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Why Cost of Living Matters
The median income in the U.S. if $52,029. At first-glance, that doesn't seem like alot, especially considering
the insane amounts of money those at the very top make. The
administration (and many politicians) seem to consider a income about
4-5x the median to be rich. Certainly, regardless of where one lives,
making more money, ceteris paribus, results in a higher
standard of living. However, "rich" in one locale is absolutely not,
no matter what anyone else may try to tell you, necessarily rich in
another one.
In order for someone in Manhattan to have the same standard of
living as someone making the national median income in St. Louis,
they'd have to make over $125,000 a year! The cost of housing is 486%
higher in Manhattan than St. Louis, utilities 87% more, groceries 66%
more.
Using relatively conservative assumptions for purchase costs, taxes,
etc, let's assume you can afford about $5,500/month or so on housing.
$250,000 a year in St Louis gets you over 6,000 sqft, 5 bed, 5 bath mansion. $5,500 (or so) in Manhattan gets you a 3 bedroom, 2 bath,5th floor 1,200 sqft
(probably less, in actuality) condo in a decent-to-good location (this
particular one is on 28th & 6th). The price/sqft is more than 5x
higher for the NYC condo than the St. Louis mansion.
Certainly, there are more $250,000/year jobs in Manhattan than their
are in St. Louis, but I think one would be hard pressed to consider
raising a family in a 1,100 sqft NYC condo (even one with high-end
finishes/appliances) versus raising one in a mansion in St. Louis, it's
hard to consider the former family rich, especially versus the
latter. Sure, many people find the allure and cultural benefits of
living in Manhattan worth the trade-off, but that's another story for
another time. "Rich," no matter how you choose to define it, is a
relative term when you account for cost of and quality of living.
Anyone who says otherwise is likely a pundit and/or politician
pandering to "the poor."
The house in St. Louis is the 10th most expensive home in St. Louis
currently listed in the Missouri MLS. The condo in Manhattan is
roughly the 1,500th most expensive current listing there. Hell,
there's about 500 current listings in Manhattan for over $5 million,
and almost 200 over $10 million, topping out at a stratospheric $60
million! $250,000 in St. Louis and you're among the top 10 in town.
$250,000 in Manhattan and you're just another middle/upper-middle class
guy or gal trying to make it big in the Big City.
Personally - and this concept goes back to when I was but a wee lad
- when I think of someone being rich, not just well-off, but RICH, I
think of at least a new(ish) S-Class Mercedes and a Range Rover in the
garage, if not a Porsche Turbo or Ferrari to drive on weekends up to
the house in Westchester or South Hampton or wherever. I don't
consider a family that can afford to live in a nice 1,100 sqft condo in
an ok neighborhood in Manhattan to be RICH.
They're certainly not poor by any stretch of the imagination - please, so saying would be patently ridiculous
- but they're not entertaining dozens of the City's upper-crust guests
for dinner parties (as one could do with the 6,000 sqft in the St.
Louis mansion) let alone taking the non-existent Bentley out to the
Country Club at which they can't afford a membership.
Heck, depending on how many children they have and how much they
spend on non-essentials, they're still relegated to flying coach. RICH
people don't fly coach - let alone commercial - unless its by their own
volition.
No one should be even remotely considering playing a violin - no
matter how tiny - for someone making $250,000 in Manhattan, but no one
should think, not for a minute, they're living the lifestyles of the
Rich & Famous, either.
They're living better than 99.99% of the rest of the World's
population for crying out loud, but a Nationally-uniform standard of
"RICH" for tax and policy purposes that ignores cost of living unfairly
punishes those who live in high-cost areas far more than it does those
who live in lower-cost ones.
Surely, there's choice involved here, but is it right to punish those who move to the areas where there are more high-paying jobs (or the chance of getting one)?
*Caveat: The information presented above on cost of living is from
the link at the beginning of this article is from ReMax, the real
estate brokerage. The data is cited as being from a CNN Money article
and the U.S. Census but I have not independently verified the accuracy
of these numbers.
- advertisements -
"Rich," no matter how you choose to define it, is a relative term when you account for cost of and quality of living. Anyone who says otherwise is likely a pundit and/or politician pandering to "the poor…” a Nationally-uniform standard of "RICH" for tax and policy purposes that ignores cost of living unfairly punishes those who live in high-cost areas far more than it does those who live in lower-cost ones. – Stone Steet Advisors
This is the story that the socialist central planners who want to tax the “rich” and destroy the American Dream incentive for the common man by demonizing him as “rich” -- individuals who make more than $200,000 a year and families whose income exceeds $250,000 to be taxed at rates similar to those who make $5 million -- never wanted told.
