Category Archives: Anything

Elizabeth Warren’s Mark to Market Tax uses Optimistic Assumptions

I don’t normally go into politics, but this topic seems to touch a little more closely to FIRE, since there are specific growth rate assumptions that were made.

Buried under the headlines over how much Jeff Bezos would be taxed under Elizabeth Warrens Medicare for All plan was a side note on an additional tax to target the top 1% of households by net worth for a new tax called “mark to market.” This tax basically would restructure capital gains to take place every year regardless if there was a sale. Warren’s plans referenced a study freely available, if you’d like to read it yourself. The researchers used the Survey of Consumer Finances by the Federal Reserve, which is what powers many of the comparison calculators on this website.

To be in the top 1% by using total net worth, you would have to have $10.350 million in net worth to be in the top 1% of households based on the last survey results available using 2016 data. The authors don’t mention if they adjusted out any assets from their projections, so I’m going to assume not. The paper referenced by Elizabeth Warren referenced uses a rather optimistic 8.33% return on investments (page 30 of the PDF).

Over estimated returns

screen shot of study saying Specifically, we use the SCF to estimate the amount of taxable publicly-traded corporate stock held by U.S. persons in 2016. We then assume an imputed nominal rate of return of 8.33 percent,
Assumptions of the 8.33% used by the paper Warren references (page 30)

Vanguard is projecting a average annual returns of only 4-6% for US equities. 86% of the top 1% are over the age of 50 so their asset allocations are most likely more conservative than the overall stock market, and would likely grow much slower than the 8.33%. So with those 2 factors combined, most likely the $2T incremental tax contribution is very over stated especially considering the effects of lower compounding growth.

Shortfalls will need to be filled with other taxes

Using the 8.33% growth over a decade you would end up with 130% cumulative growth, but with 4-6% over the decade the growth would only be 49%-82% so the taxable gains would be 37% to 69% of the budgeted $2T which would cause a short fall in taxes of $0.6T to $1.3T.

growth rates for 4% and 6% are substantially lower than 8.33%
4% to 6% cumulative growth estimated by Vanguard is much lower than the paper that Warren based her budget on, and would provide far lower tax revenues

Months ago, Warren and others had mentioned only targeting the wealthiest of the wealthy for the incremental taxes to pay for Medicare for All among other plans. The first primaries are still months away and Warren’s tax plans have started to dig further and further down the wealth ranks. Sure, people with $10m+ dollars in net worth are probably going to be fine. But if there are shortfall like the one I mentioned, where is the incremental money going to come from? A tax on $1m+ net worth households (top 10% by net worth) doesn’t look as implausible any more as the standards of who should be taxed keeps falling and falling.

Are New Grad Law Salaries Actually Bi-modal?

It’s a common refrain that law salaries for new grads are bi-modal, with a large percentage of law graduates going into Big Law. The NALP even publishes data that shows a double humped distribution of salaries every year. But a quick query of freely available American Communities Survey data (collected by the US Government) shows that there is a small hump in the same spot that the NALP survey reports. But NALP shows nearly 21% of graduates with income around $185k / year and it looks like roughly 26%+ are earning at least $160k which looks to be a huge overstatement. This is what I found:

Only 16% Reported Income Near that Range

  • Mean : $91,798 / year
  • Median : $75,000 / year
  • 25th Percentile : $51,771 / year
  • 75th Percentile : $119,976 / year

I have read comments questioning some of the data collection methods that NALP uses, and I think that this single slice of data definitely shows that there is an odd deviation from the results I derived from the ACS. If anything my data should skew higher, because I could not separate people with only 1 year of experience out. So there would be associates with in Big Law with multiple years of raises and experience in this data set. An interesting overlap is that the NALP’s adjusted mean is slightly below the mean salary that I have calculated, which is interesting as to how close it is.


  • ACS 5 Year 2013-2017 Micro-data
  • Industry : Legal services so this would be limited to law firms specifically.
  • Ages 25-28 to try to capture new grads specifically with at least one year of work, there was no way to restrict years of experience.
  • Occupation : Lawyers, and judges, magistrates, and other judicial workers (This was the lowest level, I could separate it at, but I doubt there are a lot of Judges/Magistrates/Other in this age range)
  • Education: Professional degree beyond a bachelor’s degree (Could not be more specific)
  • Weeks worked prior year: >40+ weeks / year (to try to exclude people who were reporting income from partial year internships/clerkships)
  • Hours Worked in a usual Week : >35+ hours / week (to try to get only full time)
  • Currently Employed

New name, and new calculators coming soon!

