I worry that you treat the cost of living as if it were a calibration of prices rather than prices in their own right. Eating dinner and taking the bus in SF is simply a higher value (aka higher quality) of doing a lower quality version of these same things in Kansas.
To say that we should treat SF residents as if they weren't choosing to consume luxury versions of these goods seems off to me.
It's true that different regions have higher or lower living expenses, however, while you've accurately diagnosed the problem, your solution is based on the idea that tax is something which is best to avoid, which is completely incorrect. Tax is an inherently good thing. Countries with high minimum income tax levels across the board (i.e. 40%+) have a significantly smaller delta between extremes of rich & poor. This is because--directly because--they have better public services, i.e. better standardised education, free healthcare, cheap & high-speed rail infrastructure, higher pensions, decent minimum wages, good out of work benefit, effective social care and mental health services and so on and so forth. This leads to lower rates of child & in work poverty, lower incidence of suicide, and obviously, more disposable income for the middle class families you wish to protect via the proposals raised in this blog.
I agree with you, raising tax on the top tier of the middle class in a vacuum, while doing nothing else politically, will of course mean that the middle class lose money - but this is not what actually happens when a country raises taxes. When a state raises taxes, governments quickly realise that they have more money to spend on things the middle class makes use of, and self same governments also create jobs through their expenditure, & raise the quality of the services the people in that country use. You only need to look at Denmark, Germany, Norway, Sweden, Iceland, even the UK & Canada (despite the latters' neoliberal political bent) for evidence of this in the livelihoods of its people writ large. Better outcomes for all those citizens, without the need to undemocratically ratio income tax by region (it's just going to create more tax loopholes & is completely undemocratic).
You've successfully identified regional inequality as an issue affecting the middle classes. The only real issue however, is the lack of political will to bring about policies that will address this regional inequality, e.g. rent controls, higher business rates, legislation to end the privatization of transportation and healthcare, and so on.
Rather than 'punishing a household for living in a costly area', the above policies would simply make that area more affordable & guarantee a better quality of life for everyone. It's not an impossible goal, and it doesn't require any hand wringing over regional economics, or the value of a 150K job (which, yes, is a staggeringly high wage for one person to earn).
Speaking as a city planner in Canada, we are often pressured into creating plans that aim to reinforce an existing socio-economic environment and/or be a catalyst that changes said environment. It's not that simple and this piece is great at pointing out there are much more complex factors at play. Interesting read!
Speaking from Southern CA here, but it's not really that much different than Northern part of the state.
Everyone, when they start working thinks "ah, I've now made $50k, if I only make $75k then I'll really be comfortable."....Like me, circa 2005-2007. Then they make $75k and are not really any more comfortable... so they think OK if I can just make it to 85-90k I'll be comfortable. Same result. Next, $100k, surely that will do the trick... yet just barely more comfortable. Bills get paid a bit faster, 401k's get contributed to a bit easier, medical expenses may be covered a bit more easily, and food and gas seems slightly to come by, but you still find you do not quite have enough.
A lot of this is due to inflation, but hardly explains all of it. 10 years ago when I was hoping to reach 95-100k annual salary that would have been more of a surplus than it is now that I'm making in the very low six figures personal income. Last year, our two earner household income reached nearly $250k which sounds fantastic but is just enough to afford an average home, two affordable cars, insurance, and other obligations. If one is contributing to their own healthcare, and has a mortgage in most of urban or suburban CA in the decade 2020, then there really is not enough money under $300k that will make you feel "comfortable". And some areas it's even more painful to be this "rich".
"Nothing in economics is as simple and straight forward as “yes” or “no,” and you should be wary of those who try to convince you otherwise." I feel like this could be expanded to many themes beyond economics in our current era. False binaries are unfortunately frequent today.
I enjoy the phrase "California Middle Class" as an apt explanation of high relative median income corresponding to an equal(ish) lifestyle elsewhere. My parents used this phrase all the time when I grew up, except we were in water-thieving Southern California and not the Bay Area.
Pretty cool that you've turned awful twitter discourse into a good essay. Really enjoyed this!
