Lifestyles of the Tennessee rich

By Felix Salmon
April 17, 2009

It’s commonplace to find families earning more than $250,000 a year in places like New York and San Francisco who don’t consider themselves to be rich. But the WSJ has found solid gold in Ellen and Donald Parnell: they’re earning $260,000 a year in Tennessee and still claim that they “don’t have a load of cash” to cover the things they might want to buy.

The numbers belie their claim, despite the WSJ’s best efforts to paint the Parnell’s plight sympathetically:

For the Parnells, their perception of themselves is based on the math. The value of their house is down $60,000. Ms. Parnell says the couple’s gross income last year was about $260,000. Taxes, premiums for medical care and deductions for Social Security and their 401(k) contributions cut the gross to about $12,000 per month. The family tithes $1,300 a month at their church. Their mortgage, second mortgage and payment on land they bought is nearly $4,000 a month. Other expenses, including their family car payment, insurance and college funds, as well as basics like food, utilities and donations to charities, leave them with about $1,200 left over each month.

Just check out the amount of saving that the Parnells are doing. I’m sure they’re maxing out their 401(k) contributions — that’s $16,500 apiece, this year, or $2,750 a month. If they’re over 50, it’s even higher. They’re making unspecified payments to “insurance and college funds” too, and then they have three different pieces of property on which they are building equity by making mortgage principal repayments.

If you do the math, the Parnells have around $6,700 a month in post-tax spending money. I can’t imagine that the car payment on a decade-old Infiniti is particularly high, and if they want to save or give away a large chunk of that on college funds and charitable donations, that just goes to prove that they’ve got lot of money to play with. If you can afford to give thousands of dollars a month to charity, that’s great — but don’t try to then turn around and plead for sympathy on the grounds that you don’t have much money.

It’s a simple matter of bookkeeping: if you make lots of money, then that money has to go somewhere. You can save it, you can invest it, you can buy houses or land or insurance policies, you can give it away, you can buy necessities, you can buy luxuries. But ultimately, if you add up every single thing, it balances. To then turn around and say “if you add up every single thing, it comes to our entire income” — well, that’s simply tautological, and proves nothing about whether you’re rich or not. And anybody earning over $200,000 a year is rich.

Still, the Parnells are definitely more sympathetic than James Duran, who claims to be “barely getting by” on $400k a year, the poor dear. Maybe he would like some of the Parnells’ charity.

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Comments
18 comments so far

Those families know that the money they’re saving still belongs to them right? They can go ask for it back from the bank whenever they want and their retirement checks come when they retire. How can you be “covering savings” and be “barely getting by” at the same time?

I think what they’re saying is that they no longer have as money money that they don’t know what to do with. So be it.

What was annoying about this article (and others like it) was that it could claim with a seemingly straight face that these people have barely enough to get by because everything they buy is so expensive, etc. etc., without ANY sense that the cost of those expensive things is EXACTLY the same for someone making $50k a year. But buying those things is not even in the realm of possibility for the family living on $50k/year, and so when we say that they are barely getting by as well we should at least notice that they are barely getting buy AND getting worse stuff (housing, schools, health care, food, clothing, etc. etc.) So spare us the sob stories and start realizing how incredibly fortunate you are to be in the top 5% of the income distribution.

Posted by J. Sorensen | Report as abusive

I think the real point of that article, not cited by Felix, is that these people get paid more because they WORK more total hours as a two income couple. Think of it this way: Take two guys, both of whom get paid the same hourly rate. One works 80 hours a week and makes $250K and the other works 40 and makes $125K. Is there any justification for taxing the first guy at a higher marginal rate. I would say no, and I would say the same thing about two married couples, one which works a total of 40 hours, and the other 80. The couple in this article is the moral equivalent of the guy who works the 80 hours. They are being overtaxed.

Posted by maynardGkeynes | Report as abusive

maynardGkeynes,

I’m not sure where you find your message in the original WSJ story (http://online.wsj.com/article/SB1239837 44241222865.html). True, Donald Parnell is said to work 7 days a week. On the other hand, he’s a surgeon, so his income almost certainly works out to a rather high hourly wage. There’s no mention of his wife’s working outside the home at all.

