I’m Not Rich. Why Am I Being Taxed Like I Am?

In our “Money Mic” series, we hand over the podium to someone with a strong opinion on a financial topic. Today, one woman shares what it’s like to be disproportionately taxed based on her income–and how it’s holding her back.

If someone had told me as a kid in Louisiana that my husband and I would have a combined income of $250,000 a year in our late twenties, I would have been pie-eyed. It sounds like a crazy amount of money. But after taking into account taxes, debt and living expenses in New York City, we’re actually finding it difficult to meet our financial goals.

Why Our Taxes Are Nearly Unmanageable

Last year, we paid $100,000 in taxes, which is almost exactly 40% of what we make. Even though we also paid $22,000 in student loan payments (we have about $145,000 in combined loans for my husband’s law school and my grad school), we don’t qualify for deductions–if you make more than $150,000 filing jointly, you can’t deduct student loan interest.

We also don’t get a deduction for home ownership–because we can’t afford to buy one. We’ve been saving for three years, and after another three years of diligent budgeting, we hope to have about $100,000, which would be enough for a 20% down payment on a home in a New York suburb with decent schools–the average “starter” home in these areas is about $500,000–plus an extra $20,000 for closing costs and incidentals.

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We’re in a weird place: We don’t have enough money to invest in a house or the stock market, which would get us tax exemptions. So we pay the full 40% of our salary in city**, state and federal taxes. People who are much wealthier can take advantage of tax loopholes, capital gains preferential tax rates and a larger mortgage deduction, so they end up paying only about 20% in taxes. For instance, in 2011, Barack Obama paid 20.5% in taxes. Mitt Romney paid 14% in taxes.

We find it ironic that we’d have to make more . . . in order to pay less.

If we’re being honest, it’s not only taxes that are killing us. Living in Manhattan is expensive—up to three times the cost of living in other cities—but I work for a private equities firm and my husband is in securities litigation. This city is the industry hub for both of our careers.

We’ve discussed moving, but it’s unlikely that we would both be able to get jobs elsewhere. We rent a one-bedroom apartment near our offices in a neighborhood where they go for $3,000 a month. We could move to a slightly cheaper outer borough, but we’re both called into our offices at odd hours and we also work long days. So we pay for the convenience of living near work.

  • Sheenasuzanne

    I’m sorry, but I find it difficult to relate to your story. Be grateful for the assets you already have, i.e. degrees and experience. Manhattan is the opportunity cost you both obviously have chosen. You could both find jobs where cost of living is lower and acquire a home or other write-off assets. $250,000 is upwards of the 90-something-th percentile of American earners. I think most people will have a difficult time relating to this article or feeling any empathy here.

    • Sydaries

       They aren’t asking for sympathy, they’re asking for change. They are correct- it isn’t fair that they pay a double percentage on their taxes when compared to those who make quadruple their income level. Loopholes need to be closed and deductions need a max income limit. They seem grateful for what they have, they just want things to be leveled for the 0.5% and the remainder of the 1-2%

      • saras_tears

        They’re asking for change so that they can buy a half a million dollar house faster.  This article is absurd.  They literally have it all.  Great jobs, each others love, living in one of the best locations in the entire world.  Oh wait, they want that house faster.  The whole premise gets lost in that.  Everyone knows “broaden the base” means get those 47% that don’t pay federal taxes to pony up!   It isn’t a single bit harder for them compared to the average joe coming out of college and getting a 40k a year job.  It’s the exact same. “Why Our Taxes Are Nearly Unmanageable,” I wanna barf when I read that.  Get a grip.  It really doesn’t sound like you guys know what SACRIFICE means.  And the thing is, you don’t even have to sacrifice a thing to get that beautiful home you want, you just have to wait a little longer.  My parents didn’t buy a house until they were well into their 30s.  This is ridiculous.  Hey guess what, everyone from 27k+ is probably paying a higher tax rate than Mitt Romney.  We all think it’s a bit messed up.  But for crying out loud, none of us are trying to buy a half a million dollar home at 27 and think that is a solid reason as to why the tax code needs to change.

        •  Buying a half million dollar home in NYC is like buying a $100,000 home anywhere else. That’s “cheap” in the city.

          • saras_tears

             Good point, but how is it any harder for them to buy that house compared to someone elsewhere buying that $100,000 house?

          • Makoviecki

            I think her article said in ‘a new york suburb’ ….I live in NJ, a full hour out of NYC, and $500K will buy you a teeny tiny little house with a postage stamp lawn and a property tax payment of at least $10K annually!  And there’s no longer a promise of that tiny house increasing in value….quite the opposite for those who bought that house a few years ago.

          • If that’s too difficult…. MOVE.

          • Val

            Our careers are tied to these cities, so it’s not as simple as just moving somewhere else. Taxes need to adjust acording to cost of living. Don’t forget, in NYC we pay federal, state and city taxes.

          • We do in DC as well. We figure it out. 

          • Sorry, I just think you need to pick a secondary hub. No one told you to get that far in debt for your careers. Or to pick such an expensive place to live. Maybe an apartment out of town will be better until you can afford a house. If the income issue with $250K per couple is not working, maybe it was too soon for you to marry. Maybe you should have killed your college debts first. Marriage and house buying in your 30s instead of your 20s was probably more reasonable. I’m sorry you didn’t see a financial planner before you did all this stuff.

        • CaseyC

          Beautiful home, Sydaries?!! A half a million dollar home in NY would not be a beautiful home! And this comment, “ It really doesn’t sound like you guys know what SACRIFICE means”, you just don’t get it.  So these people are suppose to ‘sacrifice’ for the good of others, is that what you’re inferring?!! Ha! Who are you to judge whether this couple knows what ‘sacrifice’ is?!! Did you grow up with them? Do you know what they had to go through to get where they are? Do you know whether they came from poverty to get where they are today? I doubt it!! The point is, whether this couple had scrape by or not, to get where they are today, doesn’t matter. This is about principle! They should not be paying such a high percentage of income in taxes.  It’s wrong! Our government is getting way too big, way too much government waste – and part of that waste is on people who are very capable of working but choose live, to a large degree, off the government, i.e., US (TAXPAYERS)!!!!!!!!!!!!!!!

          • CaseyC

            Sorry, my comment was to saras_tears, not Sydaries. I agree in essence with Sydaries, except that the much more wealthy individuals should not be paying a ton more in taxes either! Government just needs to decrease in size! Stop all of the wasteful spending.  I guarantee that if any rationally-minded individual were to look at all of the things the government spends our (taxpayers) money on, he/she would be shocked at the amountspent on such ridiculous things!

          • Glitterspark37

            Under Pres BO we’ve had the lowest taxes in 3 decades, including lower than under Ronald Reagan. But I do agree with you that we need to cut wasteful spending. What they spend money on in the military is ridiculous!! Airplanes and other equipment that we no longer need, bases we no longer need, contractors that are paid out the nose while our military men are paid so much less…not to even mention the wars we didn’t need. We’d be trillions less in debt without that!

          • luckyhorseshoe

            what do you mean by lowest taxes? rates? collections?

          • Unfortunately that wasteful spending gutted money from things like bridges and structures like the levies that failed in New Orleans. We’ve got 30 years worth of work to do in that area just to keep things from falling down. We may never get ahead of it all.

          • Sydaries

             I agree that the US Government needs to decrease in size and reach a bit, but I think that once spending is cut back and loop holes are closed (If I remember an article I read several months ago correctly, GE did not pay any taxes in either 2010 or 2011) the government will find more money to close fiscal gaps, repay our debt to China, and find a way to reduce taxes overall. This will take several decades, but if most loopholes were closed, the government would have a lot more money to fill in the gaps.

            I also believe that senators and congressmen/women should not be able to have a salary increase unless the budget is balanced. I think that if their income was on the line, they’d be more proactive about it all.

