the HENRY class - High Earners, Not Rich Yet

[Blackjack200]

Not sure what word you're thinking of. "Saver" is my word. We know what we want out of life and we're just very focused on getting there. It's painful but we're making progress.

I don't see the point in putting yourself through that kind of pain... but in any case, it seems more like your own doing than any fault of the tax code. :\

 

[AreaCode707]

It's called early retirement. As in 30 years early.

Exxxxactly. This is my tradeoff in a few years and I have no problem paying taxes on it.

I don't see the point in putting yourself through that kind of pain... but in any case, it seems more like your own doing than any fault of the tax code. :\

Oh I'm not blaming the tax code for my lifestyle, not by a long stretch! I am saying however that it seems kind of ridiculous to be taxed double when I live more frugally than many people who earn less. That's why I support taxation upon spend; tax the bejesus out of me when I'm living it up but to take 55% of my income now seems just browbeating.

 

[StageLeft]

again, lets not assume they're trying to keep up with anyone.

if you're living in a high CoL area - and I mean a real high CoL like NYC or SF, not some crummy place like NoVA - $250k gross doesn't go too far for a family of 5.

sure, you can say they don't need that 4 bedroom 4000 sq ft. house, but why shouldn't they reward themselves and their family with some luxury living?
you work hard when you're young and you reap what you sow.

presently, they're able to afford that lifestyle while paying their share of taxes, but when you start raising taxes unfairly (i'd argue that it's already unfair, the progressive scheme), they'll start complaining.

They ought to be smart enough--anybody--to not leverage current income to the hilt, as it can always change. For example if you and your new wife are making good money you don't go out and buy two new cars and a big house knowing there's a good chance you'll have kids soon and lose that second income. It's just stupid. And since taxes always seem to go up I cannot understand what motivates a person with good money to buy something very nice blissfully ignorant of the great likelihood taxes will stretch them, and soon.

I know HENRY's and yes their money is taxed insanely, but only the craziest don't realize they still, in general, have it pretty good.

Not sure what word you're thinking of. "Saver" is my word. We know what we want out of life and we're just very focused on getting there. It's painful but we're making progress.

I hope so, because it sounds like you had the same balls to the wall approach in college. Did you then know you'd have it when working and doing 80-100 hours/week? I would be deincentivized to work in your situation, too, but not because of taxes but rather I simply wouldn't enjoy life in that state. I was watching Selling New York, some new show and they said how truly rich people can't often shop for their own house so they pay somebody else to do it. Tragic, actually, and ironic. I wonder if in fact you're capable of enjoying what you are striving for. If somebody handed you guys $2M now so that you could buy that home in Northern CA and not work again and live modestly, would you even be suited to that dream? I think a catch 22 is that often those most able to retire comfortably are not comfortable doing so.

 

[tk149]

Marginal Utility.

Class envy.

 

[Tom]

Exxxxactly. This is my tradeoff in a few years and I have no problem paying taxes on it.



Oh I'm not blaming the tax code for my lifestyle, not by a long stretch! I am saying however that it seems kind of ridiculous to be taxed double when I live more frugally than many people who earn less. That's why I support taxation upon spend; tax the bejesus out of me when I'm living it up but to take 55% of my income now seems just browbeating.

How are u paying 55% ? I looeked for explanation but didn't see it.

 

[spidey07]

How are u paying 55% ? I looeked for explanation but didn't see it.

35% fed tax + 8 for SS/medicare, then add in county/state taxes and it get's very close or above 50%. And according to Obama, those WILL be going up. If he has his was the highest rate will be 40%, then add the 8% and you're looking at almost 50% in FEDERAL taxes alone.

 

[Tom]

35% fed tax + 8 for SS/medicare, then add in county/state taxes and it get's very close or above 50%. And according to Obama, those WILL be going up. If he has his was the highest rate will be 40%, then add the 8% and you're looking at almost 50% in FEDERAL taxes alone.

nobody pays 35% Federal tax on all their income. I doubt $250k single earner pays 30%.

I think the healthcare bill changed it but so far nobody pays SS/medicare above $95k, so for $250k thats a lot less than 8%.