I have waited for this article for years. Thank you. It is a powerful piece…and I almost missed it!
Interesting that a study released this past September by two Princeton University professors found that in most of the country, people feel comfortably middle class if they earn $70,000. But in New York City, the figure was $165,000.
An article entitled Debate Over the Definition of Rich points out that when Obama was asked the dividing line between middle class and rich during the presidential campaign in 2008, he replied that it was $150,000, a figure about three times the median family income – a sad limit to the American Dream.
Socialists are levelers, but they don’t to raise their people up, they want to knock the achievers down. They want to put a fence around opportunity. But who will pull the wagon when everyone is riding in it, when it pays no more to pull than it does to ride?
This is a red herring. Note the 2 year renewal of the Bush tax cuts. I'm less likely to get hit with socialism under this administration than I am to hit on the lottery. There's a reason it is meaningful to refer to the "oligarchs" in this country.
Now that is not to say that there isn't a growing "socialist" sentiment among the disaffected masses. That's what happens when the rich (and their second cousins, if you like) suck all the productivity gains from the working and middle classes for 40 years running.
But the masses have no pull in this system.
FUCK THE UNION BITCHEZ!!!!!!!!!!
FUCK THE UNION BITCHEZ!!!!!!!!!!
FUCK THE UNION BITCHEZ!!!!!!!!!!
See ya on the 13th hole, bitch.
This is ironic. Are rich people really looking ahead here? I see the NY boyz wantin' favorable treatment. Not surprising to the rest of us, but ironic nonetheless.
Is this whole issue an indication of an emerging trend: Rich people denying they're rich and pointing to the other rich guys as the "real" rich guys? Like gang members caught in the wrong territory or the sucker who got left at the scene of the crime?
The Three Stooges could do alot with this one.
Best of luck on the uber-progressive rich guy income tax! I don't think that's why you brought this up, though--there's zero chance of federal taxes going up in the next two years.
Whut's up here?
you really think being able afford to live in a 1,100 sqft apartment is rich? With 2 kids in public school, putting $ away for retirement and for their college education, you've got little-to-nothing left for things like vacations or nights out on the town. As I said, that still makes you better-off than 99.99% of the World's population, but if you're living close to paycheck to paycheck you aren't rich my friend.
Rich is when you don't need that next paycheck.
I think what's rich is that people are wrestling with this issue as if it were relevant. Why do you care?
Is somebody trying to take your money? Are they teasing you at lunch? Who cares and why?
Everybody knows that COL varies by geography--this is about use of the word "rich," right?
Maybe a Bears cartoon is in order here.
Apparently you don't pay much attention to politics and tax policy debates...
I do in fact. The rich--by anybody's definition--have nothing to worry about. Hence my amusement.
You have nothing to worry about short of a revolution.
I like ya, Bob, but you're missing the point here.
It is worth knowing by *everyone* that the percentage of Americans who are "rich" is less than 1%.
This is not about some abstract policy discussion, or some silly quibble over "how much is this much."
This is simple appreciation of the world we share. It's elemental. Of crucial importance to one's world-view.
That guy in the trailer who opposes taxes on "the rich" because he might become one in the next few years really deserves to know better. The fact that he doesn't already know better is testament to how effectively the middle-class has been manipulated.
Rich is when you stop writing paychecks.
That's what I thought.
wellcome to vote for FED existence to my blog:
http://trendybull777.blog.com/2011/02/21/hello-world/
Even though the cost of living is higher in some places the quality of life is lower in some ways in the smaller areas. My kids are disadvantaged by not having any high quality private schools nearby, the.quality of.the restaurants is poor in my area and the price to value ratio probably favors manhattan. There are more cultural activities and it is.easier to hire tutors in large cities. Having children's museums, summer enrichment camps and other nearby activities close by is priceless. I have to mail order my damn caviar. Depending on your preferences the cost of quality living is probably higher where I am, because no matter how much money I have.many things are unavailable here.
That's why god invented vacations, but I feel what you're saying. I imagine you can't simply relocate elsewhere especially considering the current state of the job market, but assuming you could move somewhere you'd like better, and make as much or more than you do now (adjusted for cost of living), would you up and move?