          • luckyhorseshoe

            1. govt cutting spending means defense contractors fire tens of thousands of workers. Not saying we shouldnt cut spending but pointing out it is not as easy as you think.

            2. what you call loopholes are incentives. Should govt not encourage us to buy homes, go to college, start businesses, hire, workers, save, invest? Should corresponding penalties on tobacco, liquor, gambling, gasoline also be eliminated?

          • luckyhorseshoe

            1. if the revenues from new taxes were committed to reduce debt, you would see opposition drop in a heartbeat. But it will be spent on further programs that do nothing to promote economic growth.

            2. screw china, they hold a paltry 10% of our debt. How about you and I who fund 1/3 of the debt through the social security trust fund. And of course the govt plans to NEVER repay that amount, just cover the shortfall as it occurs. Isnt this precisely what got US automakers in such dire straits?

          • saras_tears

            I’ll admit you started out well, but your Breitbart-esqe melt down completely tanked. You don’t seem very bright – you are the one attempting to infer what I wrote, please just go look up what infer means. Anyway, your assumption was wrong. The sacrifice isn’t for the good of anyone but herself. She said she wants a house, there are ways to do it but she doesn’t seem willing. A lot of people do this, this sacrifice, so that they can have what they want in life. There is government waste, but I don’t go blaming poor people on the internet and inflate my ego because I have a good job and pay a lot of taxes. You are an unintelligent jerk.

          • Monalisset

            Wow. I would be willing to entertain your opinion if you were more respectful of others and their opinions. This is exactly why as a government and nation we seem so stuck and unable to move forward. We can’t seem to even dialogue. We need to learn to listen more and consider the perspective that others bring. No one has the magic answer. This is an opportunity to seek out new ways of thinking and doing things. I hope this makes sense.

          • saras_tears

             Um, okay?  Casey was the one to tell me “I just don’t get it”  No, I get it.  I am very willing to listen to others, have my opinion changed, anything.  But it has to happen in a way that is backed up by facts and reasonable assertions.  Casey regurgitated the low intelligence talking point of pointing the finger at poor people. It was done in an extremely condescending way also.  Saying they are capable of working but choose to live off the government is very disingenuous and just a right wing talking point.  Perhaps you need the re read the dialog again?  I don’t begrudge and generalize different populations of Americans.  While I think it’s wrong, like the article suggests, to have an extremely high income but pay a miniscule tax rate compared to the rest of us, I do not in any way put down those that do.  I would actually consider them not very smart if they are not taking advantage of what is available to them!  Casey pointed a finger at poor people with nothing to back it up, and for that I still consider him an unintelligent jerk.

          • Sydaries

             I agree that those who take advantage of the system are smart- but that’s why policies need to be changeddd

          • Sydaries

             I agree that those who take advantage of the system are smart- but that’s why policies need to be changed across the board- loopholes should be closed (though we can’t blame those who do take advantage of them)and goverment benefits should be regulated more closely to prevent people from gaming the system.

        • MEH

          So I guess wanting to own a home, to raise a family in, the American dream- is a ridiculous notion now. Wow.

          • saras_tears

            That is not what I said at all.

            Learn to read.

        • LeeLee

          Why does it matter what their reasoning for wanting the tax code to change is?  All that really matters is that they are obviously paying more than their fair share.

          • saras_tears

             Not at all.

          • Sydaries

            I think that they would be ok with the % they were paying if others who earn more annually payed very close to the % that they are paying now. They feel like they are paying more than a fair amount, and that’s understandable- they are paying an unfair % based on the tax loopholes those with higher incomes can take advantage of. I think that tax codes need to change- close the loopholes and keep the graduated tax system.

          • Brendy G

            Ok folks, Let’s not get hot under the collar here.I think this is getting out of context. Yes, there are many loopholes that need to be closed. However, I agree with the financial expert on the first comment.Colleen, you could be paying less taxes, by itemizing more: Giving to Charity,Having a child before the House,contributing to a 401K and a Roth Ira,Using an FSA for medical expenses,etc. All these should be feasible, with a little bit more budgeting.. Take it from a single parent of 2 ,who makes 25,000 . You should be able to adjust down a little. Come out of the clouds and realize that between the 2 of u you guys make 20,500 dolars gross a month, even after paying 8,000 a month in taxes you guys still have 13,000 dollars left..If I can make it with 2000 a month living in Boston, Ma so can u, and believe me , I contribute to a Roth Ira, a 401K ,an emergency fund and give 10% to charity.You just need to adjust your thinking and maybe take a trip to Haiti, and realise how fortunate you are. This is just a little tough love,you seem like a nice kid. Good Luck!

        • Digcalifornia

           My Husband and I are on the same page as this author.  Look, years ago before moving to NYC, I would have thought 250K was enough for anyone, anywhere.  It is not enough for NYC.  In order to have the same lifestyle as we did before, we would need to make twice as much, which we do not.  It is hard to understand unless you live here.  500K buys you a 1bd apt that is not that nice.  Just think, the avg joe getting out of college where you live would need to get a 85K year job here. When you have to pay 40% and the cost of living is double anywhere else, it is hard to put money away for a down payment when you dont have it.  we pay 39K a year in rent for a 1bd. 

      • Sheenasuzanne

        I said EMPATHY. Not sympathy. There is a difference.

    • Guest

      I have to agree, especially since I have a relative living in Brooklynn managing just fine on 1/5 of their income!

    •  You don’t have to be empathic that they live in Manhattan or make $250,000 a year. Be empathic that they work very hard and then the government take 50% of their income saying “Great. Good work. We need to give that to other people who need it.” Imagine working hard and then having half of your pay check taken away. Why? Because they don’t deserve the money they worked for? And people who game the system deserve this couple’s money more?

      • rhl

        I guess I must be “gaming the system” with the medical deductions for my disabled children. 

        • T2

          Why do you have more than one disabled kids? I would stop at 1.

        • Sydaries

           No, that’s not the case. It’s those who take unfair advantage of loopholes that are gaming the systems. I plan on using my student loan interest as a deduction, and I’m ok with that. You have a legitimate reason for a deduction. I’m ok with that. It’s those who take advantage of the system and don’t try to give any “social returns” that I’m not ok with.

          I don’t have extra money, but I can donate my time and my blood to support others in the community. It’s about an inequity- not in the “give everyone equal income” way but in the “make sure everyone does actually put in their fair share” sort of way.

          Having a child with a disability puts you at a financial disadvantage because of all of the care he or she needs, including the time you need to take off of work (if you do work, idk- no judgement) to bring him or her to doctors appts, therapy, special groups, teachers meetings, etc. You are not able to devote more of your time to procuring income.

          Rich folks with fewer dependents, on the other hand, are able to use the money they already have to earn a much greater amount of income. They are not disadvantaged because they have the time to make more money.

          • luckyhorseshoe

            So loopholes are what “other” people use but dont touch YOUR loopholes. Finally someone who admits that they are the problem. When I invest in debt or equity instruments, it does just as much good for the country as when you go to school. It enablees capital spending, hiring, brings foreign investment to this country. THAT is the reason for reduced capital gains taxes. Not to feed the rich. BECAUSE IT IS GOOD FOR THE COUNTRY!!!  just like college, homebuying etc. Dont get me started on your silly assumptioon that “rich people” never have disabled children or always have fewer dependents. Or that they dont work for their money. I am sure the first black president is proud of the stereotyping you have bought into.

        •  I never said that. There are plenty of people who don’t have legit reasons for government assistance. I am thinking of someone I know well who chooses to not work at get welfare. She buys crap all day long on TV and begs money from friends… That’s gaming the system

      • CaseyC

        Thank you, thank you, thank you, thdpr! I’m so glad for your rational thinking.  Thanks for your comments – totally agree!

