Clicking on banner ads enables JWR to constantly improve
Jewish World Review April 29, 2004 / 8 Iyar 5764

Amity Shlaes

Amity Shlaes
JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Ann Coulter
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
David Limbaugh
Michelle Malkin
Chris Matthews
Michael Medved
MUGGER
Kathleen Parker
Wes Pruden
Sam Schulman
Amity Shlaes
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports

Being caught between 2 complicated syndromes: The high cost of living in big cities and the progressive structure of the U.S. tax code


http://www.NewsAndOpinion.com | It is April and I dream of Montana. I dream of Big Sky and the 11,166-foot Lone Mountain. I dream of Flathead Lakes and large-mouth bass. And I dream of acreage, endless acreage.


This ranch-in-Montana fantasy is a common one for the American male—and even some females. Dwellers in big, expensive cities know they are missing something that goes beyond a vacation-oriented lifestyle, although they cannot always articulate what. That something is the greater purchasing power of people who live in cheaper places like Montana.


Their trouble is not merely cost of living, although that is a large factor. It is also a more complicated syndrome we will dub the San Francisco Squeeze. The squeeze is the consequence of being caught between two things: the high cost of living in big cities on the one hand and the progressive structure of the U.S. tax code on the other.


As everyone knows, you need a much higher income to maintain the same style of life in Boston than you need in, say, Joplin, Mo., or Great Falls, Mont.


But the extra income that represents your cost-of-living adjustment also pushes you into a higher tax bracket. U.S. tax brackets are adjusted for inflation, but they are not adjusted for differences in the cost of living in different places. So a good share of that "extra money" goes to your national capital, not you.


Recently the Tax Foundation in Washington developed a squeeze meter for U.S. cities. It started with a simple geographic cost-of-living index, the sort personnel departments in big corporations use. Then it looked at the tax burdens shouldered by those with nominally higher wages in high-cost cities. The foundation found that the progressive rate structure overcharges people who live in high-cost cities while undercharging those in low-cost areas. (The study did not look at state and local taxes, although these also affect after-tax income and, of course, relocation decisions).


The differences are striking. In New York, a married couple needs $159,621 in income to achieve the median U.S. standard of living. That nominal income means the family's effective federal tax rate is something like 20 percent. In Mobile, Ala., it takes only $65,452 to get the average American lifestyle. That couple's federal tax burden is merely 10 percent. Another example: An income of $132,000 in San Francisco brings you about the same value that you get for a mere $84,111 in Portland, Ore., also a highly livable port city. But in San Francisco a family pays more than $22,000 in federal tax on that income, whereas in Portland a family pays less than $11,000.

Donate to JWR


New York City, parts of New Jersey, San Francisco, San Jose, Calif., and Honolulu won the contest for worst squeezed by the Tax Foundation's meter. Among the best areas were Jacksonville, Phoenix and Pocatello, Idaho.


And, of course, there is Montana, where I can have five bedrooms with a mountain view, a barn and fields for the dog to ramble across. Montana begins to sound attractive, especially when you consider that for the same purchase price, $525,000, you can get a one-bedroom shoe box, if that, in Manhattan.


The squeeze has a political context. When Democratic presidential candidate John Kerry says that he will raise taxes on the "wealthy," he is, to a serious extent, targeting the cost-of-living challenged (the squeezed). I recently published a column saying that some of the top earners in America didn't feel rich. Two groups didn't like that assertion: unswerving partisans of Kerry and people in not-so-costly places. The mail from expensive places—California, say—was by contrast generally positive. I got a letter from the wife of an Illinois doctor with a practice in an expensive town (Hinsdale). A mother of four, she was working toward her nursing degree, but was having a hard time doing it; the taxes plus the cost of living made things a struggle. She was so angry she called Democrats "sheep in socialists' clothing"—hard language for someone from the caring professions.


But the story is not merely an American one. People transferring to the U.S. will also want to take into account the progressive federal rate structure—or at least be sure that whoever calculated their cost-of-living allowance did. They might also bear in mind the relative burdens of various state taxes. (The Tax Foundation has charts on these too.)


But back to the Tax Foundation report. Put most simply, what it says is that we can get a nicer house than we have and cut back on work, all without sacrificing standard of living.


Montana, here we come.