It is hard to say if I would move if I could. I probably would but it is a moot point because start up costs and building the "business" would.cost me a couple hundred g's. It is hard to just up and move a specialized business because of costs and other barriers to entry.
try a mail service and a GSM card.
Is this article for real? This isn't just "let them eat cake", it's "let them eat cake, and pay for mine, too".
"No one should be even remotely considering playing a violin - no matter how tiny - for someone making $250,000 in Manhattan, but no one should think, not for a minute, they're living the lifestyles of the Rich & Famous, either."
Some of that is simply the effect of high value real estate, and how those costs trickle down. Most of the rest of it is a result of shitty government that people voted upon themsevles. Those in high cost-of-living areas are not being "punished" for living there; they are choosing to do so, knowing it is costing them more. You make that much, then you can AFFORD to move somewhere else nearby with a lower cost of living.
250K is 250K. If they want to piss most of it away to live in a place like that, that's their own fault. Someone with that sort of income, spent wisely, can quite handily live without worrying about any sort of material need whatsoever.
To think otherwise indicates that you're comically out of touch with reality. I've never even made 10% of that figure in a year. Median income is not 52k; median household income is 52k. I don't give a flying fuck where you live, 250K/year is not "middle class".
" Nationally-uniform standard of "RICH" for tax and policy purposes that ignores cost of living unfairly punishes those who live in high-cost areas far more than it does those who live in lower-cost ones."
While I'm in favor of cutting taxes in general, doing it just for those in high cost-of-living areas, and perhaps even increasing taxes for low cost-of-living areas, is bullshit. No one is forcing them to live there. The road out in front of my home isn't even paved, for fuck's sake, and you expect me to applaud a tax break for someone - but not for me - just because they want to live in Manhattan?
This is like saying that the tax code unfairly punishes those who choose to purchase private jets and Maseratis. Their transportation costs are higher! It's not fair! Give me a break.
This is not a personal attack so please don't take it as such. Where do you live, what sort of education do you have, and what do you do that you've never made more than $25,000/year? I was getting paid double that (pro-rated) for an internship at a tech company when I was 21 in suburban NJ.
The rest of your arguments suggest you 1. did not read/comprehend the entire post and 2. you do not understand the various costs of living, simple things, like another commentor pointed out, paying for your children to go to college. My parents make about that much and because of that I got no federal student loans for my undergraduate studies, had to take out more expensive private ones because my parents couldn't afford to pay for me, my brother, and sister to go to school. And I grew up in the suburbs, not in the city. You GROSSLY underestimate the number and magnitude of costs of living my friend.
You are wrong about not having to worry about material needs. By the time my kids are old enough.for college and graduate school it will cost about 600,000 each for high quality options such as Ivy league, and there is no.financial aid for me. Just about every spare penny goes into college savings accounts.
No disrespect. How do your choices become my burden?
How come "the rich" have to pay for the poor choices of those on welfare and other government hand-out programs? Why are they so burdened (disproportionately so) by others poor choices?
Thats what I thought.
Your questions assume a lot about my life which I can assure you are untrue. Through good and bad times I have relied upon myself and no one else. Have I been deemed deserving of the largess of the Federal Governments pity payments? You bettcha. Did I fall for the devils deal? Not on your life. One word would descibe what I have accomplished and that is claw. I suggest more people try it as I'm sure your jersey self is about to.
They dont become.your burden. The post i responded to said the obama-rich have no material worries. I oppose giving people tax brraks becaise they live in high cost areas. Their lifestyle choices shouldnt be my burden either.
Apologies. You tied savings for children s education to your material needs. Seemed like a choice rather than a necessary sacrifice.
Not feeling wealthy in Manhattan? Move to Brooklyn, or Jersey. $250K is very-very-very-top of the upper-upper-upper middle class. And if you do not blow all this money on blow and rent in manhattan - you will be able to retire rich in 12-15 years!
Depends on your non-essential spending, how many kids you have, etc. My parents make about that and they've been working for 30 years, don't spend extravagently, live in the NJ suburbs and are no where close to retiring.
This article is drivel. It completely disregards the concepts of supply vs demand. If you want to live in NY, deal with the living costs. If your job requires you to live in NY and you feel 250k is not enough, then a) your employer is underpaying you for your skill set, or b) your skill set is not worth as much as you think. 250k is a metric shit ton more than most people are working with these days. I refuse to care about these petty complaints. Get real problems.
