Taxes: A Question for Kerry Supporters [Archive]

Daliman

10-11-2004, 01:14 PM

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It baffles me that so many people claim that the middle class will not be affected!

As a small business owner, if my taxes go up, I have one of two options. One is to raise prices. The second is to cut expenses. The number one business expense is usually labor. If I decide to fire one or more people, just to keep my net income static, did that affect the middle class? I guess we would have to asked the people I laid off.

Secondly, does anyone remember the exchange about healthcare during the second debate. I admit that I am paraphrasing, but Kerry was talking about not raising taxes and increasing healthcare benefits and lowering healthcare costs. He specifically mentioned taking catastrophic cases out of the system and paying for those cases with a "federal fund". Did something change since I went to school or is a "federal fund" still OUR TAXES????? Wanna bet that our taxes don't rise to fund the "federal fund"?

Good luck in the future!

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Ok, let's say you make 300k a year in profit at your company, a good chunk of change. Now, under Kerry, that will equal $3,800 more in taxes, which you were paying before anyways. Did you hire MORE people or cut prices when Bush lowered your taxes? Cut prices;hell no. Hire more people? Doubtful, since his cuts couldnt have saved you enough to hire much more than extremely part-time positions unless you make WELL over 200K, which means you shouldn't be bitching anyways.

I love how Bush keeps saying how 3.8% tax aboe the current level over 200k and ONLY the $$$ made over 200k costs american smallbusiness jobs, but when it really comes down to it, if you are making significantly more than 200k, you're not much of a "small" business.

What this all comes out as is, "Well, i make 500k a year, so if Kerry is re-elected, i'll pay an additional $11,600 in taxes that I was paying 2 years ago anyways. To make up for my shortfall in income, I will fire one of my single-mother employees who works 40 hours a week making $6.00 an hour. God bless America"

Doesn't sound very American, does it?

And I don't even want to get STARTED on all the income lost by reservists who are among those in the guard ijacked into this BS war. I know 2 of them myself who are small business owners, one whose business failed since his deployment, and another whose business is struggling. Great job, GWB.

sam h

10-11-2004, 01:29 PM

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There are no households in the middle class making over 200K? Where are the boundaries btw between rich, middle class and poor households?

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The boundaries are subjective. But since in 2001 (last year I can quickly find data), the 95th percentile for households fell around 150K, it would be pretty difficult to argue that 200K was middle class.

Of course, lots of people - like my parents for instance - make that much and still think of themselves as middle or upper middle class. But that's just because they have trouble accepting the fact that they are in the upper class.

sam h

10-11-2004, 01:31 PM

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Ten minutes later he was talking about repealling the Bush tax cut which was implemented to help the middle class.

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He did not say this. Kerry's is position is pretty unequivocal: he's saying (over and over again) that he will not raise taxes on anybody but those making over 200K.

MMMMMM

10-11-2004, 02:24 PM

I really think 200K is upper-middle class, not upper class, and I certainly don't make anywhere near that much. Even if I did I would still not be living in a mansion, still have to do a lot of working and planning for retirement, still not be able to take plenty of expensive vacations, etc...and hey, I'm single!

A family with 2-3 kids making 200K can cover expenses, have decent medical insurance, and put away some money to help towards the kids' college costs, and live in a fairly nice neighborhood, but they aren't anywhere near being rich (rich is a measure of net worth).

Calling 200K "upper-class" seems inappropriate to me--"upper-middle", OK. If you earn 200K you are still a working stiff, and you will be a working stiff for many years, although you get nicer amenities than most.

It is certainly most disingenuous of politicians to call 200K income families "rich". Calling them "upper-class" is more excusable although I don't really agree with it. To be rich takes a lot more net worth than what a 200K income can accumulate except in the very long-term.

sam h

10-11-2004, 02:53 PM

I know what you're saying MMMMMMM and I agree in part. But it basically just comes down to whether you want to analyze it as a question of what lifestyle you can have at X income or to look at it as a question of how your income compares to others.

If upper-class means you can live very well and don't have to worry about money, then 200K is not upper class.

But if upper-class is more of a comparative measure, then I think that if you make more than 97% of other households, you're probably in the upper class.

Personally, I tend to believe in the latter, since the concept of class stratification is sort of meaningless unless it is based on comparative, rather than absolute, criteria.

texaspimp

10-11-2004, 03:21 PM

First, thanks for all of the replies to my post. As most of the respones apply to my choice of business type and/or my income, I would like to respond.

Elwood posted:
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As a small business owner who chose the structure of his business, you have made a decision that your business income = your personal income. You didn't have to make that choice. It's kind of disingenuous to now claim, "but wait, it isn't really my personal income..." If you don't want your business income to count as personal income, change the structure of your business.

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What is disingenuous is to make a false claim sir. Where did I state or imply that I was trying to hide my personal income? Do you honestly believe I was not aware of what was or was not my personal income and how I would be taxed? I made the choice to become an S-Corp specifically to be taxed once, at the personal level. Not twice, at personal and corporate levels. If you are ever in business for yourself, I would highly recommend an S-Corp or LLC (please consult your tax advisor. Poster is not a licensed financial planner)<--- Legal requirements!

Daliman posted:
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Ok, let's say you make 300k a year in profit at your company, a good chunk of change. Now, under Kerry, that will equal $3,800 more in taxes, which you were paying before anyways. Did you hire MORE people or cut prices when Bush lowered your taxes? Cut prices;hell no. Hire more people? Doubtful, since his cuts couldnt have saved you enough to hire much more than extremely part-time positions unless you make WELL over 200K, which means you shouldn't be bitching anyways.

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Your prognostication skills are amazing! Unfortunately they are incorrect. When I am able to lower prices, I do so. When I am able to make capital improvements in my business or hire more people, I do so. While a savings of $3000 to $5000 may not be much to you, it is very important to me. That allows me to purchase a new design program and/or computer equipment. Perhaps I can advertise more often or in different media. Either way, when your livlihood is on the line, I let you decide how to run my business.

Daliman goes on to post:
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What this all comes out as is, "Well, i make 500k a year, so if Kerry is re-elected, i'll pay an additional $11,600 in taxes that I was paying 2 years ago anyways. To make up for my shortfall in income, I will fire one of my single-mother employees who works 40 hours a week making $6.00 an hour. God bless America"

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As for the single mother making $12,480, if my expenses go up $11,600, yes, she might have to go. A sidenote: Why is it always a single mother?? For effect??? Back to topic. When did profit become a dirty word in America? Does it anger you that I make more than you? Does it also anger you that I spend more than you, especially on medical bills and perhaps to charity? Is the answer to get rid of all evil corporations and businesses? If that is the answer, I hope some of you have an entrepreneurial spirit (and a better business sense).