Every weekday JewishWorldReview.com publishes what many in Washington and in the media consider "must reading." Sign up for the daily JWR update. It's free. Just click here.


JWR contributor Amity Shlaes is a columnist for Financial Times . Her latest book is The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.

Up

04/20/04: Kerry's ‘Misery Index’ is just sad
04/15/04: John Kerry's ‘tax the rich’ mantra won't get the jobs done
04/02/04: Faithful following at the White House
02/25/04: It's back to the Dark Ages on trade
02/20/04: Trust the U.S. or trust Al Qaeda
02/12/04: A Political Year of Yalies: Boola Boola for Meritocracy
02/04/04: Here's what America doesn't need: Another New Deal
01/15/04: Forget Mars, U.S. economy looking like the final frontier
12/30/03: Bob Bartley put morality's place in the market economy
12/18/03: Mission accomplished: 1991's, that is
12/11/03: Shrugging off outdated data: Inside America's economic machine
11/13/03: Leaving a little something for the kids? Good luck
11/05/03: Never, Never will we Desist
09/30/03: Tax, lies and a few supply-side parables 10/09/03: Free markets are the key to rebuilding Iraq

09/25/03: Don't be sentimental, Mr. Bush
08/12/02: Howard Dean, Robin Hood
05/29/02: Berlin Diarist: To believe that by self-improvement and restraint, we can end tyranny
03/27/02: The curse of oil
11/12/02: Political Correctness at the Fed (No joke!)
10/31/02: Local enforcer who has changed national laws
10/12/02: No Mirror for Europe; US is a picture of unity
08/14/02: Keeping your financial eggs at home
07/24/02: New Democrats' unaffordable luxury
06/26/02: The evolution of eminent domain is the story of the lasting power of Supreme Court decisions to alter the American cultural fabric
06/20/02: The distinction between known risk and uncertainty: What was lost in the Martha Stewart flap
06/11/02: Europe, long waiting for a chance to assert itself as independent from the US on the world stage, is clueless to terror's threat
06/04/02: A Cold Warrior's lessons for the Middle East
05/21/02: Geography does matter when it comes to development, but aid must nonetheless be linked to good governance
05/14/02: The increasing number of new claims is hurting innocent companies and making a mockery of the Common Law system
05/09/02: Aid, development and guilt in our times of terror
04/30/02: Wine lovers may at last be able to stray across state borders. The Internet is coming to the aide of free trade
04/23/02: Taxation by way of Madison Avenue
04/17/02: Special relationships and free trade do not mix
04/08/02: Is terror the flip side of globalization?
03/20/02 Bush gives aid but seeks results
03/13/02 The Danger in policy by numbers
02/26/02: States' smokescreen for tax hypocrisy
02/20/02: Echoes of leadership against a global threat
02/13/02: Jackson Vanik May be a Useful Analogy When Thinking About the Middle East
02/07/02: Budgeting for victory: Requiem for a peace dividend
02/05/02: The detectives of 1930s pulp fiction had a nose for clients bearing gifts. Sadly, those consulted by Enron did not
01/22/02: Allow all American children a decent chance
01/15/02: Do not disturb the profit-sharing revolution
01/09/02: It is dangerous to elevate a currency as a political emblem if the need for other economic reforms is obscured
01/03/02: There is only one way for a free thinker to bring up children
12/20/01: Why America's economy always bounces back
12/18/01: When it comes to taxes, Washington lawmakers can learn a thing or two from The Honeymooners
12/13/01: Bush opens a new era
12/12/01: A flamboyant reversal for the Democratic party
12/06/01: Threat of an oil embargo on the U.S. is a bluff
11/29/01: Which is more important--the war or diplomatic comity?
11/20/01: Unbalanced by a wealth of oil and diamonds
10/17/01: Afghanistan Needs a General MacArthur
09/27/01: The US has gained an understanding of the costs of war for which its European allies have hitherto wished in vain
09/13/01: War against terrorism will rise from the ashes
08/15/01: Geography is no excuse for the state's economic stagnation. Its policymakers should take a leaf from Ireland's book
08/07/01: Teamsters may pay a heavy price for winning its batle in Congress
07/25/01: Towards a patent-free nirvana?
07/17/01: History proves the lasting value of tax cuts
