Monday, January 04, 2010

If I were a rich man...

Man, oh man. If I had a dollar for every time I got worked up about the inequalities between the rich and the poor, I'd be one of the rich folks about whom I complain.

Last week, Yahoo! News reported that earning just $32,879 puts you in the top half of taxpayers. The story was tucked away on the site's finance page, and while I understand that this might not be breaking news, I'd be surprised if many people know that figure.

I think it's an outrage that wages are so low in this country. We're one of the most educated, technologically-advanced countries in the world and more than half of our residents are living paycheck-to-paycheck.

Let's do the math: Let's say that I make just a little more than the $32, 879 that puts a person in the top half of taxpayers. (I work in Boston, which has a higher cost of living, so I make about $35,000 each year before taxes.)

The average cost of an average apartment in Boston is $1,350 a month ($16,200 a year!). Transportation (whether by car or train) is easily another $150 a month, and that doesn't include maintenance costs. Groceries for a single person come in at around $160 a month. Add in health insurance — which is mandatory in Massachusetts — for an average young professional (at around $175/month), the recommended 10% of your income in savings and/or a retirement plan ($290/month), and about 20% of your gross income for various state and federal taxes ($583/month), and you've got about $2,500 each year (or about $200 a month) for such extravagances as co-pays for doctor's visits or medications, utilities, phone/Internet, travel, and — God forbid — entertainment.

When people are paid so little and costs are so high, it's hard to imagine that people are getting ahead when so many of us are barely getting by. I live well-within my means. I don't have credit card debt, a gambling habit, or even a car loan. I buy store-brand groceries, use coupons, and shop on sale. I drive a beat up car that uses regular gasoline, cover my windows with plastic to keep the heat in during the winter, and have worn the same snow boots since college. I'm a saver, not a spender, and yet I'm still not making much financial "progress."

I do have a modest amount of school loans from obtaining my Bachelor's degree, and I have a fondness for theatre tickets, which I spend my discretionary "fun money" on. Aside from that (and a penchant for pizza, which I indulge once or twice a month), I'm hardly a careless spender. And yet, I make more than half the tax payers in the United States, and I can't afford a house, an extravagant vacation, or even major car repairs.

Something is wrong when more than half the country is barely scraping by. I tend to blame the structure of the system, but also the super-rich for the discrepancy and disparity in wealth.

How do we fix it? Someone recently told me about a business model in Japan that requires companies to succeed together. Though I don't claim to know much about it, it sounds like in order for high-level executives to earn more money, the whole company must improve and all employees must receive wage increases as the executives' wages increase. The "little guys" wages must always be a reasonable percentage of the top executives' paychecks. This ensures that companies work together to succeed and that high-level employees are cognizant of the necessity of having skilled, motivated workers throughout the whole company.

I propose that the United States adopt a similar method. There's no need for the super rich to continue amassing more wealth than is necessary, while millions of people live in or very near poverty. The government also needs a wake up call in regard to its so-called "poverty line." When the national poverty line (meaning that anyone earning less than that amount is living in poverty) is at $10,830 for a single person and $22,050 for a family of four, something is deeply wrong. I, a college-educated, frugal, single person, could not support myself on $22,000 a year, and I certainly couldn't support a family of four on it.

Readers, what do you think? I know that you have opinions on this matter! Please feel free to share them in the comments.


Anonymous said...

Not sure if this makes a difference or not, but you're talking about tax payers -- as in people who end up actually paying tax. You'd be surprised at how many Americans actually pay zero income tax.

To quote the Tax Foundation:

"During 2007, Tax Foundation economists estimate that roughly 46.6 million tax returns faced a zero or negative tax liability. These are the so-called non-payers, people whose exemptions, deductions and credits wiped out any tax that would have been due. As a result, every dollar that was withheld from their paychecks during the year was refunded. In about half the cases, substantial additional money was "refunded" to the tax filer, although that portion is classified as a government expenditure since it is actually welfare spending, not a tax refund.

Almost a third of all tax returns, 32.6 percent of 143 million federal tax returns filed, were nonpaying in 2007, the most recent year for which IRS data is final. The percentage for 2007 is the second highest, a slight tick down from the all-time highest in 2006, when 33.0 percent of tax filers paid nothing."

So jump on the bandwagon and start figuring out how to squeeze as much money as possible out of the government so you too can live tax free!

Anonymous said...

Excellent article.