Great essay! My one pushback:
I worry that you treat the cost of living as if it were a calibration of prices rather than prices in their own right. Eating dinner and taking the bus in SF is simply a higher value (aka higher quality) of doing a lower quality version of these same things in Kansas.
To say that we should treat SF residents as if they weren't choosing to consume luxury versions of these goods seems off to me.
It's true that different regions have higher or lower living expenses, however, while you've accurately diagnosed the problem, your solution is based on the idea that tax is something which is best to avoid, which is completely incorrect. Tax is an inherently good thing. Countries with high minimum income tax levels across the board (i.e. 40%+) have a significantly smaller delta between extremes of rich & poor. This is because--directly because--they have better public services, i.e. better standardised education, free healthcare, cheap & high-speed rail infrastructure, higher pensions, decent minimum wages, good out of work benefit, effective social care and mental health services and so on and so forth. This leads to lower rates of child & in work poverty, lower incidence of suicide, and obviously, more disposable income for the middle class families you wish to protect via the proposals raised in this blog.
I agree with you, raising tax on the top tier of the middle class in a vacuum, while doing nothing else politically, will of course mean that the middle class lose money - but this is not what actually happens when a country raises taxes. When a state raises taxes, governments quickly realise that they have more money to spend on things the middle class makes use of, and self same governments also create jobs through their expenditure, & raise the quality of the services the people in that country use. You only need to look at Denmark, Germany, Norway, Sweden, Iceland, even the UK & Canada (despite the latters' neoliberal political bent) for evidence of this in the livelihoods of its people writ large. Better outcomes for all those citizens, without the need to undemocratically ratio income tax by region (it's just going to create more tax loopholes & is completely undemocratic).
You've successfully identified regional inequality as an issue affecting the middle classes. The only real issue however, is the lack of political will to bring about policies that will address this regional inequality, e.g. rent controls, higher business rates, legislation to end the privatization of transportation and healthcare, and so on.
Rather than 'punishing a household for living in a costly area', the above policies would simply make that area more affordable & guarantee a better quality of life for everyone. It's not an impossible goal, and it doesn't require any hand wringing over regional economics, or the value of a 150K job (which, yes, is a staggeringly high wage for one person to earn).
Speaking as a city planner in Canada, we are often pressured into creating plans that aim to reinforce an existing socio-economic environment and/or be a catalyst that changes said environment. It's not that simple and this piece is great at pointing out there are much more complex factors at play. Interesting read!
Speaking from Southern CA here, but it's not really that much different than Northern part of the state.
Everyone, when they start working thinks "ah, I've now made $50k, if I only make $75k then I'll really be comfortable."....Like me, circa 2005-2007. Then they make $75k and are not really any more comfortable... so they think OK if I can just make it to 85-90k I'll be comfortable. Same result. Next, $100k, surely that will do the trick... yet just barely more comfortable. Bills get paid a bit faster, 401k's get contributed to a bit easier, medical expenses may be covered a bit more easily, and food and gas seems slightly to come by, but you still find you do not quite have enough.
A lot of this is due to inflation, but hardly explains all of it. 10 years ago when I was hoping to reach 95-100k annual salary that would have been more of a surplus than it is now that I'm making in the very low six figures personal income. Last year, our two earner household income reached nearly $250k which sounds fantastic but is just enough to afford an average home, two affordable cars, insurance, and other obligations. If one is contributing to their own healthcare, and has a mortgage in most of urban or suburban CA in the decade 2020, then there really is not enough money under $300k that will make you feel "comfortable". And some areas it's even more painful to be this "rich".
"Nothing in economics is as simple and straight forward as “yes” or “no,” and you should be wary of those who try to convince you otherwise." I feel like this could be expanded to many themes beyond economics in our current era. False binaries are unfortunately frequent today.
I enjoy the phrase "California Middle Class" as an apt explanation of high relative median income corresponding to an equal(ish) lifestyle elsewhere. My parents used this phrase all the time when I grew up, except we were in water-thieving Southern California and not the Bay Area.