It was just a matter of time before Obama made a statement rebutting the suggestion from Geithner that a tax increase on the middle class was imminent. Apparently, a matter of time means less than a day.
Today, President Obama’s press secretary Robert Gibbs was quick to clarify that statements made over the weekend by Geithner did not reflect the president’s plans. Gibbs said this afternoon:
The president was clear during the campaign about his commitment on not raising taxes on middle-class families. I don’t think any economist would believe that, in the environment that we’re in, that raising taxes on middle-class families would make any sense.
Agreed (even though I’m not middle class).
When asked about comments made by Geither, Gibbs said, “They allowed themselves to get into a little hypothetical back-and-forth.” By using “they”, Gibbs was also referring to comments made by Larry Summers, director of the National Economic Council, who said on Sunday that he couldn’t guarantee that the middle class would escape a tax hike.
Gibbs was suggesting what many of us thought: that Geithner and Summers (who are not elected officials and do not make law) were essentially admitting that there’s no plan.
Am I allowed to say I told you so? According to my brothers, I’m pretty good at it…
When President Obama was running for office, he pledged not to raise taxes on the middle class. Is he about to go back on his word?
Pundits are screaming that tax cuts for the middle class are “imminent.” I don’t know that I’d go that far.
What all of the hullaballoo is focusing on is this interview between George Stephanopoulos and Treasury Secretary Tim Geithner which aired on “This Week.”
In the interview, Stephanopoulos asks Geithner about the current state of the economy and what’s on tap for the future. At one point, Stephanopoulos asks Geithner very pointedly:
The President has said that taxes won’t go up for any Americans earning under $250,000, but it doesn’t appear that he’s going to be able to keep that promise if you’re going to bring the deficits down.
And Geithner didn’t say no. He started his reply by stating, “George, we can’t make these judgments yet about what exactly it’s going to take and we’re going to get there.”
Okay, yes, yes, yes. I get that’s not a no. But it’s hardly a yes either. It doesn’t warrant the headlines that I’m seeing in the press.
If you follow the interview, when Stephanopoulos asks Geithner about reducing the deficit again, Stephanopoulos uses the phrase “revenues” without specifically limiting it to the middle class. And to this is the exchange that followed:
GEITHNER: Again, we’re not at the point yet where we’re going to make a judgment about what it’s going to take. But the important thing…
STEPHANOPOULOS: But you’re not ruling it out, you can’t rule it out.
GEITHNER: I think what the country needs to do is understand we’re going to have to do what it takes, we’re going to do what’s necessary.
And that’s the few words that have pundits jumping up and down.
Come on. I don’t think there is a single American out there that thinks that taxes aren’t going to go up. It’s just a question of who bears the burden of the increases. And if you’ve been paying attention so far, it looks like it will be the rich and perhaps, corporations.
To run screaming from this interview shouting, “Middle class taxes are going up” is, in my opinion, irresponsible. We don’t know what’s going to happen yet. And keep this in mind: 2010 is a major election year for Congress. Who in Congress will vote in a package that will raise taxes on 95% of the population in an election year?
So, let’s try and look at this for what it is: Geithner admitting that he doesn’t have a plan. Nothing more.
There has been a lot of talk about which presidential candidate has the best tax plan for “middle class” America. It’s an interesting question because I’m not sure that anyone can actually define “middle class” anymore – my readers seem to feel that it’s all over the place.
Middle class – as it’s widely defined – is generally defined as those families who are in the middle of income brackets. That can be confusing. Based on 2005 Census Bureau reports, 40% of Americans earned less than $36,000 a year (the bottom 20% earn less than $19,000). The next 40% – the so-called middle class – reported betwen $36,000 and $91,705 of earnings. The top 20% of earners, making $91,705 or more, earned 50% of the income reported in the US.
[Kelly's geeky note: From a math perspective, that's pretty interesting: while the richest 20% took in nearly 50% of income, the middle class (representing 40% of Americans) earned a fairly representative proportion of total income (37.5%).]
So there you have it, statistically you are middle class if you earn between $36,000 and $91,705 (adjusted for inflation since 2005) per year. Easy, right?
Not so fast.
There are a lot of factors that pure numbers don’t take into consideration including the size of your family and the cost of living in your geographical location. Lots of folks who make more than $75,000 per year may live comfortably in some areas of the world – but that kind of money won’t take you very far in areas like New York City or San Francisco where housing costs alone can easily reach $1 million for relatively modest homes.
The reality is that almost everyone thinks that they’re middle class, though of course, you can’t be. And realistically, you don’t want to be right now. Here’s why.
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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?
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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.
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