The alternative minimum wealthy

On the Brian Lehrer show, yesterday on WNYC, the local public radio station, Brian talked with Alvin Hall, “personal finance expert and author of You and Your Money: It’s More Than Just the Numbers.” As they took calls from listeners, they got into comments about the alternative minimum tax. Listen to the segment 15:23 into the audio stream, where they take a call from Helen in Manhattan:

Helen: I have a kind of political take on this. My husband and I together earn a little over $200,000 a year, and we’re constantly getting stuck with the alternate [sic] minimum tax. And of course, we don’t get help on college tuition, and we have high property taxes, so... we’re not rich. So I checked the New York Times cost of living comparison, and I saw that $200,000 in New York is really a middle-class income elsewhere in the country. And the alternate minimum tax seems to hit hardest on people living in big cities, in cost-of-living areas. And they also happen to be heavily Democratic areas, so I’m wondering if it may be a disincentive to the Republicans to adjust the... or abolish the alternate minimum tax because it seems that they’re hitting the hardest on the urban middle class, and I know if you’re making $30,000 a year, $200,000 sounds like a lot, but when you do...

Brian: And... but, to be fair, I think at $200,000 you’re probably in the top 5% of earners in this area.

Alvin: Yes, you are... yes.

Helen: Well, in the... in the area, but I notice that after we’ve paid all of our bills, and we’ve paid our property taxes, which are about $20,000 a year, and we pay our college tuition, and we pay for our medical insurance because we don’t get help... uh, much help because we’re professionals, and obviously our...

Brian: I hear what you’re saying, and I have to go because we’re running out of time, but... we just have 30 seconds left, Alvin. Is it in effect a “blue state” tax?

Alvin: It does seem that way, given the number of people who are hit in these areas, but in reality it’s much more general than that. It’s that we feel it more because the cost of living here is higher for us. Whether you’re earning that money in California, Kansas, or Missouri, you’re gonna get hit with that tax.

Now, Alvin Hall sort of ignored Helen’s point in his answer: what she’s saying is that the amount of income that qualifies as “Holy crap, you make how much?” varies based on where you live, and that someone earning that money and living in Kansas can afford to toss some extra money Uncle Sam’s way, whereas in New York the money doesn’t take one as far.

And that’s true enough: it does cost more to live in New York City than in many other places.

What’s also true, though, is that people like Helen are exactly those for whom the alternative minimum tax was designed: people who make lots of money and have an unreasonable sense of entitlement about it. Helen, really, how can you take a thought like, “I know if you’re making $30,000 a year, $200,000 sounds like a lot,” and stick a “but” after it?

There’s no “but” on that one, Helen. I’m awfully sorry that your property taxes are bothering you, that those designer cocktail dresses kind of run into some real money, and that you can only see three plays a week, I really am. But, as Mr Lehrer says, you’re already in the 95th percentile in income, even for New York City, and be honest here: you do have some money tucked away in long-term investments, hm? Yes, there you go, I knew you did.

And you gave yourself away there, with that “I know... but” statement. Because you do know, and yet you think you deserve a break anyway. Helen, you and the Mister already have all the breaks. Be very happy that you can send the kids to Columbia and Cornell (I know you’re not talking about college tuition at CCNY), drive a couple of expensive German cars, and still have an occasional meal at Le Bernardin.

While you’re thinking about that, have a glance at the lady who cleans your apartment. She’s got no college tuition to worry about, because even CCNY for her kids is just not in the budget. No property taxes, because she can’t afford to buy. Probably no health insurance either, nor much in her savings account. She takes the bus, and her rice-to-meat ratio is very different to yours. And she lives in New York City too.