as Todd Henderson turning his rhetorical skills to attack those poorer than he is (and those who want to help those poorer than he) instead of directing it at the super-rich, at tax shelters, at the carried interest exception, and so on.  Just another example of how the rich dominate our civic discourse.  The recession has upset the sense of entitlement of a lot of people -- but the right response is not to move away from income equality but towards it.  Restoring the Clinton era tax rates for incomes over $250,000 is a good start.

Originally posted to Loge on Mon Sep 20, 2010 at 11:30 AM PDT.

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Comment Preferences

  •  Tip Jar (10+ / 0-)

    "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

    by Loge on Mon Sep 20, 2010 at 11:30:17 AM PDT

  •  Sounds to me like old Henderson (4+ / 0-)

    should be counting his blessings. He seems to be doing pretty darned well relatively speaking. I wonder though if he heard at all about the massive recession that crashed the economy. I wonder if he remembers about the $2 trillion dollar war that Bush and Co started. Maybe he could become more enthusiastic about single payer healthcare since it would greatly reduce the costs of running his household, and maybe give his spouse a better life as an MD having to face the daily misery of not providing treatment to kids who have cancer because they are too poor. I am sure Todd's wife suffers over that issue.

    But the bottom line is that George Bush himself and his Republican colleagues in the House and Senate always envisaged that the tax holiday would end one day. That's why they built in a sunset provision. So this is not a tax increase, it's the end of a gift from George Bush. So Todd really has the Republican Party to blame for the expiration of this tax holiday.

  •  Hey, Todd, your kids are not entitled (10+ / 0-)

    to go to private school. Join most of the rest of us Americans who send our kids to public schools.

  •  It should be mentioned that... (9+ / 0-)

    the Obama tax cuts will benefit every American, even the wealthy, for income earned up to $250,000.00/yr.  It is only for marginal dollars, from $250,001.00 and higher, where the Clinton rates will be restored (after the Bush rated are allowed to sunset).

    Barack Obama in the Oval Office: There's a black man who knows his place.

    by Greasy Grant on Mon Sep 20, 2010 at 11:41:31 AM PDT

  •  See He's Not Supposed t Fire His Accountant First (4+ / 0-)

    If he keeps his accountant, he'll be able to avoid sweeping changes in his lifestyle.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Mon Sep 20, 2010 at 11:42:04 AM PDT

  •  I'm sympathetic to additional indexing (3+ / 0-)

    I know that in quite a few areas of the country, a combined income of $250K does not make you rich. I think it would be better for all if there were additional indexing that acknowledges this. A rate for those making $250K to $500K, say, then $500K to $1.5MM, etc., seems fair. Especially if by the time you get to that top 1% who earns 23% of all the income, the rate is back to Eisenhower era rates.

    •  Top marginal US income tax rates 1913-2003 (3+ / 0-)
      Recommended by:
      billlaurelMD, Kitsap River, millwood

      Cry for the poor rich people.

      Maybe the Senate ought to debate going all the way back to Eisenhower rates for the top income brackets.   How do you think Eisenhower managed to pay for his highway program.  Certainly not with rates like we have now.

      This chart doesn't have a lot of details, but it is pretty stark on what St Ronnie did to the country.

      REMEMBER THE GULF! Republicans want to get the country moving by taking us from D to R for Ramble.

      by maybeeso in michigan on Mon Sep 20, 2010 at 11:52:33 AM PDT

      [ Parent ]

    •  Should people who live in cheaper areas be taxed (0+ / 0-)

      more? That seems to be a Henderson viewpoint too. If people who live in metro Chicago, NYC, Boston, and San Francisco should somehow pay less taxes because, you know it's expensive to live there; then the converse must also be true. That means people who live in Charlotte, Tulsa, Billings, and Des Moines should pay more in taxes since it is cheap to live there and they are receiving a de facto pay raise over someone in NYC w/ the same income.

    •  Bring back "1 for you, 19 for me" (1+ / 0-)
      Recommended by:
      isabelle hayes

      If you have an income over, say, $1.5M, tax the overage at a 95% tax rate.

      Living kidney donor needed; type B, O, or incompatible (with paired donation). Drop me a note (see profile).

      by Kitsap River on Mon Sep 20, 2010 at 01:47:01 PM PDT

      [ Parent ]

  •  For a lawyer - he sure didn't read the (8+ / 0-)

    "small print" in the proposed Obama tax plan.  And the public schools in that Chicago neighborhood are some of the best in the country.  He could save a hell of a lot in tuition by not being such an elitist. And if he got involved in some of the community projects in Chicago, he might actually make a positive contribution to the lives of others instead of bellyaching about how tough its gonna be on him.  He would actually have NO increase in taxes under Obama's plan.

    "Those who make peaceful revolution impossible will make violent revolution inevitable." - JFK

    by moose67 on Mon Sep 20, 2010 at 11:44:24 AM PDT

  •  the sad thing is.. (5+ / 0-)

    Henderson now makes it explicit that he wants the tax code to subsidize his purchase of a house he seemingly cannot afford.

    ...the tax code already subsidizes this purchase. Apparently his copy of Turbo Tax doesn't include schedule A, lines 6 and 10.