A couple of things did strike me in the article:

As a society, we’ve lost any clear notion of needs vs. wants. Square the Parnells’ material life, which Felix describes, with this observation by Ms. Parnell: “Our needs are being met, but we don’t have a load of cash to cover wants.” Yikes! We have set the bar for feeling fortunate or comfortable impossibly high. In contemporary America, “rich” means “able to spend money without a moment’s thought.” Anything less than that makes us feel deprived in some way.

“I’m not after sympathy. We are blessed,” Ms. Parnell says, admirably. But she adds, “What I want is a reality check on what rich means.” Me, too. And while we’re at it, a reality check on the notion that only those for whom it entails no sacrifice whatsoever should see their taxes raised.

Posted by HS | Report as abusive

As with most articles on this subject, it also fails to clarify the “marginal” in marginal tax rates. The Parnells earn about $260,000. They are really worried about Obama’s tax hikes – after all, $10,000 of their income is now being taxed at a rate 3% higher than last year! They will be paying $300 more this year!! That works out to almost a dollar a day! No wonder they are so upset.

Posted by will h | Report as abusive

@HS: Fair point. I drew my comment from the mention in the article that a two-income senior civil servant married couple, a group not thought of as wealthy, could easily make a combined $250-$300K. They are working a combined 80 hours a week to get that. To tax them at a higher marginal rate than the same couple that chooses to work a combined 40 hours a week (with one spouse at home or both working half-time) is neither efficient nor fair.

Posted by maynardGkeynes | Report as abusive

260k is probably 10x the minimum wage in tenn. minimum wage equals: you can’t buy a new car but you can fix the one you have and you can pay the rent. so if these people sold everything, built a 1500 sq ft house and bought a honda civic, they would be able to double their donation to the church and have plenty left over to spend on anti depressants and paris.

i suspect that if you’re making that kind of change the only way to retain much of it is to invest it in property. the market to me has been a sleazy cover for legal theft these last few decades. so you buy land and hope the purchase price and the taxes end up being less than the sale price. that does leave you strapped for cash.

as an omnivorous opportunist on a short leash called time, none of us will ever have enough. until we all turn into gandi, the rich will be fortunate but never rich, always just short of real wealth.

Posted by jim | Report as abusive

Can people stop confusing the marriage penalty with the tax liability of rich people? The couple in the story is not “richer” because they are working “twice as hard” as other people. There is zero evidence as to the hours they are working and the break even point isn’t some mythical “half the hours” to half the income. Income scales in this country don’t scale up that way with miners in coal mines working, say, 1 hour a week for basic necessities while lawyers “choose” to work two hours to buy twice as much. Miners, factory workers, women with three jobs routinely work more hours than Surgeons or work physically hard for more hours than Lawyers but they can’t bill as much money for their time. Rich people are rich because their investments earn money for them while they are *not working*–that’s the whole point of investments! And because they are paid more for the work that they perform either in salary or at an hourly rate.

If you want to argue that a two income family works exactly *twice* as many hours as a one income family you need to offer some data. Its true that their tax situation is, in some sense, sadder (imagine tears here) but its the family income that is being taxed, not the method by which it is earned. We could have a system that, for example, actually decreases tax rates on people who work harder physically for their money. But that wouldn’t actually benefit two income lawyer families as much as it would benefit those families with three or more hard physical jobs.

aimai

Posted by aimai | Report as abusive

People who live primarily off wage income and lack substantial personal assets (at least $5mm) can’t really be considered “rich”. I doubt the Parnells would object to the term “affluent”, but “rich” means “wealthy” and “wealthy” means large asset holdings.

People at that wage scale are not paid by the hour. Often even people making 50k are salaried and earn that however many hours are worked. The public sector is somewhat different though in which hours often do count, but that is the exception, not the standard.

Posted by Lord | Report as abusive

They’re not rich. They are middle class. With enough years and substantial savings, they could generate a nice nest egg (in the couple of million dollar range) which could allow them to be rich.

Allot of these comments focus on how they are so lucky and how some people make nothing or barely get bye. Granted, they are fortunate as anyone who is making 250k (collectively as a couple notwithstanding) is. But to call them rich is absurd.

