I saw an article breaking down the spending habits of a "typical" family of 4 that pulls in $400,000k a year, but lives in an area with very high costs of living. The position the author was taking is that while $400k/yr income can give someone a lot of flexibility, many Americans are living distinctly "middle class" or "upper middle class" lives while onlookers proclaim that $400k/yr should make them "rich."

So, let's dive into how Sigforum looks at $400k a year income.

Question:
You meet someone new at the post office. They are entirely forgettable, pleasant but not overly friendly. They are preparing their tax return for mailing, and you accidently see that they make $400,000 a year. What is your gut reaction to this?

Choices:
Good for them. They must be killing it at whatever they do.
Ugh. I wonder who they had to step on to get to where they are.
I feel nothing. The fact that someone makes $400k is not even the least bit noteworthy to me.

Question:
This person at the post office mentions that they feel that their tax burden is very heavy. What is your gut reaction to this?

Choices:
They make plenty of money, I'm sure they can spare a bit more of it in taxes.
They pay more than 99% of Americans in taxes, they're definitely paying more than their fair share.
Whatever, what they pay in taxes is no concern of mine--I pay mine, they should pay theirs.

 

What others make is no business of mine. Did Biden just pull this number out of a hat?

The article is correct, $400K can vary GREATLY depending on where you live.

Making $400K in San Francisco, NYC, Los Angeles, Hawaii or DC is a whole different story than making $400K outside of a city somewhere in the midwest.

$400k is a nice number. But it doesn't make you rich, it just gives you a nice standard of living, and a lot of flexibility. In addition, if you live anywhere close to your means with that sort of income, it's likely that a job loss or major pay cut would be catastrophic to your current standard of living, and you would have to make some pretty serious adjustments, particularly if you are in an expensive part of the country (NY, Silicon Valley, etc.) $400k will get you much more here in the Orlando area then it will in Manhattan, Arlington or San Francisco.

Furthermore, a family making $400k is likely making most of it in salary which is income, and taxed fairly heavily. Add to that the tax burden on the sort of home they likely own and the sales taxes they pay on lifestyle items, it is likely that their tax burden is a greater percentage of their annual total benefits than it is for someone like Bill Gates or Jeff Bezos. The tax code and the structure of upper middle class life is not particularly friendly to folks making $400k or so.

I think I see where the OP is coming from (I am in San Diego) and have seen it.

I can tell you this, someone earning $200K and living in Penasquitos and has a mortgage is likely just making ends meet when you consider they need a car or two just for commuting to work.

This same area might also have a neighbor who earns $400K but the only outward appearance between them and the $200K would be two Mercedes in the driveway vs. two Toyotas.

Along the same note, the $200K earner could move to the older area of El Cajon and have two Mercedes in the driveway however; the Return on Investment (of the house) will be lower than living in PQ.

So with that, if I saw the tax return of the person in the example, my first and likely only thought would be "good on them for earning so much" followed by "you eeediot, if you don't like your current tax burden, you need to withhold more for your 401K."

In my area this income is above average, and given our relatively low taxes and cost-of-living would be more than necessary to enjoy a fine life style.
Many around here who have that kind of income are mostly socking it away.
$400k as mentioned, would not go far in SF or Pebble Beach.

What someone makes is not my concern, especially since in most cases this would be two incomes.

If there’s a phrase the Dems have beaten like a rented mule for years and years it’s “their fair share.”

Here is California income taxes on $400k; there would be property taxes as well.

Tax Type Marginal Tax Rate Effective Tax Rate 2019 Taxes*
Federal 35.00% 27.05% $108,194
FICA 2.35% 3.96% $15,840
State 11.30% 8.69% $34,740
Local 0.00% 0.00% $0
Total Income Taxes 39.69% $158,773
Income After Taxes $241,227
Retirement Contributions $0
Take-Home Pay $241,227

Above from an online calculator. Now you see why people that make a substantial living are leaving. Moving to Florida gives $34,740 in the pocket... no State income tax.