      • CrankyFranky

        so – you don’t like paying taxes ?

        do you like driving on roads and bridges that are maintained and won’t collapse killing you – do you like police and ambulance to come when you need them, do you like to have your local hospital fully equipped for emergencies if you have a heart attack ?  Would you like the government to help out when your insurer refuses your claim for your home destroyed by flood ?

        Selfish (usually rich) individuals are so full of their own ego they tend to forget how much they rely on public services – paid for from your tax dollars.

        Self-made man – I doubt it – if you are rich you got there by the efforts of many – not just your egotistical paltry squib of a self.

        • LeeLee

           I don’t believe anyone said that all taxes should go away.  And does someone who makes more use these services more?  If not, why is it fair for them to pay more for them?

        • luckyhorseshoe

          This is a straw man argument. If the infrastucture/government welfare system was responsible for extra ordinary success, we would all be rich. At best you could argue that the amount of wealth up to the national average is shared performance but that amount of performance above the average cannot be due to the infrastructure/tax driven level of performance that the average person shares. Willingness. ability/aversion to risk, entrepreunurial spirit, and a million other individual traits create the exceptional. Many of my friends preferred big houses and big cars and large/early families to savings and investment. That is their right but it is more responsible for the gap between their performance and mine than any govt infrastructure. That was available to all of us and yet we each did more or less with it.

          • Glitterspark37

             luckyhorseshoe, are you basically insinuating the old “bootstrap” argument here? Are you really saying that it is 100% the individual’s fault if they do not succeed? If so, you have proven how little you actually understand about capitalism and relative wealth. Capitalism is a system set up for winners and losers. It is impossible for everyone to be middle class or rich, because someone has to be running the mcdonald’s drive thru, cleaning toilets at the corporate office, etc, while there has to be someone running the company. If every single person in this country had the same level of ability and drive, there would STILL be people in low-paying jobs, people who do not fit into the job market, and people with no-benefit positions. That is how capitalism works! There can only be rich people if there are poor people. If everyone made $1 million dollars a year, then costs of goods would go up and no one would be better off than anyone else.
            The whole “willingness” argument is the biggest lie that America tells its citizens. Wake up. Capitalism ensures there will be poor people and people with less. The rich and powerful in this country depend on it. Otherwise they wouldn’t be rich anymore.

          • luckyhorseshoe

            I am not insinuating anything. I am stating in as clear a manner as I can that people achieve different levels of success because people are different. I am not talking about lottery winners or those that inherit. I am talking about Steve Jobs and Michael Dell and Henry Ford and Commodore Vanderbilt and Bill Gates. I could not achieve what each of those individuals did. The government infrastructure available to them was the same available to everyone else. They took risk, recognized and took opportunity. You didnt. Feudalism, Communism. Socialism, pick your -ism . . . none have found/been the “cure” for poverty.  Capitalism is no different. What capitalism is the best at however is prioviding the most movement between the financial/social strata. Socialism might provide the highest minimum level safety blanket but like communism stifles incentive to excel while still not eliminating winners and losers. 

      • They live in an expensive city with an expensive infrastructure; subways, city streets, police officers, fire department, central park etc….  I can pretty much bet that state and city taxes comprise close to half of what they pay.  Living in NYC is a personal choice.  They could move to Nevada with no state tax and no sales tax.  My guess is that their income would drop relative to the tax decrease.  

        •  Absolutely true. NYC has some of the highest state and city taxes. I live in Denver and we have city taxes too.

          But you’re right. If they moved a house would be cheaper… and their income would decrease also. So doesn’t that say that there is an issue here? It is highlighting a serious issue of OVER taxation.

          We don’t say anything when it doesn’t affect us, right? it’s the “rich people’s problem” but what happens when this doesn’t solve the issue? Then we tax people making $100,000 or more at 50%… then we tax at 75%… at what point is it too much?

          • bg

             I have been at both end of the equation, making a high income ,living in Queens, NY and a low income living in Boston, ma. Yes, some people abuse the system,etc. However, the author did not ask us to judge her lifestyle choices,but the high taxes that she already pays, and might be paying more of in the near future,unless she finds ways of reducing them. If she wants,she has access to plenty of literature that will help her do that, or hire an accountant/financial advisor since most likely she could afford one, in order to pay less taxes. Otherwise, she can do like everyone else and adjust,her expenses,so that she can reach her goals quicker.It is a sad fact that all must pay taxes,however,it is also true that  those of us who make more(Rockefeller/Benjamin Franklin,etc) must help the most unfortunate people,and I am not talking of the ones that abuse the system,I am talking about the people that never make it to the news, The parents that have a sick child at home, and don’t know how they are going to afford to pay for that child’s chemo because they have no insurance and they make a little over the poverty line,to qualify for one. I am talking about the elderly that make 1000.00 dolars a month in social security and cannot afford to pay $500 in fuel to heat their homes. Living in New York is a beautiful thing,however when you make the kind of money these people make,they could afford to pay more taxes on behalf of those who already are stretched to the limit.It all goes down to CHOICES.

      • luv2graze

        thdpr and Casey C – well said!

      • SEN

        Why did you add 10% to what they pay in taxes? Did you even read the article?

        • Of course I did… your statement is just a red herring. They pay 40% now, and will pay 43% after we fall off the fiscal cliff. I have pretty consistantly said here, “nearly 50%” except is a few places. Obama’s plan is to up it to 47% which is nearly 50%… 50% is an impressive percentage if 40 isn’t… and it’s close.

          You know what I was saying. Thanks for adding your voice.

          • Guest

            Umm, again- taxes only go up on income OVER $250k.  Don’t understand what’s so difficult to grasp here. 

    • pamorama

      I fully agree, Sheena. Come on, we all contribute to the tax base because we benefit from these taxes with roads, infrastructure, public parks and recreation, and public safety services and disaster relief, etc. How do you think a country runs without taxation? And if someone in their 20s makes a combined income of over $250K, and still can’t save, then maybe they should examine some aspect of their spending. Try making $30K or less a year and living in Los Angeles. That’s where I was in my 20s and I made it work. Now should the top 1% start paying a fair share, absolutely. Should federal and local governments be accountable for their budgets and expenditures, yes indeed. But I just don’t feel that this writer’s situation is tragic.

      • CaseyC

        The point to the writer’s article is not that their situation is tragic but rather that it’s not fair! I did not get ‘tragic’ from the article.  It’s amazing that if five people were to read the same article, each could potentially come away with a different take.  Interesting. Who cares if you make $30K or $20K and make it work.  The fact is, this couple should not be paying as much as they do in taxes. It’s just not right! BTW, I lived in LA as well and made less than $20K/yr and made it work.  So we are supposedly better individuals because we can make things work on a much smaller budget? We’re not ‘greedy’ like ‘they’ are?  Wrong, wrong and WRONG! 

        •  So did I. I lived in LA on $12,000 a year.

    • luckyhorseshoe

      you miss the point. this arbitrary $250k is silly. It means something totally different in Manhattan, NY than in Manhattan KS. But the tax code is an unthinking, unfeeling piece of paper unaware of such nuance That is what I took from the article 

      • Monalisset

        Yes, I can see this point. Why shouldn’t everyone contribute equally across the board based on their income so it does’t have to be so lobe-sided? Why should people like Romney, Obama, and big corporations only pay a fraction of what everyone else pays?

        • luckyhorseshoe

          if Mitt is paying a fraction of what you pay, I congratulate you on your huge income. The folks you cite are paying in taxes multiples of what I make in annual income.

