Profile of the “Rich”

Last time I wrote, I gave President Obama the benefit of the doubt in order to make a point about his eligibility for President.

So…I’m done with that.

Let’s be real, folks. Pretty much everyone in every branch of the Federal Government has lied to the American people left and right (literally AND figuratively) in order to get their agendas passed, in violation of both the spirit and the letter of our Constitution. Yeah, remember that? That little document that so many politicians would like to brush aside? Well, it’s still the law of the land, and the people who are supposed to uphold and protect it are doing a miserable job.

For instance, it is now the six month anniversary of the passing of the healthcare bill, or as we so lovingly know it, “Obamacare”. I don’t need to remind you that it is a total bust and wildly unpopular. The news outlets, the Tea Party, and other media outlets are doing a fantastic job of that. I don’t need to remind you of how it is 2500 pages, simply too long for anyone, even the members of Congress who voted it in, to read thoroughly. I also don’t need to remind you that in order to get it passed, President Obama, Nancy Pelosi, Harry Reid, and other Democrats lied through their teeth about what was actually in the bill: subsidized partial-birth abortions, coverage for illegal aliens, mandatory insurance purchase even if you don’t want it, penalties for companies that don’t purchase the government health plan, rising health costs, hidden real estate taxes, extra income taxes…it just goes on and on…

But the biggest lie the government is trying to push on us, regarding the healthcare bill and just about every other unconstitutional bill they are trying to shove down our throats, is that the extra taxation is only going to affect the “rich”, whom they define as everyone earning $250,000 or more per year. To illustrate just how much of a lie this is, I’m going to profile the average family who makes this much money.   Keep in mind that I believe that families who achieve this income level are blessed.  But are they “rich”?  Let’s take a closer look.

To make this exercise easier, I’m going to assume the family lives in Texas because 1. I’m familiar with the state since I lived there and 2. there is no state income tax so the take home pay calculation will be easier. I’m also going to assume that while both husband and wife have degrees, the husband is the sole breadwinner, is an executive, and they have no side businesses, since two incomes and businesses would complicate things. But the same assumptions might be applied to a family with a small business as well. There’s almost no difference in the eyes of the government.

Next, let’s assume that to climb the corporate ladder to an executive position the couple is at least in their mid-to-late 30’s and has a couple of small children. Finally, executive salaries come in the form of base pay and bonuses, so let’s assume the base pay is $200,000 and the bonus last year came out to $70,000. Congratulations! This family just joined the ranks of the rich! Time to buy a couple of Rolexes and Land Rovers, right?

Not quite. While this family, through hard work, education, and dedication, has gone far, it’s not exactly the “Lifestyles of the Rich and Famous.” They have had to be financially prudent, as you’ll soon see, and they hardly have money to throw away.

How much do they have? Since normally companies in the USA pay 26 biweekly paychecks a year rather than a monthly salary, let’s figure out how much this family takes home every paycheck. $200,000 in 26 paychecks is $7692 a paycheck (I’m going to round to the nearest dollar.) Now let’s take out income tax, payroll tax, social security, Medicare, and all that other good stuff. This part is tricky because everyone withholds a different amount, claims different exemptions, and the tax code is (intentionally) tricky, so I had to ask some of my friends to let me look at their W2’s, and kind of reverse-engineer an average percentage based on what I saw in this tax bracket. I saw that all this stuff combined tends to hover around 25% off the total take home, so let’s use that.

25% off of $7692 leaves $5769. Ok, good. Now, since the company probably has some sort of 401K plan and also health insurance, let’s take out the provisions for that, too. Let’s assume the health plan takes out $125 a paycheck and that they put 8% of the paycheck, or $615, into the 401K. That leaves $5028. Finally, let’s not forget that most companies have pet charities to which all the executives have to make “voluntary” contributions. That comes out of the paycheck, too. Let’s be conservative and say that this executive contributes $100. Therefore, this family’s take-home pay is actually $4928 per paycheck. If we assume roughly two paychecks a month, this means that the family takes home about $9857 per month.

Now, let’s assume this family lives in a 4 bedroom home that they bought a few years ago, when rates were not completely hitting the floor. Since most homes where I bought mine a few years ago were in the $250,000 price range, let’s use that. And rates were hovering at around 5.5%. If they put down 20% like any financially responsible family, then their payment would be $1,135. Property taxes and insurance on the home would add about another $700 a month, so the total payment comes to $1835 a month. Add some Homeowners Association fees at $150 a month, and it comes up to $1985 to live in the house. That leaves $7872 per month for other stuff.

This family probably has two cars, one for the husband to take to work every day, and one for the wife to use for errands. The wife’s car is most probably an SUV, since she has to drive two small kids around along with all their junk including two giant car seats and probably a stroller and diaper bag (trust me, this is me.) The husband’s car probably has to get decent gas mileage on the highway, since he commutes to work every day. Two cars, costing approximately $35,000 each, at about 5% for 4 years, assuming previous cars were traded in or a down payment made means this family is going to be paying about $500 per vehicle loan. $1000 total per month on auto loans, leaving $6872 in the monthly budget.

Now for some utilities. Electricity averages $300 a month, water $40, sewer $30, Internet $25. One cell phone for the wife (since the husband probably has one issued by the company): $60 basic plan, $25 data, $5 for texting plus applicable fees and taxes make the cell phone about $90 per month. The land line is about the same. Cable or Satellite, basic plus maybe a Direct sports ticket, $170 per month. Total utilities: $745. $6127 left over.

