Guest Post by: Kate Olson
This article in a recent BusinessWeek magazine instantly made me bristle – “Taxing the Not-So-Rich Rich” makes the case that families bringing in a combined income of greater than $250,000 aren’t necessarily wealthy and shouldn’t be taxed as such under presidential nominee (D) Barack Obama’s proposed tax plan. This plan would increase taxes for couples making greater than $250,000/year and individuals making greater than approximately $200,000.
Now, I understand that no one wants to be included in a subset that includes additional taxation, but when (as the article states) the average income of families in the United States is $48,200, how can anyone claim that a family income of 5x the average isn’t well-off?
The defense that the families portrayed in the article (and many of my twitter followers) are using is that it all depends on the area of the country that the family lives in – I disagree. At the risk of sounding extremely judgmental, I find it incredibly sad that people living in obvious comfort (and luxury) dare to claim that they’re at all hard-up when the majority of the country (yes, including me) live on a mere fraction of the $250,000 threshold. Remember, that average of $48,200 is a national average. I guarantee that there are families living in the “high-rent” areas that are making considerably less than even that $48,200 – poverty certainly doesn’t have geographic boundaries.
I think this is the heart of the issue – people spend the money they have. One of my twitter followers, @mclgreenville made this point to me and it’s so true. I remember being completely broke in college and just dying for the day I’d be making $32,000 a year. That seemed like a lot of money for about a month until I adjusted my spending habits to reflect my new income – I then started feeling poor again and started using credit cards again. The families in this article may be stretched to afford the lifestyles to which they are accustomed, but an income of $300,000 is nothing to take lightly.
Of course people don’t want to be taxed more for higher incomes – no one wants to be taxed more! My issue with this article and the families in it is that these people simply don’t have perspective on what constitutes a high income. A friend pointed me toward the Global Rich list this morning and this website just confirmed my thoughts on this matter – according to this index, at a combined family income of $75,000 my family is the 49,322,169 richest one in the world. The shocking part? We are in the top 0.82% in the world.
Makes you think, doesn’t it? Taxes aside, shouldn’t we be thankful for what we have rather than complaining about the little bit we might have to give up?
—
Kate Olson is an educator, e-learning and online networking consultant, website designer, blogger, and mother living and working near La Crosse, Wisconsin. Her past professions include accountant (tax, audit, insurance) and stay-at-home mother. She does web design and consulting work as Kate Olson Consulting, LLC.
Kate blogs about her professions and lots of tech/geeky stuff at Kate Says and is also the founder of and writes about her adventures in motherhood at This Mommy Gig. You can also find her on twitter as @kolson29 and at LinkedIn.
This wouldn’t be an issue if the United States would adopt a flat income tax. It seems odd that we use the term “progressive” to describe a tax system that punishes success.
If taxing the rich would help anything I would be more for it. the only reason people want to tax the rich is because they are envious and want to punish the rich for their success. It doesn’t matter to them that by doing this, they are actually going to hurt the economy and themselves in the process. the American people are their own worst enemies sometimes.
I’m truly sorry you’er having a hard time in these economic times. That your life style has gone down really fast. I have’nt a clue what your tax is. On $300,000 a year. Nor do I know weather or not you should pay more tax on it, aka RICH… I do know the things that the people in the houses , I drive by, Have. I do not believe that 2500 sq. ft. house with all that goes with is called POOR. There is so many going up too. I don’t know personely , any one that has one or is close to getting one. That price is out of this world. To be able to buy one, I would call Rich. I grewup in a small town, we rented most of the time. My father finilly bought one in 1962 for $12000. I personelly have not bought a house yet. Mobil Home. Yes it paid for. An yes it’s 26 years old. Can I afford one now, NO. Do you have health insurance? Yes you do. Do I have heath insurance ? No … Can you afford Rice and Beans? Yes … I can too. When My wife need Insulin, aka diabetic. I have to decide, whats more important. $300 a month. I’m sure your a hard worker, aka $300,000 a year an all that. Your much smarter than me. I work 10 hours a day, at a hot manufaturing plant all day, I bring in 26,000 a year. But most of all this is not to blame you for what you have. It’s just to let you know where , I’m coming from. This is the best Blessing , God The most High ,Has ever could give me, That is to walk with me ever step of the way.
Rich is a relative term, i.e., it means different things in different cultures, societies, neighborhoods, etc. So, I object to the continued use of “tax breaks for the rich” and other volatile terms. I understand what she was saying in the article, but the broader point, on a tax blog, should be whether people should pay different tax rates because thay earn more money. As others above have noted, our progressive tax system is nothing but socialism. Look at which taxpayers pay the most, and consider that some non-taxpayers get tax refunds (earned income credit). How can you justify that in the tax code? The flat tax would be a solution, but I don’t see it ever happening unless there’s a major upheaval in Washington. (LOL)!
The problem isn’t with households in that range paying ‘more’ per se, it’s that they pay more (as in more income subject to tax) AND are then subject to a higher rate. It’s the latter that is a slap in the face to success. My household is approaching this range (with both of us working, busting our tails), and we’re hardly wealthy. In fact, in our area, being able to afford decent housing at our income is still an issue.
IMO, many of the objections people, including myself, have with the progressive system we have could be alleviated if the brackets were simply moved up. It seems wrong that a household in the 250K range has the same marginal rates as Bill Gates, when they’re clearly not even in the same economic stratosphere.
Another Tax Geek,
You make an excellent point re the tax brackets. They clearly don’t take into account economic reality.
I have to say $300,000 is not rich it is relative to each person’s circumstance and choices. I was let go from a good job after a medical leave and hit the streets and my job was trying to find a job and no one would hire unless it was commission only so I had to make a choice going on welfare to pay my bills or get a loan to start a business. I have worked 12 hours plus everyday for the last three years up until recently. I started my own business in 2005 and the first two years I lost money and because I am a business broker in a long sales cycle and the bad economy I have worked on closing the same accounts for several years. All the sudden this year all of them are closing which happens to add up to $300k and as a business owner I am throwing away $100k or more on taxes. If that $300k was spread out over the last four years my life would have been easier, bu I am very Grateful. I am also sick about it. I went temporarily blind last year from the stress but decided to hang in there. I have a business loan, no health insurance, my prescriptions run $600 a month, don’t own a home and after three years of sacrificing I am going to give it a way because the last couple of years of hard work’s income is falling into 2008 and 2009 will be another story. Do you know how I could help my family with that kind of money? Instead I have to pay business expenses and put some back and hope my business will continue to grow.