What is un-American sir, is the venom spewed by some people on these forums. Why is it a crime to make as much money as you can? Is it jealousy? I do not begrudge anyone from making as much money as they possibly can, legally. The last statement may have to be edited since we are on a poker forum! What is American is that we band together. I hope that each of you, those who agree and disagree with me, lead prosperous and happy lives.

Daliman also posts:
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And I don't even want to get STARTED on all the income lost by reservists who are among those in the guard ijacked into this BS war. I know 2 of them myself who are small business owners, one whose business failed since his deployment, and another whose business is struggling. Great job, GWB.

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I sincerely appreciate the sacrifice of your reservist friends. I hope Elwood feels the same, since they made the decision to join in the first place.

Good luck in the future!

Chris Alger

10-11-2004, 03:25 PM

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the Bush tax cut which was implemented to help the middle class

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Now that's an odd way of putting it. What the tax cut was intended or supposed "to" do isn't important. Either it helped the middle class (whatever that is) or it didn't. If so, the help was either direct or indirect. Moreover, the only rational definition of "help" equates to "net gain," rather than a borrowing that the middle class will have to pay with interest.

So just what are you talking about?

PITTM

10-11-2004, 03:27 PM

im pretty sure it would be 200k, since that is exactly what he said. i wouldnt consider a family making 250k/yr to be middle class.

rj

Cashcow

10-11-2004, 03:39 PM

Maybe they shouldn't have joined the reserves. Is thier Country more important, or thier buisness? I think they made thier choice and I respect them for it, and thank them for it.
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so if Kerry is re-elected

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That's my favorite part.

I'm not trying to belittle your opinion, but I am trying to make a point.
The decisions we make can't all, always be perfect, or even the best.
People on this forum seem to all be one sided, and not think that, "hey, maybe that guy had a good point"
Seems to be a lot of closed minded people here.

Daliman, I apologize for using your post to respond to when it is a generalized response.

elwoodblues

10-11-2004, 03:51 PM

I'm not suggesting you were trying to hide your personal income. What I am saying is that if you choose to define your personal income in such a way that you have a personal income that is not representative of how many define personal income (i.e. much of your personal income is actually income of your corporation) then you should live with the consequences of having such an inflated personal income.

By taking on the extra income from the corporation as personal, you have made a decision that it is better for you to personally be defined as someone with greater personal income. Now, when a decision might be made that affects those with greater personal income, you say (in effect) "wait, I really don't have that much personal income, it's really business income." To that, I say that's the bed you chose to lie in. It is your personal income regardless of how you derive it. The argument that you aren't really in that personal income bracket is disingenuous because you made a conscious choice to put yourself in that personal income bracket. You decided that it was better to have personal income in the upper 5%.

adios

10-11-2004, 03:59 PM

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The boundaries are subjective. But since in 2001 (last year I can quickly find data), the 95th percentile for households fell around 150K, it would be pretty difficult to argue that 200K was middle class.

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Wrong Sam you have to look at net worth, a household making 200K a year could be in debt enough that a increase in their taxes could have a substantial effect on their lifestyle at the margins, the change in income effects them a lot. It's bullsh*t IMO to state categorically that anyone making over a certain amount of money is upper class instead of middle class. I'm sure people are going to state that well that's their problem if someone incurs enough debt that $200K a year makes things kind of tight, fair enough. Then it's fine if I say screw the poor bastards that are too lazy to make a better life for themselves when they could. It's also fair as well if those that are paying more in taxes support candidates who will lower their tax bill and provide tax incentives that they can take advantage of. BTW wealthy individuals can afford accountants and lawyers to find every loophole possible to pay as little as possible in taxes. The bottom line for me is that Kerry is promoting class warfare.

Anyway I'm on the record as opposing any tax increase to anyone unless the government honchos that want to raise my taxes tell me the income distrubtion they say seek after taxes are paid. Until that time which I know will be a long time coming, I say cut spending if you don't have enough money coming in.

texaspimp

10-11-2004, 04:34 PM

Elwood, thank you for your non-combative response. I have to admit that I am still perplexed by your arguments. I still do not believe that I argued that I was not or did not want to be in a personal income tax bracket. Whether some people would like to admit it or not, it is intellectually dishonest to think that increasing expenses for companies will not have any detrimental effect on the economy or on jobs. I still submit that one only need to look at the tax structure in the late 70's and early 80's to find an example of how increased or high taxes stifle jobs.

As for the decision to be in the upper 5%, how many folks would turn down the money? If I offered you a job making $250,000 a year that was legal and did not negatively impact your family life, would you turn it down?

I still go back to the other part of my original post. If Kerry keeps his promise to only increase the tax on people making over $200,000, where is the money from the healthcare "federal fund" going to come from? Isn't any one else concerned about this?

Again, thank you for your civil debate.

Good luck in the future!

sam h

10-11-2004, 05:02 PM

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Wrong Sam you have to look at net worth, a household making 200K a year could be in debt enough that a increase in their taxes could have a substantial effect on their lifestyle at the margins, the change in income effects them a lot. It's bullsh*t IMO to state categorically that anyone making over a certain amount of money is upper class instead of middle class.

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Of course income generated in the last year is only a proxy for total wealth/well-being and may not be an accurate one in individual cases. But that doesn't take away from my argument, which is fairly simple:

1) By any reasonable definition of the words "middle" and "class", a group of households cannot be middle-class if they make more than 97% of other households.

2) However, many people that make this much money do still consider themselves middle-class, because they are benchmarking their own welfare against a vision of prosperity that holds that to be upper class means you essentially don't have to worry about money.

3) This is an absurd definition of prosperity, one that ultimately reflects how out of touch many of these people making 200K are with how most of the country - much less the world - lives.

4) This is just a position on what a reasonable definition of upper and middle class might look like when we examine income distribution. It's not an argument for rolling back the tax cuts on those making over 200K, which I do support and I know you don't.

Daliman

10-11-2004, 06:28 PM

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As for the single mother making $12,480, if my expenses go up $11,600, yes, she might have to go. A sidenote: Why is it always a single mother?? For effect???

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For exactly the same reason why its ALWAYS the "small businessman".

MMMMMM

10-11-2004, 06:37 PM

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1) By any reasonable definition of the words "middle" and "class", a group of households cannot be middle-class if they make more than 97% of other households.

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Ordinally ranked items in a database can still have little real difference or spread between them. If all incomes in the U.S. were betweeen, say, $95,000 and $100,000, there would still be those at the 97th percentile but it wouldn't mean much at all in terms of life differences.

However if the top 1% had incomes or assets far above those in the 97th percentile, then it would make sense to assign them a different label (or "class").

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2) However, many people that make this much money do still consider themselves middle-class, because they are benchmarking their own welfare against a vision of prosperity that holds that to be upper class means you essentially don't have to worry about money.

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Well if "upper-class" doesn't mean a large difference in lifestyle and assets over "middle-class" then there is no point in having the distinctive class terminology, is there?

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3) This is an absurd definition of prosperity, one that ultimately reflects how out of touch many of these people making 200K are with how most of the country - much less the world - lives.