I’ve decided to retire the old Shnugi name after 15 years of using this to host my data analysis tools. Although I will continue to use it as my username. I don’t know if I’ve gotten all the links updated, but it seems like everything is working after the migration. Please let me know if you find any broken images, links or pages.

I haven’t really been doing a lot of personal blogging, and I thought it would be more fitting to have a more descriptive name, since most people aren’t here to read about me but to find out things about themselves.

New calculator

The newest calculator is a housing percentile to compare your housing costs nationally. Make sure to include your utility costs and fixed fees like HOA.

Calculate how much can you save with pre-tax commuter benefits for 2020

Marginal Tax Bracket
Select the appropriate marginal tax rate matches your income. For example if on your taxes you report $100k in adjusted gross income (AGI) as a single filer, pick the 24% option, because you make at least $84k but less than $160k.

Monthly Commuter Contribution ($270 max/month)

How does this work?

The Pre-Tax commuter benefit works exempts up to $270 per month from Federal income, Social Security, and Medicare taxes. This money can only be spent on eligible travel to work expenses such as public transit passes (commuter trains/buses/vanpool), parking at your employer, or ride-share (Uber Pool/Lyft Line). In general, your employer will partner with another company who will provide the passes and payment cards. This has been increased from $265 per month from 2019.

So imagine that if you earn $70,000 a year in Texas, and pay $200 per month in eligible parking fees at your workplace:

Before Pre-Tax Benefit

  • Monthly Income: $5,833
  • Taxable Income: $5,833
  • Total Federal Taxes: $1,238
  • Parking Pass Using Your Credit Card : $200
  • Amount left over : $4,395

After Pre-Tax Benefit

  • Monthly Income: $ 5,833
  • Parking Pass Using Pre-Tax Commuter Benefit: $200
  • Taxable Income: $5,633
  • Total Federal Taxes: $ 1,194
  • Amount left over : $4,439

Savings of $44 / month or $528 / year!

Sure this isn’t a ton of money. But if you’re already auto-paying for public transit passes, ride share (Uber, Lyft), or parking every month to get to work, this is a quick an easy way to save some money with minimal effort. The only downside is that you employer must have an account set up with a benefits provider to allow you to take the deduction.

This calculator is for illustration only, and the tax brackets and contribution limits will likely shift in coming years. Some states will also deduct Pre-Tax Commuter benefits from their state and local taxes so your savings could be even bigger! If your income is right at the border of the break point of one of the marginal tax brackets, your actual savings will vary a little bit. Just something to keep in mind. For more information, the IRS has a very long PDF with all the details .

One weird thing about the benefit is that your employer may or may not list the benefit in Box 14 of your W2. So I’m not sure how the government tracks how compliant you are with you spending or contributions or if there’s a difference if you have multiple jobs. It seems like there’s a lot of trust in the companies that administer the benefit to do it correctly.

Household Savings Improves to only 36% Spending more than Income

After analyzing data from the 2017 Consumer Expenditures Survey (CEX) by the Bureau of Labor Statistics (BLS), nearly 35.9% of US households spent more than they earned. This is the most recently available data from the BLS. Overall, 46 million out of 129 million US households are estimated to have had expenditures that exceeded their after tax income (table below).

Large Improvements since 2015

Comparing these results to the previously reported ones for 2015’s CEX survey where I reported 38.5% spending more than income, the percentage American households saving has improved significantly. Almost 2.5 million fewer households are spending more than they earn, which is a huge improvement. In addition households tended to save more than in 2015, as the $0-$10k group dropped by 1.4 million households, with large increases in households saving larger amounts of income. One of the largest shifts appears in the decline of household who spent more than $150k than they earned. Shockingly, this category decreased 54%! I suspect that the losses of this size were primarily due to investments and housing losses, and values for both of those assets have increased significantly in the past few years.

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