Whenever we pay our taxes, we curse the government for taking “our money.” But is it really our money? I think, no, not entirely.
Paying taxes is all about expectations. Salaries and hourly wages are not paid in a vacuum. Your employer gives you a salary, or a wage, based on the knowledge that the tax bracket your paycheck puts you in will require you to relinquish a portion of what you’ve taken home back to the government. Your employer expects you to remit a portion of your paycheck to the government, and compensates you accordingly: if there were no taxes, you’d probably be paid less, and if taxes were hiked, you’d (hopefully) be paid more. Given the incorporation of the expectation of taxes into every American’s paycheck, the expectation that you, as a taxpayer, get to keep 100% of your paycheck is entirely unreasonable. In the sense that the government is taking “your” money, it’s not money that was given to you for your own spending in the first place: it’s money you get to keep until the inevitable tax form comes. Uncle Sam isn’t stealing any more from you than your employer expects to be stolen.
That said, almost no-one thinks that deeply into the issue, and the emotional reaction is unavoidable: it’s painful having to give up a ton of the money you’ve kept in your bank account (or under your mattress), even if you thought ahead enough to know that you wouldn’t have it for long. Thus, of course, tax breaks are popular not just because we as citizens get more money, but because we as citizens viscerally – if inaccurately – feel less ripped off.
And the Republicans know it. Maybe it’s the cynic in me talking, but why do you think this little $300-$600 “stimulus” rebate is coming before, rather than after, the general election? It’s like Bush is saying, “Look, heh, you know we need this money (have you seen our debt, and the cost of this war?), but frankly, I care more about you feeling nice & fuzzy about the Republican Party in November than I do about America’s future.” Even regardless of its timing, though, this little rebate is an attempt to convince us to sell out our future, and smile while doing it. I say, no.
That $300 check is, for me at least, tainted by the knowledge of the hell we as a country will have to go through to recover from the debt incurred by George W. Bush, and therefore it ought to be spent to offset the damage done to the country by its disbursement. But how best to do that?
Give your check to Barack Obama. At this point in my life, as a poor law student, I could probably use that $300. But I can also live without it (I’ll just have 75 fewer $4.00 iced chai lattes from Starbucks… ack, that’s a lot!), and if we keep propelling ourselves so recklessly into debt, America may not be able to live without it. Electing a good candidate, someone who won’t put political gain over the economic health of our childrens’ America, is as good a use of $300 as I can imagine, and the irony of turning Bush’s stimulus package against him is just the icing on the cake!
If you can afford to do it, then, I urge you to take this chance to donate your check to Barack Obama. If you can’t, please use the check in good health.
“and if taxes were hiked, you’d (hopefully) be paid more.”
(If you have unannounced plans to go all public-defender on us, please disregard this message.)
Right – no one expects to keep 100% of what he makes. But the government’s share increases under Obama, hedging in on what IS currently untaxed and “yours.” You have one candidate who wants to raise your taxes (because you’re an evil rich lawyer) and one who doesn’t.
http://www.nydailynews.com/news/us_world/2007/09/19/2007-09-19_barack_obama_tax_plan_takes_from_rich_gi.html
You’re going to take money out of your own pocket and give it to a man who will leave less money out of your check for you to keep.
And (the payoff is…) in this legal market, there is no WAY New York’s going to 190 to compensate for the the tax hike. You will keep less of what you make.
It’s a perfectly acceptable answer to say that you feel it’s your civic duty and that all that money goes to stuff that’s good for the country. But if it’s just in terms of your own bank account, I can’t see the firms being able to raise salaries to keep pace with a tax hike.
Posted by Collin | July 7, 2008, 9:55 amAlso, I doubt that employers premise your compensation based on how much you think you’re taking home.
I mean, look at Cadwalader’s summer associate pay: $3075/week in New York, Charlotte, and DC.
If they cared at all about how much you took home, they’d pay less in Charlotte (where taxes and cost of living are lower) than they do in New York (where taxes and cost of living are higher.) So I don’t really see them thinking too hard about taxes as they vary place-to-place.
Posted by Collin | July 7, 2008, 10:04 amSORRY I know, I know.
It’s “I doubt that employers premise your compensation on how much THEY think you’re taking home.”
To that point, $160k in Charlotte has the same buying power as $362,091.47 in Manhattan.
If your ability to pay were relevant, a disparity like that wouldn’t come up. Unless Charlotte associates were worth more than twice as much to the firm as New Yorkers.
Posted by Collin | July 7, 2008, 10:15 amHey collin! I’m glad you’re commenting in this one, I shouldve figured it was up your alley…
Anyways, you’re 100% right on the disparities in the legal market (don’t get me started on first year pay NYC v Houston….) but, re: lawyers #1 boo hooo (I’m not crying over losing another few hundred in a year) and #2 the legal market is exceptional. The static salary across cities is an incentive to get well educated attorneys away from the lure of NYC. My theory is that the legal market, because of that, is unique.
But you’re right on the points that salaries don’t always change fast, and that you’re giving up some if taxes do increase. The best argument then is civic virtue plus “it ain’t so bad.”
