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BigLaw Money Doesn't Go as Far as You'd Think

Over at The Volokh Conspiracy, David Bernstein makes some interesting remarks about the impact of Obama's proposed tax increases on professionals in high-cost areas like New York City. Bernstein does the math with regard to some of his friends who, though not explicitly identified as lawyers, fit the description:

My friends in the [$250,000+ income bracket that would be subject to tax increases] tend to have have high mortgages, work 60-80 hours a week, pay 40-50K or more a year for child care (a nanny is necessary when you often work into the late evening--and even day care for two kids in the DC area costs close to 40K a year), and have six figures worth of student loans, primarily from professional school, that they are still paying off. In other words, approximately 100K of their pretax income is taken up by their student loans and child care costs, which are the equivalent of "startup costs". Their mortgage costs may seem excessive, but you don't easily make six figures in low-housing cost cities like Des Moines, and living in outer suburbs is very difficult when you work 12 hour days.

If a hypothetical couple's initial income is a total of $300K, and they work an average of 70 hours each, and assuming two weeks vacation, they are in effect getting a grand total of $28.57 an hour for their labors, and a fair percent of that is going to pay interest on the mortgage. I'm sure they are glad to know that they are rich enough to be taxed at over 50% of their marginal dollar.

Bernstein's post has, thus far, generated more than 260 comments. But what say you? Do high-earning large firm lawyers and other professionals deserve the added tax burden when their effective salary isn't that high? Back in the flush times of 2007, a Palo Alto, Calif.-based legal recruiter told The American Lawyer that in places like New York and Silicon Valley, "lawyers are just a little above middle-class." Still, do they need to pay more because they earn more, at least on paper?

Posted by Carolyn Elefant on February 26, 2009 at 03:34 PM | Permalink | Comments (10)

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