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If the difference is only a matter of gradation then there is no point in defining two different classes. If the difference is large in real terms (life, lifestyle) then there is a point to using different labels.

This doesn't mean upper-class has to be defined as having, say, a net worth of tens of millions of dollars, but IMO it should be defined as more than just being a well-paid working stiff.

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4) This is just a position on what a reasonable definition of upper and middle class might look like when we examine income distribution...

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It's not a really reasonable (or meaningful) definition because you are arbitrarily assigning an ordinal demarcation point, whereas a meaningful demarcation instead should have to do with major lifestyle gaps. Again, if merely a matter of gradation or percentile, then why assign a different label that implies there is a major lifestyle gap?

Daliman

10-11-2004, 06:40 PM

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Maybe they shouldn't have joined the reserves. Is thier Country more important, or thier buisness? I think they made thier choice and I respect them for it, and thank them for it.
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so if Kerry is re-elected

[/ QUOTE ]
That's my favorite part.

I'm not trying to belittle your opinion, but I am trying to make a point.
The decisions we make can't all, always be perfect, or even the best.
People on this forum seem to all be one sided, and not think that, "hey, maybe that guy had a good point"
Seems to be a lot of closed minded people here.

Daliman, I apologize for using your post to respond to when it is a generalized response.

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As far as whether the country is more important than the business, i didn't realize our country was going to be annihilated if Uncle Phil doesn't shut down the General Store to go over to Iraq. Completely incorrect comparison.

Ya, you got me on the mistype there. Wishful thinking, i guess.

point as far as the reservists is they DID join willfully, but not to be used in the fshion they are. Don't get me wrong, back when there were alot of people bitching about going to war in the first gulf war, saying they just joined the Army, Navy, etc for the college, i had little to no sympathy for them. Yeah, i think the military used to oversell the college/life skills aspect of it, but if you're too stupid to realize what the military is for, you don't really deserve to bitch.

Anyways, reservists are now being made to stay longer than their normal tours in situations and conditions they are not trained for. Most of these people are ex-military who wanted a continuation of benefits but also wanted to "give a little back to their country". This war is hurting their families, business, and in many cases, killing them. IF this were Afghanistan, no problem, but its not. Afghanistan is now over 50% GNP herion, and we have created for more terrorists than were ever in operation before with our reckless and misguided attack on a muslim state that made no attack against us.

Daliman

10-11-2004, 06:43 PM

Well, this one i'm not sure about, but I don't think it's "family" that makes over 200k, it's individual. If so, and that # goes to 400k, we're DEFINITELY talking upper class.

My wife and I will make ~200k this year, and I consider us upper middle class.

adios

10-11-2004, 06:57 PM

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Of course income generated in the last year is only a proxy for total wealth/well-being and may not be an accurate one in individual cases. But that doesn't take away from my argument, which is fairly simple:

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Let's stop right here. That's a major problem with taxing income, defining income for a diverse set of income earners is not a simple matter and in fact it is very far from being simple. What constitutes a legitimate business expense for one earner that can be offset against their revenue may simply be consumption of an item for another earner just as an example. Even for someone making $300,000 on a W-2, if their obligations take up a significant portion of that $300,000 they can be far worse off than someone making $80,000 or even $40,000.

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1) By any reasonable definition of the words "middle" and "class", a group of households cannot be middle-class if they make more than 97% of other households.

2) However, many people that make this much money do still consider themselves middle-class, because they are benchmarking their own welfare against a vision of prosperity that holds that to be upper class means you essentially don't have to worry about money.

3) This is an absurd definition of prosperity, one that ultimately reflects how out of touch many of these people making 200K are with how most of the country - much less the world - lives.

4) This is just a position on what a reasonable definition of upper and middle class might look like when we examine income distribution. It's not an argument for rolling back the tax cuts on those making over 200K, which I do support and I know you don't.

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Just because they make more than 97% of what other households make on a W-2, doesn't mean that their net income after obligations makes them better off than 97% of the households in the U.S. The operative equation is:

Income - Expenses

adios

10-11-2004, 07:00 PM

If you file jointly and your income exceeds that $200 figure after your allowable deductions you'll pay the marginal rate for $200,000 and above on that income you made jointly above $200,000.

sam h

10-11-2004, 07:24 PM

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Ordinally ranked items in a database can still have little real difference or spread between them. If all incomes in the U.S. were betweeen, say, $95,000 and $100,000, there would still be those at the 97th percentile but it wouldn't mean much at all in terms of life differences.

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The fact is that while household income percentiles are determined ordinally, income is still measured on a ratio-level scale, one that exhibits pretty significant variance. Were the situation you describe to hold, the use of income percentiles to demarcate classes would be quite faulty. But it doesn't.

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However if the top 1% had incomes or assets far above those in the 97th percentile, then it would make sense to assign them a different label (or "class").

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If the 97th percentile had incomes or assets far above the 50th percentile, wouldn't the same argument hold? Note that household income for the 50th percentile is about 43K.

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If the difference is only a matter of gradation then there is no point in defining two different classes. If the difference is large in real terms (life, lifestyle) then there is a point to using different labels.

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Here is the crux of our dispute. Do you not think that the difference is quite large in real terms between those households making around 200K and those making around 40K?

I come from a 200Kish background. My parents work very hard, they can't always have everything they want, but life is pretty comfortable, what with the two homes, three cars, vacations abroad, etc. My girlfriend's family is much more in 40K territory. Her parents have never owned a home, don't have health insurance, and are constantly trying to stay ahead of debt collectors.

Isn't there a difference here?

sam h

10-11-2004, 07:33 PM

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What constitutes a legitimate business expense for one earner that can be offset against their revenue may simply be consumption of an item for another earner just as an example. Even for someone making $300,000 on a W-2, if their obligations take up a significant portion of that $300,000 they can be far worse off than someone making $80,000 or even $40,000.

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I understand this. But the percentage of people who fall into the 200K bracket who are small businessmen who cannot write off significant legitimate expenses against income must be fairly miniscule.

But say we do take "income minus legitimate business expenditures that you can't write off" as a better proxy. If this equation yielded a result of 200K for a given individual, wouldn't my argument still hold that they are in the upper class of American society?

MMMMMM

10-11-2004, 08:52 PM

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Here is the crux of our dispute. Do you not think that the difference is quite large in real terms between those households making around 200K and those making around 40K?

I come from a 200Kish background. My parents work very hard, they can't always have everything they want, but life is pretty comfortable, what with the two homes, three cars, vacations abroad, etc. My girlfriend's family is much more in 40K territory. Her parents have never owned a home, don't have health insurance, and are constantly trying to stay ahead of debt collectors.

Isn't there a difference here?

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Yes there is a difference there, and I think that difference could be termed the difference between upper-middle-class and lower-middle-class incomes and lifestyles. Also don't forget that when you were a kid that was a lot more money.