    • CaseyC

      Are you serious, Sheenasuzanne?!!! Can’t relate?!!! I make hardly anything but that doesn’t mean you can’t relate or understand where they’re coming from, come on!!! Do you honestly think it fair that this couple should be paying almost half of their income in taxes?!! So what if they are in NY or whatever other city in the U.S., nobody should be paying that much in taxes – period! They are paying much more in taxes to cover the fluff and waste in government as well as to compensate for the many others who pay almost nothing, or nothing in taxes.  
      Anyone with a rational mind should be able to relate to and understand these and similar people’s plight. Sheenasuzanne, it’s time for you and many like you to stop trying to defend or justify those in public office who seek continually to raise taxes. Have you not come to the realization that the more we’re taxed, the more the government spends?  That fact is crystal clear to me, and needs to stop!

      • Makoviecki

        Yes, and when they buy a house, they’ll get the mortgage interest deduction, but that will be largely offset by the incremental $15K they’ll pay in local property taxes to pay for less-than-adequate schools!

      • Glitterspark37

        Under Pres BO we’ve had the lowest taxes in 3 decades, including lower than under Ronald Reagan. So, who’s raising taxes? Do you understand who it is exactly that isn’t paying taxes? I suggest you do some research, CaseyC, because you sound very uninformed.

        •  Glitter… this discussion is about the Fiscal Cliff… wherein taxes for all will be raised… That’s what we are talking about. Listen to the President. He easily says he IS raising taxes on people he considers rich this term. And this couple above is considered rich.

          • Glitterspark37

             thdpr, the proposal is to expire Bush’s tax cuts for the rich – which were always meant to expire, and in fact were meant to expire several years before this discussion we are having today. So actually the Obama administration renewed those tax cuts – the lowest in over three decades – PLUS in addition gave further tax cuts and benefit reductions to the middle class. It’s about time we let those temporary tax cuts expire.

      • saras_tears

         They can afford to pay that much in taxes because they make a ton of money.  Do you have a $3000 month rent apartment, two school loan payments and then have 7-8k left over a month?  These people don’t have a problem at all.  If the tax code didn’t allow the uber rich that have 5-10x her income pay 10% in taxes then maybe the code could be changed and some sort of incentive to lower their rate could be created.. I would be all for that.  These people obviously work hard, full-time ever week.  But yet the tax code “penalizes” them and rewards the uber rich for finding shelters or loopholes.  You have salient points about government spending and waste, but I feel you are too far to the right to really tackle the problem in a way that won’t exile you from the “cause”

        •  I wouldn’t call it a TON of money… Yes, they are well off but they can afford to pay nearly half their income because they make so much? Why can’t we all pay a flat rate with no deductions? How is is “more” equal for people to pay a percentage more than others?Already they are paying more in taxes than you are because they make more. That’s how math works.

          You make $10,000 and pay 10% = 1,000 in taxes.
          They make $250,000 and pay 10% = 25,000 in taxes. How is that not fair? Because we can’t balance our budget and we need people to bail us out?

          • Cj3wilso

            ‘How is it “more” equal for people to pay a percentage more than others?’

            I’d argue if you have a very unequal society regarding wages it could make some sense to balance things out. A person making $10,000 a year is making 4% of $250,000. That’s a huge difference. If the bottom 10-20% of our society need most of their money just to get food and shelter and the top have a huge surplus and you need X amount of dollars to run a country you may want to tax the wealthy a bigger percentage of their wages to pay for it all. Taxing people too much when they are poor.. may just kill them especially this poor $10,000/year person.. which makes them bad tax payers over the long-haul. Just sayin’

            Now whether governments are using that money effectively? Sure its a good argument. But we already have a huge deficit to pay off. So it may be an argument that’s too late to stop the tax hike, but may be needed to stop further tax hikes!

    • lindor dark

       ”Be grateful for the assets you already have, i.e. degrees and experience”
      Those didn’t come free or as a handout. They have to be paid for and clearly the employment that would enable that is in this case in Manhattan. Unless you are suggesting they were wrong to get an education in the first place.

  • Sagestar

    The writer clearly stated she and her husband are thankful for what they have.  Yes, it is relative, where they live, the types of jobs they have – another area might have a cheaper cost of living but the salaries would be relative as well. The point to the article hits home, I am in the closer to $50,000 per year as a single mother with one child, I am contributing to my 401k at max, as well as have an emergency fund, and I paid a higher percentage rate in federal taxes than the 14% Mitt Romney paid. Obviously, my 20% is still probably a smaller dollar amount than his 14%, still not equitable. I believe reform is needed as well, eliminate loopholes and stop giving away funds as “credits”. A level playing field is not that much to ask for.

    • luckyhorseshoe

      question . . . If you believe in removing loopholes and credits that encourage investing, college, home buying, etc, do you favor also removing punitive taxes on things like gas, tobacco, liquor and gambling? Just wondering if your preference for “fair” is absolute or targetted.

  • Jen

    I don’t think any intelligent person would say you aren’t paying your share. but lots of people making over $250,000 aren’t paying their share- like you said, many pay less than you. I find it interesting that you complain about people wealthier than you only paying 15-20%, but then your tax solution is to broaden the tax base among lower income people rather than to raise the effective rate paid by the super rich.

    • “Fair Share”

      The problem isn’t the tax rate, as evidenced by the fact that the writer pays 40% in taxes and people who make more than she and her husband pay 15-20%.  Our tax code was designed to be progressive – the higher your income, the higher your tax rate.  The problem is the loopholes an deductions!

      A couple who makes more than $250k can pay less in taxes than the writer if they qualify for certain deductions/credits for participating in activities that the government wants to promote (buying a home, having children, etc.)  It doesn’t matter if we raise tax rates because when you’re rich enough, you find ways to take advantage of existing loopholes and not actually pay that rate (think Warren Buffet…)  Raising tax rates hurts families like this one, not “rich” people.  If you want “rich” people to pay more, simplify the tax code!!!

      I also think it’s interesting that the writer brings up the “fair share” argument.  Certainly the idea that higher income people should pay more in taxes is legitimate, that’s why few people support a flat tax.  But what is “fair”? Is 40% fair? Or is 75% more fair? Who decides what’s fair?  Is “fair” just however much we need to cover the bill?  If we are going to keep talking about “fair share”, I think our leaders owe us a rational discussion on what will be considered “fair.”

      • CrankyFranky

        a good considered reply – also a factor in tax breaks is government wanting to encourage investment – I believe an international standard is being able to claim tax deductions for investments towards producing income.

        So – your billionaire ponies up $100m for a new factory and claims it on tax – and can claim they are creating jobs.

        • Guest

          How about a tax credit for each job created instead of the reduction in income/investment tax? That makes much more sense to me.

  • anon3000

    Harriet, Thank you for sharing your story.  I’m also in a somewhat similar position living in NYC, though a lower combined income, where I don’t have any deductions and end up paying much more than peers who can take advantage of the deductions available to them through owning a house, having kids, etc.

    LearnVest, For articles like this, it would be extremely helpful to see a “typical month” budget breakdown for the person you’re profiling.  It would help us readers get a sense of what’s normal, other people’s spending priorities, and see where we can make changes ourselves. It’s touched upon in the beginning for Harriet’s largest expenses, but an in dept profile would be great.  Thanks!

  • Dana

    I relate to your story in some ways — living in New York City in a 1-bedroom apartment with student loan debt. My husband and I earn a combined $89,000 before taxes and pay roughly 25% to taxes before living expenses and debt. We also have graduate degrees. We’re barely floating by and it’s difficult to imagine saving up the 20-30% for a down payment, then pay more in commuting costs. However, your difficulties result from choices you make in education and lifestyle. Nobody needs to live in a neighborhood where the average house sells for $500,000. That is a personal choice, as well as putting the priority toward saving for a house as opposed to contributing to retirement savings. We’re focusing on retirement first, housing changes next. But it’s going to take us longer to get to our goal.

  • Lauren Lever

    I haven’t taken a proper vacation in 5 years due to a variety of reasons, at least you can take a vacation. 