Insurance: auto insurance, $140 per month for two vehicles. Term life insurance for two 30-something adults in excellent health, for 30 years, $1.5 million for the husband, $500,000 for the wife, about $150. Consolidated student loans still at $80,000 for two graduate degrees (the wife doesn’t work, but she uses those skills to manage the household and invest wisely): $500 a month. Money left after student loans and insurance: $5337.

Groceries consume about $300 a week. The wife goes to the store twice a week. She carefully plans the weekly menu, makes a list, and sticks to it. She cooks healthy meals, and they eat out only on weekends. They try to take a break by going out a couple nights a week, so babysitting, at $12 an hour, costs $120 a week. Also, they have a housekeeper come once a week to help the wife with cleaning. This costs $80 a week. Monthly cost of groceries, babysitting, and housekeeping: $2000. Money left over: $3337.

To make sure they stay healthy, the family has a gym membership, and also plays tennis. However, for the wife to be able to work out, she has to use the child center, so they have to get a family membership. Cost of family gym membership: $200/month. Cost of family membership at tennis club: $100/month. Cost to play a tennis match twice a week for 4 hours while children are at kids club at club rate of $16/hour: $512/month. Total for working out/sports: $812/month. Money left over: $2525.

Now, since this family is financially responsible, and they want to send their kids to college, maybe build up some funds to perhaps eventually invest in a business, plus of course have an emergency fund in case they ever find themselves without employment, it makes sense to put some money away every month for this purpose. Let’s assume this is 10% of their gross pay, or $1500 a month. This leaves $1025.

As you may already know, most Americans are very generous as well, and the higher their income, the more charitable donations they make. Most families get calls or letters from at least one charity a month: March of Dimes, Susan G. Komen Foundation, local Shriners, United Way, Toys for Tots, etc. Donations can vary from $150 to $300 and most are tax deductible (some are not) but on average, let’s say the family donates about $200 a month. Money left over: $825.

Preschool for the three-year old, twice a week: $150 a week, or $600 a month. Money left over: $225.

This has to cover any other incidentals: medical bills, home repairs (or home warranty payments), clothing and shoes for themselves and their ever-growing children, alarm services, pest control, landscaping, prescription and over-the counter drugs, school field trips, fundraisers, PTA, etc. And maybe, just maybe there’s something left over for a family vacation once a year.

What?? The bonus, you say? Well, it’s incentive pay, so IF they actually get it, then it’s received at the end of the year and taxed at the highest rate (33%) and actually comes in at about $43,000 after all the taxes (income tax, payroll tax, Medicare, etc.) are taken out. It ALL goes into Savings, or helps pay off the credit card after the family vacation (and Christmas presents for the entire extended family, plus all those charities that come knocking at the door during the holidays), then goes into Savings, to help build that emergency fund/college fund.

Pretty luxurious life, huh? Um, no. And mind you, this is in a CHEAP state that doesn’t charge income tax. God help the people in California, New Jersey, Oregon, or Washington!

Folks, these are the people that DRIVE the American economy! This is the typical American family, not the “rich.” If you have a college education, are ambitious, driven, and have any brains, then this is YOU, if not today, then soon, and you will be punished for those qualities. Think about all the businesses I named (and the people employed by them) that benefit from families such as this. Who benefits when they are deprived of their hard-earned income by heavy taxation and forced government healthcare?

The government would tell you that, well, the poor would benefit. The poor? Do the poor have the creative ability, drive, and education to use and invest the money the same way? Of course not! They need a freaking job! A job that is going to disappear the day you raise the taxes on the “rich” family, who is going to have to fire their housekeeper, and cut back on playing tennis at the club to compensate. So, the tennis club is going to turn around and fire the kid’s club babysitter because there aren’t enough people using it. On top of that, the family is going to think twice before starting a business with their carefully saved money, and employing people for whom they are going to be forced to buy government health insurance, or pay a heavy penalty. Maybe they’ll invest in something else instead. So, who really lost out, here? 

There is evidence today that household savings in the United States is at an exceptionally high level and credit card debt is rapidly shrinking, per capita.  Is this a good sign or are these “rich” people holding off on investing for fear of being further punished through more government-sanctioned “redistribution”?

One last thing…

When this heavily taxed “rich” family goes to the emergency room because their 3-year-old is running a 105-degree fever at 2 am, and find they have to wait four hours to get their baby seen, because of all the people in front of them getting “free” healthcare, this not-so-stupid family understands exactly who is paying for all of this, again and again and again. Despite government assertions to the contrary. It’s not the super-wealthy who know how to get around the tax system through trust funds and offshore accounts (and who are in bed with the politicians.) It’s also not the 47% who don’t make enough to pay taxes at all. Do you know who it is??

About Rosa Barron

I’m a first generation American whose parents came to the USA from Nicaragua. Educated partially in the USA and partially in Nicaragua, I’ve lived all over the USA and traveled all over Latin America for work. My formal training is in Environmental and Biological Engineering from Cornell University, and I also have an MBA from the University of Florida. When I married my wonderful Idahoan husband, the need for me to work disappeared and I moved permanently to the USA, where we live now, currently in California. I raise our kids, manage our investments, and learn more every day about this wonderful country in which I had the good fortune to be born.
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