Some states have no income tax, and city income taxes are low or nonexistent everywhere I've lived last 50 years.

 

[spidey07]

nobody pays 35% Federal tax on all their income. I doubt $250k single earner pays 30%.

I think the healthcare bill changed it but so far nobody pays SS/medicare above $95k, so for $250k thats a lot less than 8%.

Some states have no income tax, and city income taxes are low or nonexistent everywhere I've lived last 50 years.

That's a big negative. The HCE limit is for SS only, medicare has no cap. The healtcare bill actually just tacked on an extra 4% medicare tax on capital gains.

It's 33% tax rate for married jointly over 210k, 170K for single. Do you think I'm making this up? I do my own taxes, I know exactly how much I pay and it sucks.

 

[AHenry]

You know what? I find it hard to believe that someone that actually hauls down $200k+ has the time (or inclination) to google random web forums to find people talking about "HENRYs", register a brand new account, and post their idiotic, extremist views for everyone to see.

Really hard to believe.

I find it far more likely that you're some freeper keyboard jockey living in his parents basement who's never made more than $30k in his life, beating off to a portrait of Ronald Reagan and promising yourself that you'll finish that dog-eared copy of "Atlas Shrugged" some day (like that fundamentalist Christian that hasn't quite made it all the way through Genesis yet.)

amirite?

Of course, I may not be. Maybe you really are a brilliant and savvy businessman, and maybe you have climbed to the top of your field through nothing but your own blood sweat and tears. You hate the thought of a sick child being cured with money that could have gone to another BMW in your driveway. How will that child pull themselves up by their bootstraps if someone is killing their infectious diseases for them?

In that case, I humbly request that you exit the workforce and live off your investments. We will suffer mightily for the loss, but it is the only way we will learn. By continuing to work and pay taxes, you are just enabling us to continue down the dark and hopeless road of caring about each other and expecting those that benefit from our society to contribute to it.

Boy, you're not a very trusting type. Actually, in the last few years I've managed $400k+ and its not that hard. I put in about 60-65 hrs a week. The state and local government take about $125k off the top and I invest a large portion of what's left. Actually, I think you are probably irritated because I pay mare in taxes than you earn in a year.

I spend a fair amount of time on the internet educating myself on world politics, finance and economics. I ran across the "HENRY" term in a Forbes article a few days ago and I wanted to see if there was anything behind it. Frankly there are a lot of HENRYs that share the same opinions I do.

 

[Tom]

That's a big negative. The HCE limit is for SS only, medicare has no cap. The healtcare bill actually just tacked on an extra 4% medicare tax on capital gains.

It's 33% tax rate for married jointly over 210k, 170K for single. Do you think I'm making this up? I do my own taxes, I know exactly how much I pay and it sucks.

Why are you excluding the tax rate for the first 210k of income ? Your tax rate is what you pay on all your income, which is what you pay per bracket minus deductions.

That is going to be significantly lower than the rate for the highest bracket you're in, unless you have very high income in which you'll get closer to it.

Sorry if I was wrong about Medicare, but that still means it isn't 8% on all income.

 

[Jhhnn]

That's a big negative. The HCE limit is for SS only, medicare has no cap. The healtcare bill actually just tacked on an extra 4% medicare tax on capital gains.

It's 33% tax rate for married jointly over 210k, 170K for single. Do you think I'm making this up? I do my own taxes, I know exactly how much I pay and it sucks.

You're talking out your ass, spidey. You refer to the top marginal rate paid as if it were the rate paid on total earnings- it's not, and you'd know that if you actually did your own taxes.

 

[AHenry]

LOL, you think everybodies' grandparents have a farm ?

And your story doesn't add up. Nobody who works 2 jobs "struggles" to come up with $3 unless there's some other serious drain on their finances.

You are clearly too young to know or you grew up with a silver spoon. A non-union line factory job in a small town in Michigan doesn't earn you much. Weekend gigs covering the high school football game as an aux police woman in that same small town also doesn't earn you much.

 

[Tom]

I just went to irs, the tax on $250k single person is $65k.