    •  Sounds like he can afford it, just doesn't want t (2+ / 0-)
      Recommended by:
      millwood, susanala

      give up some of his high side perks.

      I know too many people who live quite well on a fraction of that.

      REMEMBER THE GULF! Republicans want to get the country moving by taking us from D to R for Ramble.

      by maybeeso in michigan on Mon Sep 20, 2010 at 11:53:59 AM PDT

      [ Parent ]

      •  Perhaps he should start with private schools (1+ / 0-)
        Recommended by:
        maybeeso in michigan

        As the diarist noted, law professor Henderson does a piss poor job of advancing his argument. He actually describes a false dilemma of having to give up his cell phone because of the tax increase:

        ...We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center, but these are only a few hundred dollars per month in total. But more importantly, what is the theory under which collecting this money in taxes and deciding in Washington how to spend it is superior to our decisions?

        Dude, where the fuck do you shop for your cell phone? If you and your wife are spending more than $100 a month, you're paying too much. You don't even discuss junking cable, but allude to canceling your premium channels — just some because you know, you really wanted to watch that premiere of Boardwalk Empire on HBO.

        If Henderson didn't want to sound like an entitled elitist asshole, then it was an epic fail. Art classes? Go to the Y or a church. Better yet go to an evil socialist government sponsored art program instead.


  •  It's amazing how Republicans (4+ / 0-)

    When they send their kids to private schools paying tuitions the middle class could never afford complain about paying taxes for public schools.

    This in another of their "double taxation" arguments they like to apply to everything.

    • the "death tax" (0+ / 0-)

      Actually, it's a wealth transfer fee. The person who had the money paid taxes on them. Now they're dead and you want the money. If you win money on a game show or the lottery, you pay taxes on the winnings. What is so different about inherited money?

  •  Yeah - and I teach at a University too, but mow (5+ / 0-)

    my own damn lawn and clean my own damn house....but then I'm not contributing to the capitalistic system by employing anyone.  Damned if you do and damned if you don't....

    "Those who make peaceful revolution impossible will make violent revolution inevitable." - JFK

    by moose67 on Mon Sep 20, 2010 at 11:48:30 AM PDT

  •  Dear M. Todd Henderson: (1+ / 0-)
    Recommended by:
    D in Northern Virginia


    "When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." -- Dom Hélder Câmara

    by SLKRR on Mon Sep 20, 2010 at 01:08:17 PM PDT

  •  The University of Chicago Law Professor (1+ / 0-)
    Recommended by:

    M. Todd Henderson has deleted his posts from the Truth on the Market website, so your first link comes up "Page not found".

    But not to worry.  Brad DeLong reposted it from Google's webcache here.

    And in an earlier post Professor DeLong commented on Todd Henderson's argument that he shouldn't have to pay more taxes than he is currently paying because it's unfair because he's not "rich".  More from DeLong:

    He doesn't say: "Wow! My real income is more than twice the income of somebody in this slot a generation ago! [...]

    Instead, Mr. Xxxx Xxxxxxxxx looks up. Of the 100 people richer than he is, fully ten have more than four times his income. And he knows of one person with 20 times his income. He knows who the really rich are, and they have ten times his income: They have not $450,000 a year. They have $4.5 million a year. And, to him, they are in a different world.

    And so he is sad. He and his wife deserve to be successful. And he knows people who are successful. But he is not one of them--widening income inequality over the past generation has excluded him from the rich who truly have money.

    And this makes him sad. And angry. But, curiously enough, not angry at the senior law firm partners who extract surplus value from their associates and their clients, or angry at the financiers, but angry at... Barack Obama, who dares to suggest that the U.S. government's funding gap should be closed partly by taxing him, and angry at the great hordes of the unwashed who will receive the Medicare, Medicaid, and Social Security payments that the government will make over the next several generations.

    Do I wish that Professor Xxxxxxxxx had a little more self-knowledge? Yes. Is it pathetic that somebody with nine times the median household income thinks of himself as just another average Joe, just another "working American"? Yes. Do I find it embarrassing that somebody whose income is in the top 1% of American households thinks that he is not rich? Yes.

    The comments are just as interesting.  "Just 'cause you're rich, doesn't mean you have common sense."  "Does this rich, whiny guy have no sense of perspective, no sense of shame?"  "I'm still trying to get past his idea that 'someone to cut my lawn' and 'someone to clean my house' are not discretionary spending."   And my favorite:

    After reading the litany of woes that have decended upon Prof. Henderson, I'm going through my 2-ply Walmart tissues at an alarming rate.

    I'm a disabled veteran. My entire year's income would just about cover the gasoline costs of the Henderson family. My wife and I get by, but do not envy those who enjoy higher incomes than ourselves, which is the majority of Americans.

    However, I find it almost amusing that someone with so many blessings can invert a Biblical quote, i.e.," How you treat the wealthiest of you is how you also treat me." I might suggest to the good professor (and his entire family) that they cut their cloth to suit their measure.

    At the very least, the Henderson family does not have Sen. Alan Simpson asking veterans with health problems to patrioticaly die off as soon as possible.

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