Monday, November 26, 2007
Interesting article in the Washington Post: That's Rich -- But Maybe Not for Someone Else; Issue of Who's Really Wealthy Can Also Affect Political Debate, by Joel Achenbach:
Who's rich? Who's middle class? How can you tell the difference? ... The two front-running Democratic presidential contenders, Sen. Barack Obama (Ill.) and Sen. Hillary Rodham Clinton (N.Y.), sparred over tax policy and quickly got entangled in the question of whether someone making more than $97,000 a year is middle class or upper class. That's upper class, Obama said. Not necessarily, suggested Clinton. ...
The exchange between Obama and Clinton began when the senator from Illinois said he was open to adjusting the cap on wages subject to the payroll tax. That's the tax that the government prefers to call a "contribution" to Social Security. Under current law, a worker pays a flat percentage (and employers match it) of wages up to $97,500. Wages beyond that aren't taxed.
Clinton responded by saying that lifting the payroll tax would mean a trillion-dollar tax increase, adding that she did not want to "fix the problems of Social Security on the backs of middle-class families and seniors."
Obama replied: "Understand that only 6 percent of Americans make more than $97,000 a year. So 6 percent is not the middle class. It is the upper class."
Clinton: "It is absolutely the case that there are people who would find that burdensome. I represent firefighters. I represent school supervisors."
Obama doesn't want to lift the payroll cap entirely, according to one of his campaign's senior advisers. Rather, Obama has said he would consider a "doughnut hole" arrangement, in which people would not have to pay any additional payroll tax until they had made at least $250,000 or $300,000. The adviser said of Obama: "He has always said that the people he expects to pay their fair share are households with income above 250,000."
Clinton has cited that same figure, saying households with income above $250,000 can pay the marginal rates set in the 1990s when her husband was president. She would also give married couples with estates worth less than $7 million an exemption from the estate tax, known in conservative Republican circles as the "death tax." ...
Edward Wolff, a professor of economics at NYUy, thinks that the middle class in a major city includes people in households with incomes from $40,000 to $100,000. From there, up to $200,000, people are "upper middle class." ... People making $200,000 to $350,000, he says, could be considered rich, but they still have to slog to work every day. To be really rich, in Wolff's scholarly judgment, you need not only an income upwards of $350,000 a year -- which happens to be right about the point where today's top marginal income tax rate of 35% kicks in -- you also need at least $10 million in accumulated wealth.
See also The Motley Fool: Tax-and-Spar Democrats, by Rich Smith.