Posted by Ames | July 7, 2008, 10:24 amcollin, i think you are erroneously oversimplifying ames’ point.
first, when large national (and global) corporations determine pay scales for employees, they DO consider tax encumbrances. they ALSO consider not only relative cost of living BUT ALSO what salary incentive might be necessary to attract competitive candidates to, er, less exciting places to live. new york candidates actually take a relative hit because so many (especially young) people think it offers “more” than places like … charlotte.
i think the algorithm goes something like this (apologies for the simple arithmetic)
(national average salary) * (consumer price index, adjusted for area-specific cost-of-living) – (area excitement level) + (incentive to live in area) = gross salary
and in that cost-of-living calculation is the tax encumbrance.
i think these things become more clear to a person once they are in the mix … married, with children, budgeting every month, saving for retirement, paying a mortgage … even with an advanced degree and an established career …
Posted by didionsmommy | July 7, 2008, 10:33 amames … you are reading my mind!
Posted by didionsmommy | July 7, 2008, 10:34 amIf you have experience setting corporate compensation scales, feel free to stop me.
But I disagree with the premise that people wouldn’t work in places other than New York and whatever other urban centers you choose to name unless they were overpaid in such “less exciting” places.
Less exciting? That’s condescending. There is a solid portion of this country’s work force that wants to live in places like Charlotte, Denver, Salt Lake City, and Tampa and doesn’t require any monetary incentive to do so.
Look at the Atlanta legal market. It’s dominated not by Latham, Skadden, and Gibson, but by Southern firms. They’re not on the 160 scale because they don’t need to persuade New Yorkers away from New York offices. They hire out of Emory, Vanderbilt, and Georgia, taking Southern graduates who want to stay in that area. Never does “stealing” them away from “more exciting” New York enter the equation.
Legal pay scales change very, very slowly. If firms were really assessing things like “area excitement level” and “incentive to live in area” they’d be much more fluid because things like that change. Also, how do you quantify excitement? Who at the firm is in charge of that?
Posted by Collin | July 7, 2008, 12:19 pmo.k., collin. you win.
i just happen to have a husband working for a huge, multinational, and i happen to have spent five years of my life working for the single biggest public employer in the nation. i also happen to have studied income inequities and changes in grad school.
i suppose, though, i do not have my finger on the pulse of the legal market in georgia.
and i’ll be careful to never use the word “excitement” again.
Posted by didionsmommy | July 7, 2008, 12:41 pm“i think these things become more clear to a person once they are in the mix … married, with children, budgeting every month, saving for retirement, paying a mortgage … even with an advanced degree and an established career …”
I really try not to be personal in these posts, but this makes it awfully hard. I’ll just say this paragraph offends me, that it’s presumptuous and personally condescending (toward someone you do not know) and that I’d like you to apologize.
Posted by Collin | July 7, 2008, 12:41 pmi should be more precise … single biggest STATE employer in the nation …
Posted by didionsmommy | July 7, 2008, 12:42 pmwell, i didn’t mean to sound presumptuous. quite frankly, it perfectly describes how my views have changed over time regarding wages and personal finances.
that i didn’t make that part clear is my error.
Posted by didionsmommy | July 7, 2008, 12:43 pmWoah. I think people read in insults where there were none. Collin, people with families probably do have a different perspective, and I don’t know about your law school, but the people here (and at harvard I hear) who aren’t interested only in the biggest cities, at least to start, are few and far between.
Posted by Ames | July 7, 2008, 1:23 pmAmes, first, I don’t question and didn’t question that married people with children “have a different perspective.”
Also, I understand that there are people who are dead-set on major cities.
My point was merely that there is “a solid portion of this country’s work force that wants to live in places like Charlotte, Denver, Salt Lake City, and Tampa and doesn’t require any monetary incentive to do so.”
These people may not be at NYU or Harvard in numbers, but at least a few of them are still “well educated attorneys.” Atlanta was merely an example of a case where firms outside New York have decided they can get satisfactory talent without hiking pay to lure away kids who preferred New York.
Posted by Collin | July 7, 2008, 1:34 pmI’m sorry we got into the whole debate about how firms decide compensation. It was, in the end, immaterial to my point; regardless of what calculus gets put into legal pay, salaries wouldn’t rise to compensate for a tax hike, at least not all that promptly. During that time, a lawyer at a firm would take home less money.
If he can reconcile himself with that situation on the grounds that it makes him politically virtuous, then it’s no problem for him. If he has difficulty accepting that the government is taking more of his money than before and using it on projects he opposes, I’d expect him to be rather upset.
Posted by Collin | July 7, 2008, 1:44 pmMy logic was less about tax hikes than about not viscerally reacting to the existence of taxes, and demanding breaks because you think its your money. I admit that that logic applies with less force to tax hikes, since management will often not match. As for the last sentence…. Huh?
Posted by Ames | July 7, 2008, 1:57 pmAmes, assuming you refer to Collin’s last sentence of his last post, it’s the whole “70% income tax being spent entirely on things I approve of is preferable to 7% income tax being spent on things I’d still want eliminated if they were free” mindset.
Anyway, why the fuss over legal pay? I’m pretty sure non-exempt jobs strongly outnumber exempt jobs in the U.S., and that’s a pretty big case of apples & oranges that makes me think that even if we assume, for the sake of argument, that the way law firms set their pay scales is representative of all salaried jobs in the U.S., it’s still not going to be typical since most jobs are waged, not salaried.
Anyway, if you get your withholding set up right, the money that isn’t yours never gets put in your possession to begin with. Yeah, some people say withholding’s bad because of that, but it’s a good material aid to help you keep from counting your chickens before they’ve hatched.
Posted by Steve | July 7, 2008, 10:40 pmWell said! Wish you’d been here to make that point earlier, it sets it up very nicely.
Posted by Ames | July 7, 2008, 10:41 pm