Location, location, location! How long is your supply chain, and how many taxes have been embedded therein ? Don't like your location, try emigration. Just forget trying to get good crab cakes in the Midwest.
Jams, Spencers and Vivace in the big O do just fine. The big Mighty brings 'em already coated in delicious oil. Wood, steam and paddles will survive.
What I fear is something like this - I'm able to double the money I make each day but the govt triples my taxes each day, or inflation is 300% per day, or both.
Inflation is the end result of printing too much currency into existence and brings poverty to all that use it.
This is why medical reimbursement rates are so hotly debated. A physician in NYC has to make a lot more than one in Springfield Missouri. Hospital costs also vary widely depending on competition (or lack thereof) You can't set a single rate that would fairly compensate one without either jacking with the other or giving the other a windfall. This is also what kicks about minimum wage. In the Midwest, MW can at least allow you to survive (barely) while in the larger cities, 7.75 is not going to cut it unless you want a cardboard box and a gutter bath as amenities. One size fits all does not work economically across the swatch of our nation
Bingo, great comments!
Considering the shortage of physicians in rural areas they should pay us more than large city physicians. Apparently the pay rates still favor large cities. We need a " shit hole " premium of 50 percent to attract doctors to where I live.
Nobody, and I do mean absolutely not one person at all, should ever move from any of the 5 boroughs to St. Louis. Fugettaboutit wiseguys and stay in NY.
Yeah! And don't come to Arkansas either.
We don't need no stinkin' Mexican tomatoes... or peppers... or anything else.
If your wage-earning ability significantly affects your standard of living, you ain't rich.
A person just can't spend that much per year on *any* level of personal indulgence.
"If your wage-earning ability significantly affects your standard of living, you ain't rich."
I really, really like that definition.
The point of the article is not entirely clear, but if it is to suggest that Congress should take into account local cost of living when setting tax policy (e.g., not applying a single, national level of $250K for loss of certain tax benefits), that runs into an insurmountable constitutional problem at Article 1, Sec. 9. Unfortunate for those of us living on the coasts, but it is what it is. All the more reason why we should support a flat tax and end geographic tax discrimination.
You have higher quality school choices. You have museums, enrichment activities, better restaurants and more entertainment choices. Urban east coast gets a lot for their tax and real estate costs. We should not give high cost areas tax breaks.
you think the cultural advantages come anywhere close to the massive difference in cost of living? I think you should seriously reconsider, or better, spend a year or two living in Manhattan and you'll realize how much $ you spend just doing regular things without even noticing.
when has the Constitution ever been a problem for congress...
OR, all taxing could be done from the state level as i believe was originally intended
Or we could simply continue to tax everyone to death and PRESTO! True equality!
Jamie Dimon, CEO of JPM took home a Whopping $16 Million Bonus last week. I guess he is trying to catch up to Goldman Sach's Lord Blankfein.
It is precisely because of inflated valuations using credit and debt that has pushed the divide.
Bankers, lawyers, corporate executives, and other elites "need" more money to feather their nest or build their McMansions, not to survive or be content.
So much of the high cost is ego driven - and the cost of every bonus, overblown salary, and kickback is passed down to the middle class in the form of higher premiums, fees, taxes, costs, and lack of value.
Why do we have riots in Wisconsin and a debt crisis? Because it's never enough. "Live simply so others can simply live" is forgotten or derided. Governments bail out banks, insurers, corporations - then pass the bill to individuals and families.
Largesse goes to the few who have no real need for it but the greatest lust - while austerity is handed to the indviduals who can afford the least and who have already paid and are paying for the excesses of the elite.
Every post WWII generation has been raised on consumerism and materialism; trained from birth to feel that what they have is not good enough and that they must CONSUME.
It is no mistake that the geographic regions containing the headquarters, the management, the trade associations, unions, organizations, and seat of government have bloated valuations.
Great post. In the old days management was content to earn 40 times labor. Now they have to have 400 times labor.
Look at the nation that is doing relatively well right now, Germany. Every corporation has to give labor a seat on the corporate board. Labor is RESPECTED. it is NOT a race to the bottom. wft have we let these oligarchs do to America? it is sickening.
Guess you better take the tunnel then, whiny.
NO pedestrian traffic in the tunnel. Learnt that in court.