A family of four earning say 120K jointly could be termed middle-middle-class. But it just isn't right to call a family income of 200K "upper class: or "rich". If you do, what would you call incomes of 500K, or what would you call those families worth tens of millions of dollars? At 200K you can live fairly well but you certainly aren't very rich and you are probably working quite hard. To me that sounds a lot more like a well-paid version of the middle-class lifestyle, than "rich". Thus I think it is disngenuous and divisive of politicians in general or Kerry to say that his tax cut rollback would only affect "the rich". At 200K a family still has plenty of bills to worry about and a lot of future to be planned for and saved for. It's really still working class and not even very luxurious working class.

A relative of mine and her husband earn jointly over 150K but under 200K, and have no kids. Damn near all they do is work to make the mortgage payments on a 300K home in Massachusetts and drive a couple nice late model Toyotas. They get a company vacation once a year and probably work 60 hours a week each. Would they be "rich" if they earned another 50-100K per year jointly? I don't think so. If they had kids they could earn that much more and it would all go on the kids, too. They are solidly upper-middle-class and just about all they do is work. No two homes, no vacations except the yearly prize vacation won by performance for the company, etc. Sorry but I don't see how that can be considered upper-class. An extra 50K or so per year would not be enough to greatly change their lifestyle for the better.

Daliman

10-11-2004, 09:11 PM

Ok, what's the top rate then if you are filing singly?

lastchance

10-11-2004, 10:04 PM

MMMMMM, step back for a minute. 50k a year is a LOT of money. Most people do actually make around 50k a year, and they make it stretch quite a long way.

MMM, if they only have a 300k house and two Toyotas off 150k a year, then they probably are spending a LOT of money on things I don't to care to guess.

There's a big difference between 50k and 150k. Make it last.

This is actually quite an interesting debate though. What does define upper class and middle class, also lower class? What are the things that separate them?

I don't want to be politically correct here.

MMMMMM

10-11-2004, 11:28 PM

I really don't see how 50K a year is a LOT of money--you just wrote that people have to stretch that amount, right? And at 50K they probably don't have great medical or dental, nor much contribution towards their retirement. If they have kids too, forget about it, I don't see how anyone can raise kids on 50K a year though a lot somehow manage to do so.

Sure you can get by on little if you scrimp on everything but you aren't really taking care of yourself health-wise, diet-wise, and in many other ways. It takes a lot of money just to live healthy once you get out of young adulthood, never mind living luxuriously--and I'm not even talking insurance costs, just lifestyle costs.

What about housing? If you live in many major parts of the country, housing alone is a huge financial burden, especially if you don't want to live in a crime-ridden area. I'm not talking about luxury living, just try finding a decent place in a nice area around say Boston or metropolitan New York or California without paying through the nose.

I don't know exactly what ought to define upper class but I don't think it is defined by some arbitrary ordinal demarcation; rather it is a lifestyle or net worth issue. Also the lifestyle of just having a nice car and a nice house does not seem to me to be rich or upper class. A family of four with 200K income just gets two nice casr and nice house and still works hard and gets a few little extra tidbits. It isn't being rich by a long shot even though it is of course significantly better than 50K. And seriously, it isn't even enough money when you get right down to it.

Now 500K compared to 50K...there's a huge difference both in lifestyle and in how much discretionary income a family would have to sock away for early retirement or whatever. But at 200K a family is basically still forced to spend almost all of what they earn with a few discretionary tidbits thrown in. If they seriously plan for retirement and college and live in a good neighborhood and take care of their health and their kids well, they just aren't going to have a whole lot of money left over. In fact they still probably aren't going to have fully enough set aside for college and retirement and future health issues, realistically speaking. If they live in a part of the country with lower housing costs I admit the picture should be adjusted somewhat.

elwoodblues

10-11-2004, 11:36 PM

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just try finding a decent place in a nice area around say Boston or metropolitan New York or California

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Of course those are some of the most expensive places to live in the US.

MMMMMM

10-11-2004, 11:44 PM

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just try finding a decent place in a nice area around say Boston or metropolitan New York or California
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Of course those are some of the most expensive places to live in the US.

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Yes they are Elwood but a relatively large percentage of the US population happens to live in those places. Also, a lot of other areas, while not so steep, are still considerably more expensive than the semi-boonies in parts of the South or Midwest.

cardcounter0

10-11-2004, 11:48 PM

Whenever a member of the Bush Klan says he is going to "give" you something -- you better grab your wallet, hang on tight, and run!

vulturesrow

10-11-2004, 11:48 PM

Well that is because they are desireable places to live. Housing in cheaper areas is cheaper because they are less desireable. Of course part of the problem in NYC is rent control.

elwoodblues

10-11-2004, 11:54 PM

My only point was that to say you can't live on 50k because you can't afford housing in 3 of the most expensive places to live in the US doesn't help your argument.

MMMMMM

10-12-2004, 12:11 AM

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My only point was that to say you can't live on 50k because you can't afford housing in 3 of the most expensive places to live in the US doesn't help your argument.

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Er, I don't believe that's what I said, but I'll go back and check just to be sure.

jcx

10-12-2004, 12:22 AM

Some people can't grasp that income does not equal wealth. There are many people who have busted their rumps for decades to build a business or career and are enjoying their peak earning years - These people cannot afford a yacht or private jet. Conversely, there are idle rich who, thanks to tax shelters (Legal and otherwise) show little income and thus pay very little income tax realtive to their wealth (Mrs. Heinz-Kerry?).

Punishing the industrious is quite foolhardy. When taxation reaches a certain level, an individual will make one of two choices: 1. Stop working so hard as all of his/her money is going to Uncle Sam or 2. Look for ways (Again, legal or otherwise) to evade said tax. Eliminating the income tax altogether and implementing a small tax on consumption (Along with cutting govt spending) would go a long way toward restoring people's freedom and give the economy a tremendous boost.

jcx

10-12-2004, 12:45 AM

[ QUOTE ]
My girlfriend's family is much more in 40K territory. Her parents have never owned a home, don't have health insurance, and are constantly trying to stay ahead of debt collectors.

Isn't there a difference here?

[/ QUOTE ]

I don't know how old your girlfriend is, but if she is still a dependent of her parents (If she is in college, for instance) and her parents make $40K per year they already likely pay little to no income tax. If she has a significant amount of minor siblings they definitely pay nothing. So whatever their money problems, it can't be blamed on overtaxation. The top 50% of wage earners in this country currently pay 94% of all income taxes. Bush's recent tax cut removed millions more people from the tax rolls. This will be a major problem in the future. How to you offer tax incentives to people who already pay nothing?

andyfox

10-12-2004, 12:51 AM

Who's talking about punishing the industrious?

lastchance

10-12-2004, 01:37 AM

If this is the case, and I believe it is, then why is there not more talk about closing down tax shelters and being able to try to stop people from evading taxes.

natedogg

10-12-2004, 02:41 AM

[ QUOTE ]
If this is the case, and I believe it is, then why is there not more talk about closing down tax shelters and being able to try to stop people from evading taxes.