  • seriously?

    oh no! i have 100k saved up for a home and a healthy retirement account! poor poooooor me. move to north jersey. drive in when you are called into work at odd hours. you can obviously afford the parking costs and you will no longer be paying 3k in rent. you taxes will also be significantly lower. if you want to complain about not having enough money, then don’t say you *need* a 3k apartment. i think suze orman would slap you.

    • Monalisset@yahoo.com

      You might be missing the larger message of the article. Read it again and see if you don’t find something deeper.

  • Erin

    If you are making that amount in your late 20′s, you’ve got plenty of time to make up the difference.  You don’t need your dream home immediately.  But, I agree with the LV planner, they definitely need to start contributing to 401K!  While reading the article, I kept thinking…40%?  How could they be paying 40%?   Don’t they take advantage of HSAs or 401Ks?   My husband and I are higher income earners.  Not quite at the 1%, but we save, save, save and almost max out our 401Ks and HSAs.   We do own a house and get the interest as a deduction, but I purchased my first very modest house at age 26 before I even met my future husband.  Couldn’t the writer and her husband purchase a modest house, townhome or condo to begin with, use the tax savings, and then save up for a larger house?  It’s better than wasting $3000/mo in rent and even more in taxes.

    • Lauren

      It’s insight like this that makes me want to read a follow-up with them and a Learnvest expert!

    • Karen

      Exactly.  Something isn’t adding up here.  I would need to see a budget because their take home has got to be at least 12k a month.  After shelter and assuming another $2000 or so for student loans (a high estimate), that’s still $7000 a month left for variable expenses.  How is that not enough?

  • What about moving to a less expensive neighborhood and making the case with your employer for flex time? Then you could work from home when random things come up, and could save an extra $1k a month, perhaps. That’s what I do, and it’s the only thing allowing us to chunk down money for a down payment on a house. I don’t know what the rest of your budget looks like, but I imagine there’s probably space in other areas that you haven’t thought about. Gotta reframe everything to get what you want, sometimes!

  • Alison

    The article is about taxes, and I agree that losing 40% off the top is a really tough pill to swallow.  Unfortunately, I think most of the tax focus is lost in the article because it’s hard not to question the stated strict budgeting and tone of not being able to save enough for a house and an emergency fund or contribute to a 401k.  After taxes, AND after the next biggest expense of housing (in this case rent – so no other maintenance costs need to be considered) AND even an assumption of $2k a month in student loan payments that still leaves $7,500 a month for food, transportation, discretionary expenses and the opportunities for a whole lot of savings.  Even in NYC it would take an awful lot of groceries and subway rides to put a dent in that each month….

    • gcola3

      Well said.  The message totally got lost.  The taxation IS a real issue, but in this case the details were distracting.

  • Michael

    We all know that those who have extreme means can pay a team a of tax accountants to cheat the system and that must change. They need to pay their fair share and haven’t for decades. With that said, your situation is not sad at all. You are choosing your own view of the American dream which comes with its own pros and cons. I live in NYC too and know home ownership is not really in my future if I stay here. Making what you do is a dream that almost no one in America will see in their lifetime. You make almost as much monthly POST tax as someone earning minimum wage does PRE tax in a year and people live and save on that in America. The dream is to be free to do what you like where you like. There’s no guarantee to owning a home and paying the amount of tax you think is fair. It takes hard work.

    • luckyhorseshoe

      why is using the tax code legally considered “cheating” the system? Because you arent smart enough to use the code? It doesnt require an accountant, merely a willingness to do more than piss and moan and blame others.

  • My concern is less about how much they are paying in taxes and more about what their savings actually looks like. Once they’ve finally saved enough to buy a house (outside of the city, where they are currently not willing to live), will they be able to put what they were currently saving into 401k’s and an emergency fund? Or will they be stretched too thin by the costs of homeownership? If they are willing to budget and move to the suburbs in a few years, why wouldn’t they save more sooner by moving out of the city now?

  • Lauren

    I’d love to see Learnvest help this couple out with a new money plan. There has to be a way to help them save for retirement, save for a house, and enjoy their well-earned salaries. I’m so curious to know what advice an expert would give them.

    My best guess for them? They need to move out of Manhattan. If they’re planning on moving to a NY suburb eventually anyway (how will that work when they’re called in late to work?), they can start practicing that now. Move to Jersey City. Save an extra $1,000/mo. The commute would be easy (especially if they work downtown). 

    I assume they’ve thought of this and don’t want to do it partly because of a status thing. I get that, too, but there’s the trade-off. How soon do you want to buy a house? If they can hold off until they progress a little more in their careers, and possibly earn some more, they should be able to settle down nicely eventually.

    All that said, I do think their tax rate is crazy. 

    • luckyhorseshoe

      my guess is that the advice is to forget about buying a house. No telling when home prices will rise again at old time levels so it is not an investment. Pay off debt (student loans). Delay home purchase at least until debt paid off, path of income future and family plans are more certain. If income stagnates and family grows, you will regret buying a starter home now.At current rate of reduction, student loans paid off by age 35 or so. Still young.

  • sarah

    I find it very hard to relate to this story.  I am living below the poverty line and have given up so much just to survive.  The last time I had a vacation or even could afford health insurance was over 2 years ago.  As for paying off my student loans…not going to happen until I get a full time job.  ( I’ve been looking for over a year for full time work.) I pay the minimum on my credit cards from my failed marriage, and by the way I can’t even divorce my husband because I can’t come up with the money to do so.  I don’t ask for pity or handouts I accept that this is the way it is going to be and I certainly don’t try to live beyond my means.  Cutting out non-essential things was hard but it was necessary.  I couldn’t have a clean conscious to complain if I was still giving into to luxuries that could easily be forgone.  

    • Thuy

      If you are living below poverty line and you want to get a divorce without dealing community property than you may qualify for legal aid.  There may be some waiting but it would you help you to look into that.

  • Anna Leath

    Just approximating here, but if your apartment is $3,000/mo and your taxes are $8,500/mo you still have over $9,000/mo to live on, how can you not get that to work for only 2 people? I mean I would honestly like to see the numbers. I cannot fathom having that much money each month. I agree it’s unfair that people making more than you end up paying less in taxes, but I don’t in any way feel sorry for you. 

    • lin

      I completely and totally agree.  I don’t understand where the money is going.  With the 40% taxes, you are bringing home $12,500.  Let’s say 3k goes to rent and $1500-2000 goes towards student loan repayment.  That still leaves a hefty $7,000 to $8,000 a month.  That is a generous amount of money for two people, even in Manhattan.  You should be able to save half of that, easily.  I don’t understand what this woman, and many more like her, are complaining about.  

      • Lauren

        Hadn’t actually done the math until now. Totally agree! What isn’t she telling us here?

        My guess is that “cutting back” to them isn’t what cutting back is to people with lower incomes and jobs with a bit less “status.” They probably have friends with similar jobs and go out often because of that. Their lifestyle probably dictates more expensive choices, and even when they cut back it’s still a lot. 

        • saras_tears

           Yeah I’m not sure this article could be posted if they gave us any details about their spending in a month.

          Feigning “unmanageable” on 7-8k a month of available funds.  Truly a slap in the face to anyone that has had to make serious cut backs in their standard of living to save for a long term investment like a house.

    • luckyhorseshoe

      I disagree. Despite the class warfare rhetoric, rich (financial) is matter of  balance sheet, net worth, not income. That many people dont get this is largely why the rich get rich and the rest dont.

  • Leena

    I have to agree with most of the commenters here, while I understand your plight, and agree with your tax suggestions, a huge factor to why you are in this position is due to the lifestyle CHIOICEs you’ve made. You don’t NEED a 3k apt or 500k house. (off topic but FHA loans allow you to make a down pymt lower than 20%, just saying). Move and buy a starter place that’s more affordable while you continue to save, max out the 401k.
    You have to make some sacrifices, put your big girl panties on and deal with it….

