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A low six-figure income does not buy what it used to. But Democratic Presidential candidate Barack Obama has said he will cut taxes on lower-income families and make up the difference by raising taxes on households that make $250,000 or more.
Obama’s proposal suggests that double-income families are hoarding cash under mattresses in tony multi-unit McMansions, while working-class men and women are taxed into poverty. But, like everyone else, the estimated 2% of the population that makes more than $250,000 has been hit by a 6.6% increase in the cost of college tuition from last year, a 20% increase in gasoline from April, 2007, to April, 2008, and a meteoric rise in grain prices that has pushed the cost of a loaf of bread from $1.28 in January to $1.37 in April.
Consumers at all economic levels have been hit by the higher cost of living, but saddling 2% of the population with higher taxes to lessen the tax burden on the remaining 98% caters to a populist myth that national crises have an impact only on the very poor and leave everyone else unscathed.
The fact is that businesses are tightening their belts, and some higher-paid employees are having to take a pay cut or losing their jobs altogether. And the National Association of the Self-Employed reported that 86% of its members, many of whom would be forced to pay higher taxes under Senator Obama’s plan, believe the economic downturn has negatively affected them. Most have said they will not purchase new equipment or inventory this year. And as many as 40% say they expect their profits to drop for the rest of the year.
The so-called wealthy will have to stretch their dollars to keep up with the rising cost of living just like everyone else. But there is a silver lining. If their incomes continue to drop, maybe they will end up benefiting from Obama’s planned tax restructuring.
“Wealthy” is a relative term, and one that gets batted around for political purposes quite a lot. Its definition isn’t always clear. But if you look at the total income spread of working Americans, those making more than $250,000 are indeed wealthy—at least statistically. It’s easy to forget what the average person really makes amid big-money talk of billion-dollar writedowns and executive pay packages in the millions. But in 2006, the median household income in the U.S. amounted to just over $48,000. Even if you take out those just starting their careers and only count workers older than 25, the median household income is still about $53,000. That’s the true middle of the spectrum.
On the far end are the richest American households, or those who make more than $250,000 a year. These are America’s elite. The Mercedes-Benz-driving, Coach-bag-carrying set. Only the top 2% of households in the U.S. pull down that kind of cash.
Also, the people in this tax bracket don’t just make 250 grand and then stop. They are in the $250,000-and-up (and up and up and up) bracket. And it’s this group that has reaped most of the benefits from the Bush tax cuts.
To be sure, recent economic events have not left anyone’s wallet bursting. And rising food and fuel prices are raising everyone’s cost of living. But the top income earners in America don’t deserve much sympathy. In addition to the obvious fact that they have more money to spend than lower-income people, as a proportion of their income, the amount richer people pay for food, fuel, and education is smaller. Feeding a family of four takes the same amount of food whether you make 30 grand or 300 grand. Ditto with paying for fuel to drive said family to school and work or for a college education. Higher prices for necessities hurt the truly disadvantaged more.
Tax breaks should go to the people who are in danger of losing their homes or not being able to afford health insurance. The wealthiest 2% will find a way to scrape by.
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