[/ QUOTE ]

Is this a trick question?

natedogg

adios

10-12-2004, 05:35 AM

The same, you'll probably have to figure them both ways i.e. each individually or jointly to see which way you come out the best. Might be prudent to see an accountant if you're itemizing with a 1040.

adios

10-12-2004, 05:40 AM

[ QUOTE ]
How to you offer tax incentives to people who already pay nothing?

[/ QUOTE ]

I've made this point myself many times, you can't give someone a tax cut that pays nothing in taxes.

adios

10-12-2004, 05:41 AM

.....

adios

10-12-2004, 05:49 AM

[ QUOTE ]
If this is the case, and I believe it is, then why is there not more talk about closing down tax shelters and being able to try to stop people from evading taxes.

[/ QUOTE ]

Because when you tax income and you have a diverse economy with a diverse set of income earners, it becomes a very complicated matter to define income for all of these income earners. Invariably a legitimate write off for some income earners can be taken advantage of by others. That's the short answer.

1111

10-12-2004, 06:58 AM

I find it amazing that you are actually trying argue that someone who earns more money in a year than 97% of the rest of the population in the richest nation in the world should not be considered "upper-class" or "rich." Yes, there are people for whom 200k is not a significant amount of money, but to argue that those at 200k are not extremely well off financially is just absurd. I don't know your background or current situation, but you really should get out more, because your current perspective seems remarkably narrow.

adios

10-12-2004, 10:25 AM

[ QUOTE ]
I find it amazing that you are actually trying argue that someone who earns more money in a year than 97% of the rest of the population in the richest nation in the world should not be considered "upper-class" or "rich."

[/ QUOTE ]

So every household that makes over $200 is "wealthy" or "rich" in your view? That's ridiculous if it is.

[ QUOTE ]
Yes, there are people for whom 200k is not a significant amount of money, but to argue that those at 200k are not extremely well off financially is just absurd.

[/ QUOTE ]

That's even more ridiculous. If you earned $200K in a tournament are you suddenly wealthy?

[ QUOTE ]
I don't know your background or current situation, but you really should get out more, because your current perspective seems remarkably narrow.

[/ QUOTE ]

I think you ought take your own advice.

MMMMMM

10-12-2004, 11:07 AM

[ QUOTE ]
Ifind it amazing that you are actually trying argue that someone who earns more money in a year than 97% of the rest of the population in the richest nation in the world should not be considered "upper-class" or "rich."

[/ QUOTE ]

Those earning 200K still basically lead a middle-class lifestyle, and therefore do not merit a separate class-distinction. Why is this point so hard to fathom?

[ QUOTE ]
Yes, there are people for whom 200k is not a significant amount of money, but to argue that those at 200k are not extremely well off financially is just absurd.

[/ QUOTE ]

Those earning 200K do not have a largely different lifestyle than many earning considerably less. Contrast this with the truly wealthy or with those earning say $1 million+ per year. Where there is a very large gap is where class distinctions should be made IMO (if indeed any class distinctions should be made). Since there are really only 3 major "classes" (lower, middle, upper) it doesn't make sense to lump people together who share more or less similar lifestyle. Just having a few more amenities is not a major lifestyle gap.

It is fallacious to categorize income as being the defining element in comparing lifestyle or class. Net worth is a considerably more important measure.

[ QUOTE ]
I don't know your background or current situation, but you really should get out more, because your current perspective seems remarkably narrow.

[/ QUOTE ]

I suggest you read up on this issue a bit more. I've posted thiks before but I'm pretty sure you missed it. Good short article, though:

"Who's Rich
Thomas Sowell (archive)

July 15, 2003 | printer friendly version Print | email to a friend Send

Congressman Patrick Kennedy, a Rhode Island Democrat, recently declared to fellow party members at a Washington night spot, "I don't need Bush's tax cut" and added that he had never worked a day in his life.

A number of other rich people have at various times likewise declared that they do not need what are called "tax cuts for the rich." But, whatever political points such rhetoric may score, it confuses issues that are long overdue to be clarified.

One of the most basic confusions is between income and wealth. You can have high income and low wealth or vice versa. We have all heard of athletes and entertainers who have earned millions and yet ended up broke. There are also people of relatively modest incomes who have saved and invested enough over the years to leave surprisingly large amounts of wealth to their heirs.

Income tax cuts apply to income, not wealth. So the fact that some rich people say that they do not need a tax cut means nothing because they are not getting a tax cut on their wealth, since their wealth is not being taxed anyway.

Looked at differently, high tax rates hit people who are currently earning high incomes -- usually late in life, after having worked their way up in their professions over a period of decades. Genuinely rich people who have never had to work a day in their lives -- people like Congressman Kennedy -- are unaffected by income taxes, except on what they are currently earning, which may be a tiny fraction of what they own.

In other words, soak-the-rich tax rates do not in fact soak the rich. They soak people who are currently earning the rewards of having contributed to the economy. High income taxes punish people for becoming prosperous, not for having been born rich.

Even estate taxes can be minimized by hiring ingenious lawyers and accountants. But people who have had to work all their lives may not be nearly as able to afford such expensive ingenuity.

Someone who eventually works his way up to $100,000 a year will qualify as "rich" in liberal rhetoric but, by the time you reach that level, you may have a child in college and need to put some money aside for your retirement years. You are very unlikely to be able to afford a yacht.

Another fundamental confusion over tax cuts is confusing lower tax rates with reductions in tax revenues collected by the government. One of the enduring political myths of our generation has been the claim that the rise of federal deficits during the 1980s resulted from President Ronald Reagan's "tax cuts for the rich."

Tax rates were cut. Tax revenues were not. More tax revenue was collected during every year of the two Reagan administrations than had ever been collected in any previous year in the history of the country. Nor was this experience unique.

When John F. Kennedy cut tax rates during the 1960s, tax revenues went up. The whole point was -- and is -- to encourage more economic activity, and more activity generates more tax revenues, even at lower rates. The same thing happened back in the 1920s.

Why then were there federal deficits during the Reagan administration? Because Congress spent even more money than the rising tax revenues brought in. There is no amount of money that Congress cannot outspend.

Although these were christened "the Reagan deficits," all spending bills originate in the House of Representatives -- and Ronald Reagan was never a member of the House of Representatives. Indeed, the Republicans never controlled the House of Representatives during either of the Reagan administrations.

Only after the Republicans gained control of the House in 1994 were there budget surpluses -- for which Bill Clinton took credit, even though he too had never been a member of Congress.

It is fascinating to see Congressional Democrats, who have for decades been spending the country into growing deficits, suddenly expressing shock at the current deficits that have occurred while George W. Bush was in the White House -- and the country was at war.