    • Roxie_0102

      It is my understanding thatFHA loans are not allowed for mortgages of that amount

      • luckyhorseshoe

        In the Washington DC MSA, the limit is $729,750. Assume it is not less for the NYC MSA 

  • Lauren

    I can’t entirely relate to this story but I completely understand. We are taught from a young age to do well in school, get the appropriate degrees and work hard and you will have the “American Dream”. However, for many of us, for the careers we have worked hard for, we must live in an area that sometimes can put a strain on our finances, no matter what are income. My husband and I live in a DC suburb (another high tax area). We often end up paying quite a bit in taxes because we have “done the right thing”. Interest on investments (which include emergency and retirement funds) kill us. Also, our incomes are growing higher each year. This year we expect a big hit. We will be able to use student loan payment information this year, but we have now paid those off. We own a home that is “below our means” therefore the interest is low and therefore we have a limited tax deduction there. Next year we will likely be hit hard in the tax arena because we have done the right things: received college degrees, work hard therefore make a nice income, paid off student loans and other debt, started investments for emergency funds and future needs, and live in a home below our means. We also do not have kids yet as we believe in being able to afford them. To us, our child will not just be a tax write-off but we will enjoy that side benefit. 

  • Becca

    Please, move to Jersey City. My husband and I pay $1,600/month for a beautiful 1-bedroom, a 10-minute walk from the PATH.

    • MKH

      That would actually make her tax situation worse. Then she would be paying NYC taxes and NY state taxes because she works in NYC, federal taxes, and NJ state taxes because they would live in NJ. 

      • Lauren

        I live in NJ and work in NYC. You don’t pay NYC taxes if you work in NYC and don’t live there.

        • ranavain

           Exactly. Income tax is only paid to the state you live in. Unemployment ta would be paid to New York, but the employer pays that, the writer would not. They would also not have to pay the city tax.

  • eat the rich

    Wow, 250K/yr. I cry for you.

    Get some perspective.

  • Roxie_0102

    I am reluctant to disagree with the author who is obviously bright and well educated, but I believe there is a factual error in her assertion that expiration of the Bush era tax cuts would raise her overall tax rate. As a couple filing jointly ad earning between $250-500k, it is my understanding that their tax rate would increase on the amount of earnigs over $250k, not on their entire earnings. This is a big difference. However, I do agree with the premise that the tax code is broken and needs to be fixed. As much as their situation may be enviable and even difficult to relate to, consider that we probably all want our children to be able to attend college and land high paying jobs with great potential and have an opportunity to build wealth and afford a home, etc.

  • This article (like a lot on learnvest) is very misleading. First I consider anything over six figures “rich” of course that is just my personal opinion but it happens to match with most people I know, even the rich ones. Second you CAN afford a house and to invest you just choose not to. I’m just not sure what anyone is supposed to learn from this… mo money mo problems? 

    • eat the rich

       Well, LV is partnered with Chase, so consider the source and read with a critical eye.

  • Lauren M

    I certainly understand the author’s frustrations, but talk about a need for a reality check. $250,000 makes you rich – period. Yes, you pay a lot in taxes; yes, you live in an expensive city. There are also hundreds of thousands of people who live in NYC who get paid $10/hour and also have to make sacrifices. 

    Often, the cost of living factor is reflected in one’s earning ability. You live in an expensive city – you make more money (typically). I’m not saying it’s easy or you aren’t going to have to make some tough choices – but this is a LIFESTYLE choice. I have the same issues (house savings, vacation, etc) and yes the tax code should be changed to better help the true middle class achieve prosperity.

    Learnvest, I am disappointed with the way this article was presented. During the holiday season, when we  should be helping those who are truly less fortunate, this article smacks of first world problems, that many in this country would be happy to have.

  • rhl

    I understand your frustration.  I live in a high COLA too.  If you want the deduction, contribute to the 401K and use the tax “savings” to put towards a house.   Some 401K allow you to take the money out if it is for your first primary home puchase.  Have you checked that out?   Do you do your own taxes?  Find a good CPA and consult with him to make sure you are getting all the deductions you are entitled too.  Have you considered investing in a house in a cheaper area to rent out possibly to move to later or vacation in?  That is another deduction you may want to consider.
    Please remember that in times past, the percentage your are paying is actually MUCH lower than in time past when you would have been paying 50% in taxes!! 

  • wendie

    You choose to go to grad school. Your husband choose to go to law school. Those are years that you choose to be out of the work force. If you’re in your late twenties, you’ve been only working for the last 5 yrs in your late twenties, and still saved up 100k that’s great. Everyone paid high taxes before they bought a piece of property, this is your current situation but it definitely won’t stay the same. I honestly don’t see much to complain about..

  • Mara

    Would it make sense for them to file separately?  She mentions if you make over $150k filing jointly, you can’t deduct student loan interest.  It seems like they need a financial planner to help them reduce taxation.  

    • Brianne Archer

      I don’t think you’re allowed to use the student loan interest deduction if you file as Married Filing Separately, but I’m not a tax professional.

      • LeeLee

         You are, but the limit for AGI is about half of that of a married couple, so the couple in question would be screwed either way.

    • LeeLee

       It is likely that they would make more than the $60k or so that prevents them from deducting their student loan interest if they file separately as well, unless one of them makes $200k while the other only brings in $50k.

  • Nurserust

    So, you’re “not looking for a pity party”. It sure sounds like you are. Many professionals have student loan debt. Be glad you have an education and meaningful work. Very few 20 somethings make the kind of money that you are making. I am a professional making under $80,000 after 42 years of hard work.  I didn’t have everything when I was 20 something; and your expectation that you should already have “everything” is unrealistic. I would suggest that you seriously review your expenses and spending habits. You like ly will find numerous areas where you might cut back so that you might be able to save for the things you want. Incidently, after 40% tax rate is paid, you still have $150,000 per year to live on! That’s about 3 times what I have left. Those on social security are living on about $24,000. I say  Get A Life! 

    • Untmaggie

      I agree, Nurserust! I’m in my 30′s, have student loan debt, and make less than $40k. Even when I finish my master’s, I’ll be likely to make only $60k starting out. They could use some perspective. The point of this article is entirely lost in the details of their situation, which is FAR better than most Americans’.

  • Trm218

    Really? It’s not my job to relate to what you are saying. But, 3k on an apartment, vacations….there are ways to cut back. A healthy dose of gratitude that you have jobs during this economy is in order. And, the whole “we worked hard and were told that this meant we would have a house and such” rhetoric just isn’t the fact anymore. Better yet, accept that your take home salary is just that: what you actually bring home in fiscal assets. Also, don’t compare yourself to anyone. It’s bound to drive anyone insane.

    Sorry for sounding harsh

    • Micah Winnecer

      Harsh?! You are being way too kind. This is a perfect example of a “poor” New Yorker. I have been there, in my mid 20′s. I spent every dime I had on my “life style.” Now, in my 30′s, I live beneath my means and have never been happier. 250k and scrapping by is embarrassing.

  • forcesforgood

    LearnVest, you must be kidding with this article…

    Harriet, “choose your choices”, as the kids say. You choose to live in Manhattan for the convenience, that is your choice. You are not being oppressed by an unfair tax system, you are choosing an upper class luxury. Your complaint is essentially that you are upper class instead of upper upper class. 

    Having lived in New York for more than five years, I can say most New Yorkers choose whether they want the convenience of living in Manhattan (usually in a small rental) or the economic benefit of home ownership (usually in a borough or in New Jersey). Harriet just threw a pity party all over your website because she, like most people, has to prioritize her desires instead of getting absolutely everything she wants…IN HER LATE 20′S!!! And so Harriet suggests changes to the tax code for all of us so that she and her husband can have everything they want at the same time. 