And California is still broke!

question #1 : good for them

question # 2 : they're probably getting raped in taxes as our income tax system punishes high earners

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400k for one year is nice income.
If you can do that every year, it’s nicer.

This year has been my best ever year for income.
Next year doesn’t look nearly as good.

The figure $400, provides the greatest divide with a heist number of likely sympathetic possible "grudge" voters


Envy. Jealousy. Covetousness.

$400K is a large income, but it doesn't put you into the "rich" category. It will certainly give you a very nice lifestyle, but it isn't 2 Ferraris and private jet money. "Rich" has more to do with accumulated money than annual income, by and large. Although, with a high enough income, you can start accumulating.

And 37% sounds like a very, very large tax burden to me.

Back when we had our business, we made a pretty good pretax income. We used every tax law to our advantage. Always legal but it was always on my mind with any business decision made. And since we worked our collective asses off to generate that income, I never felt guilty using every law on the books to my advantage.

So to the question; if someone makes 400k legally and some how uses existing laws to pay zero taxes, that's fine with me.

I’m all for a flat tax...then everyone pays the same %age regardless of income...and if we could keep the .gov to spending w/i their means that would be great too.

First off good for them. They and their family's probably had to work hard and make a lot of sacrifice to get to this point in their lives.
In my opinion they are paying their fair share if not more in taxes.

Their is a large group of Americans that pay no taxes and in some cases they get back more than they pay in.

In the county in Florida that I live in the average household income is just over $51,000 dollars a year. In the united states the average household income is a little over $65,000 dollars a year.
My wife and I make no wears near $400,000 but we live a comfortable middle class lifestyle based on where we live and our fixed cost of living.
A family making 400,000 dollars a year in the area I live in would give them a very very comfortable life. And once again good for them.
If they lived in NY,NJ,Conn or any of the other high cost of living states whose to say their lifestyle might not be as good. They may be mortgaged to the hilt. They are also probably going to be paying all kind of other taxes.
This is also a big reason the three big states people are moving from are New Jersey, New York and California. They are moving to Florid Texas and Arizona.
Once again good for them.

Whatever other people make matters zero to me. I have enough problems that I need to pay attention to.

I have many clients that husband and wife are mid level professionals and combined making about that. Add in a ~1,000,000 mortgage And commensurate house that mortgage that big supports And the new car payment Or 2 and at least in the SF Bay Area That couple could be a job loss away from disaster and as long as the job holds up they are getting by.

quote:

The figure $400, provides the greatest divide with a heist number of likely sympathetic possible "grudge" voters

Where does the “envy” where’s my free stuff stop? I am very blessed and I have worked hard. I live a great life. Lived a great life when I was in an apartment with my second “real job”.

So because I cannot go out and buy a new Ferrari should I be jealous? I can’t afford a summer home. I have to go to work everyday unlike so many?

My point is I have watched a dude drive by my in a Bugatti Veyron and while my first thought was that is like driving around pallets Of money I never thought “that son of a bitch”. I just thought wow, good on ya brother, try not to scratch it.

I guess I just don’t get the gimmie some of your money brigade.

$400k a year in CA is completely different from $400k a year in, say, SD. You can never pay me enough to live in CA. Ever. That's my answer to question 2.

As to question 1, don't care what people make. None of my business.

quote:

$400k a year in CA is completely different from $400k a year in, say, SD. You can never pay me enough to live in CA. Ever.

This is why I have no idea how to respond to this.

Although if I was making $400K where I lived now....I'd buy a solid gold Rolex Day Date "President" and every Saturday I'd sit out front dressed like Sheriff Buford T. Justice and hire a chick who looked like Sally Fields to fan me with a palm leaf...and I'd STILL have enough left over for unlimited Natural Light in the cooler...

Gross income is like magazine capacity...it depends on where you live...