How serious are these deficits? As with all debts, the burden depends on what your income is. As a percentage of national income, today's deficits and national debt are far below what they were when Democrats were doing the spending.

©2003 Creators Syndicate, Inc."

http://www.townhall.com/columnists/thomassowell/ts20030715.shtml

tolbiny

10-12-2004, 11:09 AM

I am going to have to disagree with your assesment of what a family of 4 making 200,000 a year should be like. In 1986 my parents moved to cleveland with 6 kids between 1 and 10 yrs old. They had a combined income of $45,000 that year. Fortunately they had dental/medical through work for the family, and they chose a reletivly cheap city to live in, but we still lived in a suburb with the top school system in the area and had a 6 bedroom house (with 2 in a redone attic). They admit it was quite tough for a few years, but ultimately it was possible and though with inflation it probably isn't today at 45,000, it probably is around 70-80k.
I currently earn 37,000 per year and i could afford by myself a mortgage on a 194,000, 4 bed 2 bath in a nice neighboorhood (again thanks to clevelands lower cost of living i know), a $350 per month car payment and small contributions to my retirement plan (with medical and dental from work) if i choose too. I would consider this lifestyle to be middle class. Property, no real debt, and a retirement account. This amount covers the basics a family needs- car and a home and healthcare. If you increased my income by 5 times and gave me 3 dependants i could retire at 55, own two homes, two cars a family vacation every year and supplement my childrens collge tuitions (i don't intend to pay for it all, but that's part of my strategy for raising children as opposed to cheapness). I could do all of this easily, no problems whatso ever. Even paying an extra 50% on my mortagage (a 300,000 house) i could do so. i really don't understand how you could say that people makeing 200,000 have only a few extra tidbits. That extra 10 years of retiremnt is worth a hell of a lot on its own.

MMMMMM

10-12-2004, 11:12 AM

[ QUOTE ]
If you increased my income by 5 times and gave me 3 dependants i could retire at 55, own two homes, two cars a family vacation every year and supplement my childrens collge tuitions (i don't intend to pay for it all, but that's part of my strategy for raising children as opposed to cheapness). I could do all of this easily, no problems whatso ever.

[/ QUOTE ]

Fine, but that is still a middle-class lifestyle, and that's my point.

elwoodblues

10-12-2004, 11:16 AM

What are the lifestyle indicators that you are using in your mind to suggest that they have similar lifestyles. In my mind, it depends on how you frame the questions.

I would be surprised if there were many 200k'ers living paycheck to paycheck. I would be surprised if there were a significant number of 200k'ers without a solid retirement savings plan.

There are certainly a lot of similarities -- a 200k'er probably has a mortgage. However, having a mortgage on a $500,000 home is different than having a mortgage on a $200,000 home.

adios

10-12-2004, 11:27 AM

Your peak earning years are more than likely in your 50's. Just because someone makes over $200,000 in their peak earning years doesn't make them wealthy. There are so many varied circumstances that making a blanket statement about people being rich making $200,000 plus is too simplistic of a viewpoint IMO.

tolbiny

10-12-2004, 11:32 AM

I wasn't argueing the class distinction point... i guess i was just incrudulous that Four people living off 200,000 a year would only have a few "tidbits" as you put it ahead of those making 100,000 or 50,000 a year.
I agree that the distinctions are tough to make and i believe it comes down to lifestyle. Being able to retire 10 years younger, have an extra car, put your kids into basically any college you want, have a secure retirement plan. These are enourmous advatages- Idon't know if i would describe 200,000 per year as "upper" class or not... it would be very difficult for me not to feel that 300,00 in personal income did not justify the "lower Upper class"

andyfox

10-12-2004, 11:37 AM

By changing the marginal rate from 35% to 39.6% for people who earn over $200,000/year?

MMMMMM

10-12-2004, 11:39 AM

OK. And maybe "tidbits" wasn't the best choice of wording.

IrishHand

10-12-2004, 11:44 AM

[ QUOTE ]
Those earning 200K still basically lead a middle-class lifestyle, and therefore do not merit a separate class-distinction.

[/ QUOTE ]

I'm sorry - this is just obscene. Are you so blinded by the abundant material wealth of the weathly in this country that they look normal to you? My family makes under $100K and leads an extraordinarily prosperous life. We live in a wonderful home, we have two (relatively) new cars, and we're able to travel once or twice a year. (I also have nearly $100k in debt from law school.)

A family of 4 making $50k is middle class. If they live sensibly and frugally (which the vast majority don't), they should enjoy a good lifestyle.

My sub-100k family is upper-middle class. (Indeed, I would rate most officers in the military somewhere between middle and upper-middle, depending on their chosen lifestyle and, obviously, rank and time in the service.)

A family making 200k is unequivocally upper class. A poster above noted:
[ QUOTE ]
I come from a 200Kish background. My parents work very hard, they can't always have everything they want, but life is pretty comfortable, what with the two homes, three cars, vacations abroad, etc.

[/ QUOTE ]
Two homes, three cars, vacations abroad?? That's more than comfortable - that's luxury. And that's perfectly normal, I'd hazard, for a family making 200k.

adios

10-12-2004, 11:46 AM

This is good article by Sowell IMO. Let's take the Bush's and the Kerry's. There was an op-ed piece in the WSJ yesterday that stated the Bush's paid a 30% tax rate on the income they earned in 2003. The average middle class taxpayer paid about 20%. The Kerry's paid about 12.8%. However, that doesn't tell the entire story by a long shot. I'm almost certain that the Kerry's could have made a lot more money and thus more taxes by undertaking a certain amount of risk. Apparently Teresa makes a substantial income from tax free munis. Nothing wrong with that IMO. However, I've looked at tax free munis myself and I determined that if I took a reasonable amount of risk I could make more after taxes in taxable investments. The operative word is risk here. The Kerry's have so much money that they don't need to take risk. Put another way is that their utility function dictates that they invest in munis. The point I'm trying to make is that given a representative utility function, it would seem that level of declining marginal utility should be a major determining factor in who is deemed wealthy. The second point is that the Bush's, do to the type of income they received, payed a lot higher tax rate than the Kerry's did. Before the ABB faction chimes in, I realize the Bush's are wealthy but it does show that different income streams are taxed differently for a variety of reasons.

MMMMMM

10-12-2004, 11:47 AM

Agreed.

By lifestyle definition I mean they still both have to work full-time (or more), still have to make mortgage payments, still have to plan for unexpected expenses and medical expenses etc., plan and save for college and retirement, have to watch expenses, etc. The 200K family gets somewhat more leeway and a somewhat nicer things than the 100K family, but they are still both definitely living a middle-class lifestyle with similar concerns. One has a higher income, higher taxes, and higher monthly expenses that the other and gets a bit nicer stuff. Not a really huge difference IMO and certainly not worth saying they are in distinct classes.

adios

10-12-2004, 11:49 AM

Yes, aren't their industrius people making over $200,000 a year? If their tax rate is raised aren't they being punished?