07/10/01: Stem cell research has awakened a bitter debate in Washington but voters care more about other electoral issues
07/03/01: America foots the bill for Europe's largesse
06/26/01: America the litigious, land of the lawyer's fee
06/20/01: Five reasons for gloom about global growth 06/18/01: Show pity for Alice in Tax Wonderland
06/13/01: America must take a French lesson in trade
06/11/01: Time to dream the impossible dream for Iraq
06/07/01: Whatever happened to simple?
06/04/01: When the relationship between companies becomes as close as a marriage, the eventual break-up is often very painful
06/01/01: Loving and hating the Bush tax bill
05/30/01: Will Grisham soon be unemployed? In America's courts these days, there's no room left over for legal fiction
05/22/01: Republicans sample the rhetoric of confidence
05/16/01: Boeing has been promised $60m to site its headquarters in Illinois. The deal looks a poor one for taxpayers
05/14/01: Adam Smith in love
05/09/01: Those rotten Russian capitalists
05/07/01: Why tax havens provide shelter for everyone
05/04/01: Middle classes pay for get-the-rich folly
05/01/01: Money can't buy happiness? Think again.
04/26/01: Calling America's rogues and entrepreneurs
04/19/01: High earners right to feel lonely at the top
04/11/01: The right must learn the comfort of strangers
04/04/01: When domestic law arrives by the back door
03/30/01: A Lexus tax cut suits the jalopy driver
03/27/01: The unchallenged dominance of King Dollar
03/20/01: Natural selection of an intellectual aristocracy
03/16/01: The hidden danger of a regulatory recession
03/14/01: Is the American condition that boring? Why so many Oscar nominated movies aren't set in America
03/07/01: Trampling on the theory of path dependence
03/05/01: Fighting the good fight
03/01/01: It is time for Fannie and Freddie to grow up
02/27/01: IT's important
02/22/01: The guilty conscience of America's millionaires
02/14/01: The benefits of helping the 'rich'
02/09/01: The Danger and Promise of the Bush Schools Plan
02/05/01: Crack and Compassion
01/31/01: Debt is good
01/29/01: Clueless
01/24/01: A gloomy end for a half-hearted undertaking
01/17/01: The challenge of an ally with its own mind
01/15/01: An unexpected American family portrait
01/10/01: A fitting legacy for America's beloved dictator
01/08/01: The trick of tax 'convenience'
01/03/01: Time to stop blaming Greenspan over taxes
12/11/00: So smart they're dumb
12/06/00: How economic bad news came good for Bush
12/04/00: The Boies factor
11/30/00: "The inevitable demands for recounts erupted like acne…"
11/28/00: Fair play and the rules of the electoral game
11/23/00: The shining prospect beyond a cloudy election
11/21/00: Try the Cleveland model
11/16/00: A surprising winner emerges in the US election
11/09/00: Those powerful expats
11/07/00: What's right for America versus what works
11/02/00: Time to turn off big government's autopilot
10/30/00: Canada beating America in financial sensibility
10/26/00: When progressiveness leads to backwardness
10/24/00: The most accurate poll
10/19/00: The Middle East tells us the hawks were right
10/17/00: The split personalities of America's super rich
10/10/00: 'Equity Rights' or Wake up and Smell the Starbucks
10/04/00: Trapped in the basement of global capitalism
09/21/00: The final act of a grand presidential tragedy
09/21/00: Europeans strike back at the fuel tax monster. Should Americans follow?
09/18/00: First steps to success
09/13/00: America rejects the human rights transplant
09/07/00: Minimum wage, maximum cost
09/05/00: Prudent Al Gore plans some serious spending
08/31/00: A revolution fails to bring power to the people
08/28/00: A reali$tic poll
08/21/00: "I Goofed"
08/16/00: Part of the union, but not part of the party
08/09/00: Silicon Alley Secrets
08/02/00: Radical Republicans warm up for Philadelphia
07/31/00: I'll Cry if I Want To
07/27/00: Cold warrior of the new world
07/25/00: The Estate Tax will drop dead
07/18/00: Shooting down the anti-missile defence myths
07/14/00: A convenient punchbag for America's leaders
07/07/00: How to destroy the pharmaceutical industry
07/05/00: Patriots and bleeding hearts
06/30/00: Candidates beware: New Washington consensus on robust growth stands the old wisdom on its head
06/28/00: White America's flight to educational quality
06/26/00: How Hillary inspired the feminist infobabes

© 2003, Financial Times