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.