MMMMMM

10-12-2004, 12:01 PM

Look, Irishhand, one can be prosperous and still lead a middle-class lifestyle. In fact I'd say that a good definition of middle-class is to have a career which enables you to live a reasonably prosperous lifestyle. "Prosperity" and "middle-class" are not mutually exclusive terms.

To be "gapped" away from the middle-class lifestyle (to "upper-class") you need either to earn very large amounts of money (say 500K/yr.+) or have millions of dollars in net worth. Anything less and you are still middle-class, with varying although largely typical middle-class concerns, even though you may be a prosperous version of the middle-class. There are three gradations of middle-class, and living rather prosperously while working a career that enables you to do is is solidly upper middle-class. It certainly isn't anything like what the Kerry's or Kennedy's or what someone earning a mil a year can do with their lifestyles.

andyfox

10-12-2004, 12:26 PM

Even if we agree that taxes are a form of punishment, the marginal tax rate reinstatement to 39.6% from 35% for industrious people who earn over $200,000 a year is not very punitive. As I pointed out in a thread a few months ago, if you chart the marginal tax rate for the highest income bracket and compare it with productivity, there's almost an inverse relationship. This doesn't mean that high marginal rates cause faster economic growth. But it certainly doesn't offer any proof of the opposite. As you allude to in one of your posts in this thread, there are so many elements of the tax system that simple relationships are hard to discern.

jcx

10-12-2004, 12:54 PM

To me, "Upper class" or "Rich" means I could stop working, never earn another dime except through my investments, and live a very comfortable lifestyle. My household has a six figure income. If my wife and I quit working, our savings would allow us to keep our lifestyle up for 2 years or so and then we would be in big trouble. I suspect the majority of $100-200K income families would be in much the same predicament. These people are not rich, just fairly well paid.

elwoodblues

10-12-2004, 12:54 PM

I guess my disagreement with you is that you are tending to discount the "nicer stuff" piece and overvalue the existence of monthly payments (i.e. a mortgage.) Somewhat more leeway and somewhat nicer things can be a big deal. For a family making 50K a year, a $5000 medical bill is 10% of their earnings for the year. Certainly something that would need to be budgeted and that budgeting would be significan. While the $200k family would certainly want to budge for the same $5000 expense, it is MUCH easier to do.

It seems to me that implicit in your position is that the key differentiating factor between upper and middle class is that upper class essentially have no financial worries. They don't need to budget, they don't have a mortgage, they don't have to plan for unexpected expenses. I don't think that's a good definition of upper class - though, I don't know what a good definition really is --- maybe it's like pornography; I know it when I see it (and I want to see it often /images/graemlins/grin.gif )

MMMMMM

10-12-2004, 01:54 PM

A 4.6% difference on income of 200K is an extra $9200 paid in taxes. Sounds like a fairly punitive difference to me.

Paluka

10-12-2004, 02:26 PM

[ QUOTE ]
Yes, aren't their industrius people making over $200,000 a year? If their tax rate is raised aren't they being punished?

[/ QUOTE ]

Taxes aren't about punishment. There are many justifications one can make for a tax system which taxes the rich more heavily than the poor. One justification is the idea that this is essentially a risk-hedge for everyone. Another justification is that, in general, people with higher income reap greater benefits from the infrastucture etc...
The real problem with the $200k number is that all $200,000 arent created equal. I live in NYC, and my cost of living and states taxes are brutal. Also, I don't have much along the lines of businesses, investements, real estate etc... which can often help out with creating tax deductions. I fit the profile pretty well of the type of person most screwed by Kerry's tax plans.
I'm still voting for Kerry.

MaxPower

10-12-2004, 02:33 PM

[ QUOTE ]
A 4.6% difference on income of 200K is an extra $9200 paid in taxes. Sounds like a fairly punitive difference to me.

[/ QUOTE ]

That is wrong because it is a marginal tax rate. Plus a household in making 200K isn't even in the 35% bracket. For a household with income at exactly 200K, a 4.6% difference in the marginal tax rate would be less than 1K because the marginal tax rate would only be applied to about 2OK of income.

IrishHand

10-12-2004, 02:51 PM

I hear what you're saying M, and I agree with some of it. Really, our disagreement is immaterial in the grand scheme of things since we're simply disputing the boundaries of certain arbitraty labels (the divisions between the classes in our society).

I suppose in the end it comes down to this: if my family's income went from it's current <100k level to 200k, I wouldn't change any part of my material lifestyle. In two years, the increased income would have paid off every non-mortgage debt that I have, in another three years, my mortgage would be gone. (That's assuming that I'd only be netting 50% of the money over $100k which I hope you'd agree is very conservative.) So...in 5 years I'd have zero debt. Ten years later, I'd have well over half a million in the bank - and keep in mind that during those 15 years I'm continuing to enjoy what I feel is a materially prosperous lifestyle (although not wealthy in the accumulation of capital sense).

By the age of 50, I have over a million dollars in savings and a retirement plan which will continue to pay me, say, $80k a year until I die and provides lifelong medical coverage. I own a very nice house outright, I've continued to travel around the world and have every material possession that I want. (Keep in mind that all I want is a decent computer, a nearby non-smoking poker room, a happy wife, two well-fed dogs and a few hundred history and law books.) Am I upper class then? If so, at what point did I become upper class, since neither my lifestyle nor the level of my material wealth ever changed?

MMMMMM

10-12-2004, 03:23 PM

MMMMMM

10-12-2004, 03:29 PM

Well at the age of 50 you might have become somewhat "upper-class" in a sense--if you had actually managed to do all you say--but you still would have spent most of your life working as a well-paid middle-class grinder. Also there is no way to know for sure in advance just what your kids or health problems might cost you at some point.

I'm not knocking the middle-class lifestyle--thank goodness so many Americans are reasonably well-off--just saying it isn't the same as being truly "rich" or "upper-class".

IrishHand

10-12-2004, 03:36 PM

[ QUOTE ]
Also there is no way to know for sure in advance just what your kids or health problems might cost you at some point.

[/ QUOTE ]
I know exactly what kids will cost: food, clothes and some measure of my limited sanity. And health problems are covered by that medical plan I noted earlier.

adios

10-12-2004, 03:40 PM

[ QUOTE ]
Taxes aren't about punishment.

[/ QUOTE ]

I feel awfully punished when the extra amount of taxes I'm paying is going into someone else's pocket.

[ QUOTE ]
One justification is the idea that this is essentially a risk-hedge for everyone.

[/ QUOTE ]

Ok so what are the stated goals of the "risk-hedge" as Kerry certainly hasn't used this justification.

[ QUOTE ]
Another justification is that, in general, people with higher income reap greater benefits from the infrastucture etc...