Posted by John Can | Report as abusive

But consider the morality of the situation from the point of view of a Real American: these people are contributing $260k/year to the national economy. While someone else may be contributing only $50k/year. The latter are not pulling their weight; they are keeping America down. The Parnells are far more deserving than the lazy people who can\’t be bothered to do better.

For a Real American people contributing $260k/y to the economy are morally superior to those contributing only $50k/y, and it is the results that matter. Real Americans also just *know* in their heart that minorities get huge mortgages for mansions for free thanks to the CRA, they get guaranteed free university thanks to affirmative action, cruise around in Cadillacs thanks to welfare checks, and are on t-bone steak diet thanks to foodstamps.

It is outrageous to a Real American that fat lazy luxury loving luxury living poor enjoy a much better lifestyle than hard working Real Americans who can barely cover their needs and cannot afford their wants with the little money left after the government has given exploitative parasites all they ask.

Also Real Americans see that punitive taxation on producers like the Parnells and lavish freebies to lazy fat poor give entirely the wrong incentive, and holds back progress, which is entirely the result of the efforts of the creative, enterpreneurial, acquisitive.

Therefore my Modest Proposal for a progressive tax system that would reward instead of punishing people like the Parnells:

Start with a 50% tax rate on income up to $30,000/y, and end with a 10% Extra Incentive tax credit for income above $1,000,000/y.

This would be a way to TAX POVERTY INTO HISTORY, by giving everybody an incentive to try harder and earn more; any Real American knows that poverty will always be the easy option for the immoral and greedy as long as it is rewarded with low taxes and a luxury lifestyle based on lavish welfare.

@Aimi, let me make it simple for you. Say it takes exactly 1 hour to wash and wax a car. One guy washes 50 cars a week and another guy washes 100 a week. This is Beverly Hills, so the first guy makes $125K a year, and the second makes $250K. I can’t see any reason why the second guy should pay a higher marginal rate. His greater income is solely the result of working twice as many hours. The real world is more complex, but to say that this element of more work for more pay does not exist in the real world is simply ridiculous.

Posted by maynardGkeynes | Report as abusive

After reading this article, I do not feel sorry for any of them. They all want to keep up with the Jones’s and now it is coming to bite them in the wallet. For example, the Parnell’s situation. I also have a family of five. My car is 13 years with 200000 miles. However, our home is 1400 sq feet and we never get to go on vacation. I would be willing to bet they have a lot more luxury items than meets the eye, as well as, a savings account. So when they can say the broke or middle class, try to make it pay to pay on $38,000 gross a year.

Sincerely,

R. Ryan Miller
High School Math Teacher

Posted by Ryan Miller | Report as abusive

Hey Maynard G. (love the handle, BTW!):

Your point would be well-taken if there were a strong relationship between how long and hard people work and their income. If you look at the relationship between hours worked and total income for individuals, you won’t find a high correlation. Most workers in the US work about 40 hours; many of the working poor work more, as do many of the salaried well-to-do. Involuntary part-time work is on the rise, too.

Your point is therefore moot. The real question, given actual working patterns, is whether a progressive tax system, which by its nature taxes income used for basic necessities at a higher rate than income used for luxuries, is fair. It’s still a good question about which we might disagree, but your argument is not at all convincing.

Posted by Strat | Report as abusive

@Ryan the math teacher

Who do you think is paying the taxes that support the schools, Ryan? America is riding class envy all the way down into the dirt, and as someone who teaches math a lot of us on the right expect you to be a step above the NEA/AFT rabble.

Funny, if you keep a car long enough, you don’t have to make payments anymore. I really seriously doubt they have any payments on a ten year old car.

Hey, I have a 96 van they can have if they want transportation with no car payments. They can trade me any Infiniti for it. ;^) Then I won’t have to borrow my husbands’ Infinit — oh , which we bought used anyway, so probably payed a lot less for it than they did for theirs.

And, strangely enough, we have a mortgage payment less than their church donations. Funny, that.

Anyone caught “The Richest Man in Town” by W Randall Jones? I was suspect of this topic at first, but it is well worth the read. An excellent view into the mind of self made billionaires.

http://www.therichestmanintown.com

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