Monday, February 09, 2009

crying themselves to sleep in their million dollar homes

It's hard knock life being rich and incompetent. Seriously though, this media swill about how it's hard to live in NYC on a half million dollar/year pittance is just silly. Who do they think they're going to convince?

The argument is that $500k/year is overly punitive because that means these execs will have to cut their standard of living. Notice from the article:
“As hard as it is to believe, bankers who are living on the Upper East Side making $2 or $3 million a year have set up a life for themselves in which they are also at zero at the end of the year with credit cards and mortgage bills that are inescapable,” said Holly Peterson, the author of an Upper East Side novel of manners, “The Manny,” and the daughter of Peter G. Peterson, a founder of the equity firm the Blackstone Group. “Five hundred thousand dollars means taking their kids out of private school and selling their home in a fire sale.”
Few are playing sad cellos over the fate of such folk, especially since the collapse of the institutions they run has yielded untold financial pain. But in New York, where a new study from the Center for an Urban Future, a nonprofit research group in Manhattan, estimates it takes $123,322 to enjoy the same middle-class life as someone earning $50,000 in Houston, extricating oneself from steep bills can be difficult.

What? You mean people who get paid millions of dollars a year yet squander it all on an absurd lifestyle, run their businesses into the ground, eat up hundreds of billions of dollars in taxpayer money, and send the economy into a tailspin costing millions of poor and middle class people their jobs, might have to lower their standard of living, perhaps even living with the same lifestyle as the hoi polloi in Houston who make (gasp!) a mere $200,000/year? How will they eat?

The article then ascends to a sort of nirvana of unintentional comedy, listing all of the highlights of these people's conspicuously consumptive lifestyle and how much it costs to maintain them, stating with no hint of irony, "The cold hard math can be cruel." The first thing on the list is taxes. Taxes. Do I even need to discuss the audacity of an article defending the lifestyles of people whose businesses accepted government bailout money to complain about their tax burden?

The second thing on the list? Two annual vacations at a minimum of $16,000. It only goes downhill from there.

Let's try to come up with some more revealing facts about these people's new lifestyle. I wonder, just what kind of a house can one of those $500k/year-making practically-Texas-ditch-diggers afford? Assuming a 35% tax burden (most people pay closer to 25%, but I estimated upward to account for high income bracket) and that they're spending a quarter of their income on their mortgage (a conservative estimate for most people), a New Yorker of that income level could afford a monthly PITI (principal, interest, taxes, and insurance) of $6,770. We'll use double the New York property tax rate of 1.2% to account for higher taxes in the city, a 5.1% interest rate, and an insurance rate of 1% (which is high). Using this calculator that comes out to a roughly $1.2 million mortgage. Looking through Google Base, I found a picturesque 4 bedroom house on a 4 acre paradise in New City, this 3,216 ft. monstrosity overlooking the ocean, and a pair of nice condos on the upper east side for that amount.

Poor saps, who could live in those hell-holes?

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