    Wow. LearnVest, this article is infuriating. I am older than Harriet and earn 50% of what Harriet pays in taxes every year because I have chosen to work as a teacher. I choose that choice- I believe strongly enough in social justice that I will certainly never own a home in Manhattan, but that is my choice. I don’t expect anyone to change the tax code so I can live out a princess fantasy. Tell Harriet she should be writing in to Kiplinger’s for sympathy…or maybe us non-princesses should look somewhere other than LearnVest…

  • Guest

    Cannot relate to this story at all. You people are lucky, wealthy, and in the prime of your life. Stop complaining. No sympathy from me, you made a choice. I still cannot find a job that pays over $40,000 in my industry and I live in an equally expensive city with no husband to share bills and cut costs with.

    • If you are living in a city “equally” as expensive as NYC (San Francisco, perhaps) and you can’t find a job that pays more $40K, you either aren’t looking very hard or are in the wrong industry (PR, interior design, art, etc.)

      • Untmaggie

        Kendall, with the situation in this country for the last few years, looking hard means nothing. I know people who look for work like it’s a full time job and still find little more than temp work, in a state with lower unemployment than most.

  • Claire Spencer

    Here’s another strategy for saving money in New York: be careful who your friends are. 

    Living in the city, it’s easy to have friends who make anywhere from $50k to $500k. The thing is, your peer group can have a huge influence on what you consider “reasonable” expenses. If at all possible, find ways to spend time with people who are making less and get their perspective – and budgeting philosophy. 

    I know plenty of journalist friends who work 12+hr days, and still live in the outer boroughs because they can’t afford Manhattan prices. They live rich, interesting lives -and- commute. My friend ($50k/yr) and her husband (a musician) have managed to save $250k for a downpayment, and are some of the most fun and successful people I know.

    I read an article several years ago that examined what “rich” really meant, and they interviewed several people in each income bracket. Each ascending person also felt “insecure” – but only by comparison. A family making $2m per year made nearly the same argument as you, but on a higher income level scale. They had less than $5m in savings. They lived in a (comparatively) small Manhattan apartment (and still had a mortgage) rather than a house within reasonable (to them) commuting distance. They bought the kids “normal” clothes from LL Bean and The Gap, but rarely could afford “really nice things.” 

    It’s very hard to see your peers making more money and spending it differently. An important step is to sit down with your husband and discuss not only your long-term goals, but also how your income and “status” affect your ability to feel successful and wealthy – and what you REALLY need.

  • Brianne Archer

    Her tax percentage comparisons don’t make sense. She keeps throwing out the 14% Romney paid, but that’s just his federal income tax rate; however, she uses 40% which is her total federal, state, and local income tax. As far as I know, only Ohio and New York have city income tax, so they are subjecting themselves to that solely by living in NYC. 

    If they want to truly reduce their tax burden, then they need to look into investments that will shield them appropriately. They could put a full $34K into their 401Ks and they could buy a more modest property to use the mortgage interest as a deduction. Plus, if they started itemizing their taxes they would also be able to deduct state income tax and property tax. If they reduce their taxable income, they may even be able to avoid the AMT. 

    Personally, I have no problem with letting all of the Bush tax cuts expire. 

    • HL

      Great points and I generally agree with you, but just out of curiosity, which city in Ohio were you referring to? And Philadelphia also has a city tax (just under 4% if you live in the city regardless of where you work, a bit less if you work in the city but live elsewhere).

      • Brianne Archer

        I paid local income tax in my hometown of Trenton, Ohio. Even when I moved away for college they always tried to bill me. It’s 1.5% now. http://www.ci.trenton.oh.us/depts/tax/general.asp

  • Anon NYC Chick

    Cry me a river. I’m in my late 20s, I am single, just paying for myself. I lost my job a year ago, and now I’m freelancing, working ridiculous hours, and spend tons of time looking for work.  I’m gaining debt each month, but if I was even making $60k I could make enough to pay my minimum bills in NYC. It is completely doable.

  • TH

    I agree that the middle class has been carrying the bulk of the tax burden in this country while the super rich have been making out like bandits. 250k sounds like a lot, but Inflation has been quietly growing our cost of living while wages have decreased in this country. I feel I earn a good salary and still cannot seem to keep on top of my finances because of taxes. There is no reason you should have to pay double what a billionaire pays in taxes. Be glad you don’t live on 50k per year. It could be much worse.

  • Kimberly Patrizi

    Sorry, but read “Why You’re NOT Actually Poor”.  Again.

  • I pay 35% of my gross pay and I make  a quarter of what you make.  I make do what is left after taxes.  The biggest expense I have is cost of housing ( I live in Westchester,New York).  I could get cheaper housing but I would have a longer travel and the cost of that longer travel to work.  Instead of complaining about the taxes look to the cost you have to pay out and trim there.  I would like this site to expand on this issue in a more real life situation, since taxes are not going to go away.  We need to find a way to help lower our everyday necessary costs especially in high cost areas like New York.

  • Engvall

    Good god people – your debt and life style choices are all yours. No way do I feel you could every be justified having a problem with an extra 3% in taxes. Eat out much, buy good wine, expensive clothes? Most of us don’t.

  • Thanks

    Thanks for sharing your thoughts and experiences in this article. Living and working in a vibrant city has given us both the opportunity to gain valuable work experience in ambitious positions and to enjoy the community and culture that surround us. My husband and I are in a similar financial position to yours, and we are thinking carefully about tax planning. My objective in participating in the LearnVest community has been to manage my household finances and gather information to make sound savings and investment decisions relevant to our financial position – your article, along with the advice from the CFP, were timely and informative to me. 

  • Ne Walker

    I find it difficult to relate to this story.  Last year I made 99,600.00. This year was the first time in my life that I paid less in taxes. I do not no what this couples is talking about.

  • Artzfrtsi

    I like the idea of a cost of living factor brought into the calculations.  I am a single mom in the San Francisco Bay Area.  I am a teacher and don’t make much compared to others in the area, but I make 90K and this is a fortune for other people in the country.  Our car insurance is higher.  So is the rent and state taxes. I managed to scrape enough money together to buy a house, but it isn’t in a great neighborhood and I worry for my daughter. I make too much to get a child tax credit or a deduction for my student loans, but there are so many other things sucking away at the pay check.  With live very simply.  No cable, staycations, thrift store clothes, etc.   I will pay $16k taxes this year.  I will pay about $30k just in interest on the mortgage and my rate is 3.5%.  That’s $46k that just floats away each year.  I am grateful for the life I have and the wonderful weather.  I can’t move, as my elderly father is here and needs me.  It’s just tough and it doesn’t feel fair.

  • Tania

    I hear what you’re saying about the tax breaks at income levels higher than yours and I do agree. I don’t agree Federal tax rates should consider your home state and the COL. You have chosen to live in a high COL state. You do have a choice. I also live in a high COL state (Hawaii) that also has the flip side of having lower wages on the average.  I choose to live here and fully understand I need to give up other things in order to do so. I could move to another state and make more while paying less (I’m also in accounting).

    I would love to live in NYC and I’d make likely double than what I make here but I fully understand what that would also mean from a housing perspective as well as dealing with winter, etc.  So, I choose not to.  You could choose to relocate, make less but pay less on housing too.  But you may have auto costs that you don’t have now living in the city. I can also emphathize with student loan costs, I’m fortunate I don’t have loan costs as my parents helped with school. However I did go to a state school as a resident, which is why my family could afford school without any other financial assistance.

    When I was in my twenties, I do remember feeling like having a career and a paycheck wasn’t all it was cracked up to be. As I’ve gotten older I do realize we do have control over our life and very few people can truly live the American dream as we imagined while we were in college.  I do think we need to continue to say our piece about taxes and other legislation but  I also think we have to take a good hard look at our own choices. 

