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As the Bush tax cuts become a central issue of the midterm elections, more and more people are asking why President Obama, in refusing to extend them for "the rich," has defined the upper income limit for middle class singles as $200,000 and for families as $250,000?
How did the president and his party ever get the idea that $200,000 to $250,000 is a "middle class income?"
The U.S. Census Bureau breaks down reported household income into quintiles (five divisions). In 2007, the income range for the middle quintile was $36,000 to $57,660. If we want to define middle class more broadly and include all three middle quintiles, the upper range still only goes up to $91,705 â?? just 36% of President Obama's limit.
Some television news anchors have recently commented that $250,000 a year does not go very far in New York City or West Los Angeles. Putting aside the issue of whether it makes sense to define "middle class" by what it takes for some people to live comfortably in Manhattan or Beverly Hills, a study co-authored by Princeton psychology professor and Nobel laureate Daniel Kahneman, recently published in the Proceedings of the National Academy of Sciences, finds that the impact of income on lifestyle satisfaction peaks at $75,000, almost regardless of the local cost-of-living.
If this figure is not a practical definition of a middle class income, what is?
Could it be the president really wants to exempt families making $250,000 and under because he thinks they will stimulate the economy by spending all their income? While the relationship between income level and savings rate has always been a contentious issue among economists, few doubt that those making $250,000 will in fact save a much greater proportion of their earnings than a family in the upper range of any honest definition of middle class.
The president himself suggests that the $200,000/$250,000 cutoff is motivated by deficit concerns, that increasing taxes on the top 2% will save the Treasury $700 billion over 10 years.
But the same congressional assumptions that produce this number also say his plan as a whole would increase the deficit by over $3 trillion.
In trying to fathom an economic rationale for stretching the definition of middle class income to $200,000/$250,000, some go back to the 2008 presidential campaign, when then-candidate Obama promised that no individual or family earning up to these amounts need to worry about tax increases from his administration.
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Posted By: Tom in Michigan(2970) on 9/17/2010 | 9:31 PM ET
No doubt true. But, this misses two key members of the leftist cabal altogether-the "obscenely"? rich Hollywood and political classes. I read a post today wherein a troll averred "the rich"? spend their money on "Mercedes and etc."? and don't create jobs. A completely accurate assessment; if one considers these two leftist stalwart classes who spend their money on $7M yachts ("Man of The People"? John Kerry) and lavish yet dissolute lifestyles-all the while advocating raising taxes on me-and you.
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