That's about 25%

 

[Tom]

You are clearly too young to know or you grew up with a silver spoon. A non-union line factory job in a small town in Michigan doesn't earn you much. Weekend gigs covering the high school football game as an aux police woman in that same small town also doesn't earn you much.

I'm 53. bought my own lunch when I was a kid by returning pop bottles for 2 cents each. Sometimes ate mustard sandwiches because that's all we had.

Not sure where u lived that it costs $3 for lunch a week, I doubt my packed lunches cost a quarter, and milk was a nickel a carton.

 

[AHenry]

nobody pays 35% Federal tax on all their income. I doubt $250k single earner pays 30%.

I think the healthcare bill changed it but so far nobody pays SS/medicare above $95k, so for $250k thats a lot less than 8%.

Some states have no income tax, and city income taxes are low or nonexistent everywhere I've lived last 50 years.

Actually my marginal Federal tax rate for last year was 39.5% because of the AMT hit I take (every year).

 

[AHenry]

I'm 53. bought my own lunch when I was a kid by returning pop bottles for 2 cents each. Sometimes ate mustard sandwiches because that's all we had.

Not sure where u lived that it costs $3 for lunch a week, I doubt my packed lunches cost a quarter, and milk was a nickel a carton.

$3/wk for HOT lunch at school. I bagged it many weeks. I never went w/o lunch.

 

[Tom]

Actually my marginal Federal tax rate for last year was 39.5% because of the AMT hit I take (every year).

that's not relevant. What actual tax rate did you pay ? don't give your income and tax if u don't want to, but use those figures and there's no way you paid anything close to 40%.

this practice of quoting the highest rate only is BS. Nobody pays it.

 

[AHenry]

This is an interesting thread but it appears to me that the liberal progressive camp here see no limit to the taxes that "rich" HENRYs have to pay.

I agree taxes are necessary and its definitely worth paying taxes to live in the US. I did 2 years in France with my family; its a nice place to visit but its not the US.

My point is that there is a limit to the marginal tax rates that should be applied. The point I initially tried to make is that there is a limit above which the marginal tax rate actually makes it a disincentive to work harder to earn more. When the marginal rate reaches that point (variable by person), people will stop working as hard and tax revenues will actually go down.

I definitely look for ways to cut my tax burden. My company has a deferred income plan for executives (yes, its an evil perk). Obama has indicated he will let the tax cuts expire which would have significantly raised my tax bill. I'll be maxing out on putting money into the deferred income plan. Hopefully when I retire and take that money out, I'll be in a lower tax bracket.

The point here is that increasing marginal tax rates to painfull levels will drive HENRYs to take decisions to minimize their tax bill through deferred income plans, 401k plans, SEPs, KEOGH Plans, etc. Again, the point is that tax revenues will go down or at least not go up.

 

[AHenry]

that's not relevant. What actual tax rate did you pay ? don't give your income and tax if u don't want to, but use those figures and there's no way you paid anything close to 40%.

this practice of quoting the highest rate only is BS. Nobody pays it.

My total state and federal AVERAGE tax rate was 29%.

Note the top marginal rate a person is subject to is not BS. It is the tax rate that applies to the last few dollars you earn (few is a relative term). The top marginal rate is the one that drives people to take decision to reduce their tax bill.

Example. My top marginal rate was 35% w/o AMT and 39.5% with AMT. So, if I find another deduction that allows me to deduct $100 on Schedule A (not limited by AMT deduction rules), I actually pay $39.50 less in federal taxes. That's the way it works. If you want another opinion, find a tax accountant.

The top marginal rate really matters.

 

[Tom]

My total state and federal AVERAGE tax rate was 29%.

Note the top marginal rate a person is subject to is not BS. It is the tax rate that applies to the last few dollars you earn (few is a relative term). The top marginal rate is the one that drives people to take decision to reduce their tax bill.

Example. My top marginal rate was 35% w/o AMT and 39.5% with AMT. So, if I find another deduction that allows me to deduct $100 on Schedule A (not limited by AMT deduction rules), I actually pay $39.50 less in federal taxes. That's the way it works. If you want another opinion, find a tax accountant.