  • Forgive me if I don’t weep with you. My husband and I are in our 40′s, both college educated and have 20 plus years of experience in our fields which involve human beings so we don’t make squat. You are rich, you don’t feel rich but you are. Now you need to make some choices to modify your tax burden and you absolutely must pay off your debt. I love Manhattan, always have but not only does living there cost a lot but I find that the lifestyle there adds up as well. Look for where you can cut back, throw that money at the debt. In the meantime, take advantage of 401k’s, IRA, FSA’s and maybe make some charitable contributions to decrease your tax loads.

  • Levityyoga

    It’s hard for me to sympathize. I’m single, 36, and live in Santa Barbara, CA.  The average home price here is $700,000 and salaries in SB are below average considering cost of living (the price to live in paradise). I make $85,000 a year, have $55,000 in student loan debt, pay $1500 to rent a STUDIO, and have hard time saving. My taxes are also high, as if you look at my income, I make a decent amount for a single person.  I would NEVER complain about my situation, as I know I make conscious choices to have the lifestyle I have and live where I do- and that affects my ability to save, buy a house, etc.  I also love where I live and feel grateful for all that I have- I know it is frustrating to work so hard and earn a decent wage and have hard time really getting ahead, but I have so much more than so many. Yes, taxes need to be adjusted- but me paying less isn’t the answer.

    Bottom line: if you don’t like your situation, make different choices.  Otherwise, be grateful, because it sounds like you have a lot.

  • formerNYer

    This seems less an issue of federal taxes than it does of state and city tax.  I find it very hard to believe that the writer is being taxed at a level of 40 % on the federal level.  Paying the larger taxes associated with New York City are part of the opportunity cost associated with living there, and to suggest that the rest of the nations federal taxes be adjusted due to this is unreasonable.  The tax rate of your individual state has no bearing on your federal tax rate, I for instance live in AL and have one of the lowest state tax rates as well as lower cost of living…but does that mean all of my federal taxes should be raised.  All areas have there pros and cons, this is a con of the New York metro area.

  • Glitterspark37

    “The Bush-era tax cuts for
    married couples that make over $250,000 will expire, raising our taxes
    by 3%. That’s thousands more dollars we would have to pay—making it even
    harder for us to save money for a house.”
    I can’t believe you, LearnVest! This is false information! The taxes for ppl making over $250k only count towards the amount OVER $250k. Everything UNDER that amount will be taxed less, the amount for people who make under $250k. Since this writer is making right around $250k, there is a MINIMAL amount they have over $250k to be taxed at a higher rate. This means that any raise in taxes over $250k due to the Bush-era tax cuts expiring won’t make much of a difference to this couple’s taxes.
    I am very disappointed that LearnVest did not correct or comment on this erroneous piece of the article. I hate to see a financial site misinform its readers on how our tax system works.

  • Ashley

    Thank you for sharing this story, I am in the exact same boat and self-employed – living in Los Angeles. Looking for any tips or advice as well!

  • Alice Freeman

    The tax solution would be a flat tax. Then everyone pays the same. If you have a low income you pay in proportion to your income. The same for the higher earners. Then everyone pays their fair share.
    If you take the biblical prospective which has always seen me through in lean times and now. God says the first 10% is His. If you don’t believe in God and his principles donate to what you are passionate in. Save 10% and live on 80%. People want everything now so they create debt and then you become a slave to that debt.
    The fiscal cliff could be solved in taking out the bloat of things that don’t even matter. They wouldn’t have to scare everyone about their benefits.
    I could go on and on about my situation but that wouldn’t do any good.

    • LeeLee

       The problem with the flat tax is that some people believe that the fair share of those who make more money is a higher percentage. 

  • Anon

     The answer to this article is to BUY a condo in Brooklyn (like the rest of us approaching 30 and making a good combined income in Manhattan). There are plenty of 1-2 BR option in Brooklyn neighborhoods for $300-400,000. You can start a family and live there for 5+ years before your children need pricey the school system of the suburbs (In NYC you typically pay much more in home value for the towns with good public schools). By buying in Brooklyn you’ll gain valuable equity with that $3000/month you are putting towards rent. The commute from Brooklyn for my boyfriend and I to our Manhattan jobs is only 20-30 minutes.
    You should really talk to others your age or a financial advisor. Saving to buy a house in the suburbs of NYC in your late 20s is a high and mighty goal for couples making more like $250,000 each. If you dont like the idea of a condo before the burbs, you shouldn’t be living in NYC!

  • ,

  • I’m finding it hard to not shake my head throughout this article. Yes it was an article about taxes, but taxes aside, they have a combined income of a quarter of a million dollars a year…and they can’t afford a down payment on a house?
    My husband and I have a combined income of 85k. We bought a 3+1 bedroom home, own a car and have two kids. We make ends meet; we both pay into our retirements and have savings accounts for the kids for when they go to school. We don’t go for big trips, but we put a little aside when we can to be able to go to Disnwyworld when the kids are older. It would be interesting to see what they budget their after tax income on (and after essentials like rent). Somewhere they’re allocating a lot of money to things that aren’t “essential”; I’m thinking lots of outings to restaurants and the like.

    It’s hard to relate to someone making that much money and hearing their “plight” about how they can’t afford anything when so many people out there are living on a LOT less then that and can legitimately complain about their situation.

    Incidentally, having an article entitled “I’m not rich…” is misleading when in the first sentence she states that they make 250k combined. Save that kind of article name for an article from someone making 40k or so a year combined…THAT would be a better definition of the term “not rich”.

  • How is it fair to pay nearly half of your income to the government? When these new tax rates go into place, when we go over the fiscal cliff… it will only power the government for 8 days. How does that help? These people just spend less and thus, the economy doesn’t grow.

    Sure it’s fine to ask other people to pay 40-50% of their income but if the government came knocking at your door to do it, you would say see ya! There has to be a better solution than saying “someone else should give away half of their income.” I makes me mad when people say “you make so much more than me, you should fix this issue.” It sounds like plain old jealousy. If we all paid 30% or 20% and got rid of loop holes and cut spending, we could run our government without a deficit. But the reality is, many people don’t pay taxes and we spend more than we bring in.

    A 50% tax on my income means that I will stop contributing to charities. Why? Because I can’t afford to. Put food on the table, put money away for kids’ college, pay off my own debt, pay my bills, and put some away for retirement. Charities, 501(c)3′s … they lose.

    • Glitterspark37

       No one is asking anyone to pay 50% of their income in taxes. People are asking those that make over $250k to pay more taxes on the amount OVER $250K. Anything UNDER that $250k you will be paying the EXACT SAME AMOUNT as anyone else making less than you. That seems completely fair to me. If you start making MORE money, then you could continue to afford to contribute to charities.
      Understand the issues before you advocate for a policy that will affect others – I wish everyone would follow this rule.

      • LeeLee

        LOL.  Perhaps you should follow your own advice…. Those making less than $250k will not pay the exact same AMOUNT as anyone else making less than they are.  They won’t even pay the same percentage. 

        If you make more money, sometimes you no longer qualify for certain tax breaks, so certain  portions of your income would then be subject to federal, state, and local taxes.  Depending on which benefit we’re talking about, you could pay more in your total taxes than you made in extra cash. 

        • Glitterspark37

          LeeLee, you just argued a non-sequitor. I was discussing federal income taxes. Also, percentage-wise YES they will pay the same rate – the difference will be in the deductions they can or cannot take due to how much they are making. I see no sad story here. If they are in that thin area where their tax deductions have decreased and resulted in them paying more than the raise they just got, then maybe they need to work harder to get to that next raise. That’s what you would tell a poor person who isn’t making enough, right? That all it requires is a little extra elbow grease, and how can they complain because they made their situation? Then why wouldn’t you tell this to a wealthy person, LeeLee? Should be the same story here – if they are unhappy with their circumstances, then they need to “pull themselves up by their bootstraps”, right?