Monday, March 9, 2009

A Quarter of A Million Dollar Salary: A Lot of F***ing Money

A small point in rebuttal of the idea that Obama's attempt to fund a tax cut for 90% of Americans, build new infrastructure, and keep the deficit under control by among other things returning to Clinton-era tax rates on families earning $250,000 a year will hit the "middle class". Some numbers of interest:
  • The average salary for a family practicioner with 10-19 years of experience is $141,671.
  • The median starting salary for law school graduates is $62,000. However, this doesn't tell you the whole picture; in reality, one set of law students graduate and take jobs making between $40,000 and $50,000, while the other (smaller) set takes jobs making between $130,000 and $160,000. The median salary for lawyers with 10-19 years in the industry is $102,915.
  • Software engineers with the same experience earn $83,188.
  • Full professors have a median earnings of $76,945.
  • Usually when Republicans bring this up, they come up with some trope about the tax increase hitting small businesses that file individually. But let's do the math to see how "small" we're talking. Margins for apparel retailers seem to be around 5%-7%; for hardware stores, 3-4%; similarly for Best Buy. Let's be extremely generous and say our small business owner has an 8% margin. To earn $250,000, then, the business would need $3.125 million in revenue. Retail sales in major malls are about $400-500 per square foot, as do the fancier mall-chain restaurants. So our small business needs 6,000-8,000 square feet. This means our small business owner needs either one very large chunk of floor space in some prime commercial real estate, or four or five smaller store fronts. Joe the Plumber this ain't; you've got to be a bonafide business and not just some dude operating out of your house to pull in this kind of money.
It is, in fact, quite possible that the overwhelming majority of Americans neither earn a $250,000 per year nor know anyone who does. There are probably entire towns where no one is this loaded. In terms of income earners as opposed to investors, that kind of money is exceedingly rare outside of high finance, successful tech firms, high-end law firms, doctors who are specialists, professors who are teaching at top schools, and a tiny fraction of entertainment personalities.


Anonymous said...


David said...

As a personal income, $250k is high. As a joint income, I don't think it is quite as high as you're implying. Couples with two professionals aren't that uncommon. One getting a median (professional) income and one slightly above could easily push them over, using your numbers.

That's not to say that they are middle class or shouldn't pay a higher tax rate. Just that, even if you don't know anyone making $250k, you might know a few making $140k and a few them might be married to each other.