The top marginal rate really matters.

Using it to discuss overall tax ratesleads to claims that total taxes are "55%', which is baloney.

The argument it's a discentive is rational, but also baloney. I've never met a succesful person that liked paying taxes, but never met one who was motivated by their salary either.

So it's baloney in my book. besides, the only real alternative is high deficits which devalue that salary anyway.

 

[AHenry]

Using it to discuss overall tax ratesleads to claims that total taxes are "55%', which is baloney.

The argument it's a discentive is rational, but also baloney. I've never met a succesful person that liked paying taxes, but never met one who was motivated by their salary either.

So it's baloney in my book. besides, the only real alternative is high deficits which devalue that salary anyway.

I don't agree. The other alternative is reduced government spending.

My HR Director and I have that "not motivated by compensation" argument frequently. My HR Director is full of BS on this one. Incentive compensation is used widely and is widely effective because people are motivated by money. I set the incentive bonus targets and the goals for my executive staff. Those incentives work very well.

 

[Tom]

I don't agree. The other alternative is reduced government spending.

My HR Director and I have that "not motivated by compensation" argument frequently. My HR Director is full of BS on this one. Incentive compensation is ues widely and is widely effective because people are motivated by money. I set the incentive bonus targets and the goals for my staff. Those incentives work very well.

reduced government spending is nice, but unless you think the USA(or Japan, Germany, or others that follow our lead) was a failure in the 20th century, it can't be cut enough to make a difference without a huge risk of killing the engin, which in a nutshell is giving poor people a chance to succeed, which isn't cheap. Difference the USA has over poor countries is we spend money to give people a shot, and that usually pays off. Not talking about handouts, btw.

Only exception is reducing interest on debt, which is where we should have headed in 2000.

 

[Tom]

I don't agree. The other alternative is reduced government spending.

My HR Director and I have that "not motivated by compensation" argument frequently. My HR Director is full of BS on this one. Incentive compensation is used widely and is widely effective because people are motivated by money. I set the incentive bonus targets and the goals for my executive staff. Those incentives work very well.

you have lots of people turn down promotions, assignments, because of the marginal tax rate ?

really now ?

 

[DanDaManJC]

This is an interesting thread but it appears to me that the liberal progressive camp here see no limit to the taxes that "rich" HENRYs have to pay.

I agree taxes are necessary and its definitely worth paying taxes to live in the US. I did 2 years in France with my family; its a nice place to visit but its not the US.

My point is that there is a limit to the marginal tax rates that should be applied. The point I initially tried to make is that there is a limit above which the marginal tax rate actually makes it a disincentive to work harder to earn more. When the marginal rate reaches that point (variable by person), people will stop working as hard and tax revenues will actually go down.

I definitely look for ways to cut my tax burden. My company has a deferred income plan for executives (yes, its an evil perk). Obama has indicated he will let the tax cuts expire which would have significantly raised my tax bill. I'll be maxing out on putting money into the deferred income plan. Hopefully when I retire and take that money out, I'll be in a lower tax bracket.

The point here is that increasing marginal tax rates to painfull levels will drive HENRYs to take decisions to minimize their tax bill through deferred income plans, 401k plans, SEPs, KEOGH Plans, etc. Again, the point is that tax revenues will go down or at least not go up.

Other than the bolded, I would tend to agree with the idea that there should be some limits on taxation. It's all a continuous spectra of opinion -- it's not like this is an either or scenario by any means.

Going back to the bolded, what makes you think "libruls" want to tax the rich to death? To some degree it's just an imperfect system and someone has to get f*k'd, but on the other it's a well founded theory. I posted a link to the wikipedia article earlier in the thread (or maybe another thread) that mentions several for and against arguments for progressive taxation. Many of the pros go beyond that silly "class envy" misnomer.
Once again, this really just agrees with your overall sentiment -- that this isn't a black and white issue.

 

[AHenry]

you have lots of people turn down promotions, assignments, because of the marginal tax rate ?

really now ?

I don't think I said that. I said marginal tax rates will drive people (like me) to take actions to reduce their tax burden. The higher the marginal tax rate, the stronger the driver.