[/ QUOTE ]

Who benifites more from entitlements like Medicare and Social security? The guy making $200,000 a year or the guy making $20,000 a year? Entitlements make up the lions share of the federal budget.

Progressive taxation is all about re-distributing income.

[ QUOTE ]
The real problem with the $200k number is that all $200,000 arent created equal.

[/ QUOTE ]

Yep that's what myself and some others have been stating in this thread.

[ QUOTE ]
Also, I don't have much along the lines of businesses, investements, real estate etc... which can often help out with creating tax deductions.

[/ QUOTE ]

Yep I've made this point as well, different income streams are taxed differently as I've pointed out in other posts.

[ QUOTE ]
I fit the profile pretty well of the type of person most screwed by Kerry's tax plans.

[/ QUOTE ]

Probably so from what I can gather.

[ QUOTE ]
I'm still voting for Kerry.

[/ QUOTE ]

I'm not.

Daliman

10-12-2004, 03:55 PM

no, it's not. It would be $9200 more on earnings OVER 200k. People seems to keep forgetting that.

Also, i think the # is 38.6%

mmcd

10-12-2004, 04:08 PM

[ QUOTE ]
If this is the case, and I believe it is, then why is there not more talk about closing down tax shelters and being able to try to stop people from evading taxes.

[/ QUOTE ]

Ummm, maybe because the types of people who write the tax laws are the ones who benefit most from tax-shelters/loopholes.

1111

10-12-2004, 07:12 PM

I understand your arguments just fine, but I completely disagree with your premises. Anyone who makes more than 97% of the general populace yearly is clearly upper-class. Also, your claim that those who make 200k live a similar lifestyle as those making 50k is beyond absurd, which has been pointed out by another poster. To claim that those who, on a yearly basis, are in the top 3% of wage earners are not rich is just ridiculous...I don't even see how this is debatable honestly. What percentage of the populace, do you suppose, would consider 200k to be rich? 70%...maybe a bit more? For most people, not living month to month is rich.

lastchance

10-12-2004, 07:59 PM

The risk-hedge is this. Everyone who is born has a certain percentage chance of starting off poor, just based on the percentage of the population you are born in.

Contrary to what a lot of people believe, you have to get lucky to get rich. You have to be very, very lucky. Of course, this is not for America, just considering the whole world.

Let us assume you have a 20% chance of being poor, based on where you were born and what life deals you. No matter who you are, if you are dealt the hand as bad as the one Andy Dufrense got in the "Shawshank Redemption" you're not going to be rich, period.

For the 80% chance you are not poor, of course John Kerry's tax plans do not help you, and probably hurt you. However, the risk-hedge thing happens because of the 20% chance you are poor, where John Kerry's plan helps you. If there is no medicare and Social Security in place, then that 20% becomes a lot worse, while 80% of the time, you get relatively marginal benefits.

MMMMMM

10-12-2004, 08:24 PM

[ QUOTE ]
I understand your arguments just fine, but I completely disagree with your premises. Anyone who makes more than 97% of the general populace yearly is clearly upper-class.

[/ QUOTE ]

Why, because you say so, or because someone arbitrarily picks the 97th percentile as a demarcation point?

[ QUOTE ]
Also, your claim that those who make 200k live a similar lifestyle as those making 50k is beyond absurd, which has been pointed out by another poster.

[/ QUOTE ]

That's why there are sub-classifications within the middle-class. And I didn't say that 50K and 200K live the same lifestyle, just that they both live middle-class lifestyles.

[ QUOTE ]
To claim that those who, on a yearly basis, are in the top 3% of wage earners are not rich is just ridiculous...I don't even see how this is debatable honestly.

[/ QUOTE ]

I think you harbor a common misconception as to what "rich" means. Net worth is far more determinant than income as to whether someone is "rich" or not.

[ QUOTE ]
What percentage of the populace, do you suppose, would consider 200k to be rich? 70%...maybe a bit more?

[/ QUOTE ]

If so maybe they harbor the same misconceptions as you.

[ QUOTE ]
For most people, not living month to month is rich.

[/ QUOTE ]

Not living month to month is the absence of being poor. It also might surprise you that quite a number of families earning 200K are probably nearly living month to month in their own way. Having a six month's savings certainly isn't "rich". Also, it is net worth or assets which makes it possible to not live month to month, rather than income.

1111

10-12-2004, 08:33 PM

Anyone who makes more than 97% of the general populace yearly is clearly upper-class. Arguing against that point, to me, is asinine. You can talk about net worth, general lifestyle, etc...but I do not see how you can dodge this simple point.

MMMMMM

10-12-2004, 08:57 PM

[ QUOTE ]
Anyone who makes more than 97% of the general populace yearly is clearly upper-class. Arguing against that point, to me, is asinine. You can talk about net worth, general lifestyle, etc...b

[/ QUOTE ]

Try looking at it with this example instead, OK? Say you have a certain town where the median home price is $130,000, and where most homes range from 100K to 150K. Now say there is a tiny exclusive residential area within that town where homes cost in the millions of dollars. Let's say that tiny exclusive area comprises only a fraction of one percent of the total number of homes in the town. In this example, the homes in the 97th percentile are not "rich" or "upper-class" or "extraordinary" compared to other homes in the area, because of the clustering effect. The homes that are truly "rich" are in less than the top 1%. So just because something is in the 97th percentile, in ordinal terms, does not mean it is incredibly better than the next 30% or 50% or 70% ranked under it.

Also, while the median average price of homes in the region might be, say, 130K, the mean average price of homes might be over 300K, because the homes priced in the millions so offsets the mean average.

Similarly, when comparing lifestyles, there is far more difference in the lifestyle of the fabulously wealthy who need not work and can spend pretty freely, and the middle-class, than there is between the upper and lower parts of the middle-class.

So it is a serious gap in assets and lifestyle that sets "upper-class" or "rich" apart from the middle class, not some arbitrarily conceived percentile ranking.

1111

10-12-2004, 09:21 PM

I thought you might provide an example like this, but it really does not change the point. Yes, there are people who make millions of dollars which may throw off the data, but when you make 200k you are still making more money than the overwhelming majority of the other people in your country, and you are also living much more comfortably than the overwhelming majority. I have an uncle who has a multimillion dollar business. He owns 5 sports cars, a plane, and has a very nice home. He also recently built a 2 million dollar vacation home. He is a very nice guy, he deserves what he has, and he lives very well.

His sister and her husband make 175k per year. They live in a nice golfing community in a rather nice home, with many great amenities. They can save for college for their daughter, who is getting a very good education at a local private school. They can save for retirement and take nice vacations. They drive fairly modest, but new vehicles. They live very well.

I grew up in a family with 3 kids that made around 45k per year. We did not take nice vacations, nor did we go to private school. My parents did not save for college because they quite simply could not afford to, and so myself and my older brother went to the state univerisity, and borrowed money to do so. They did own there own home, but it is a very modest 3 bedroom in a small town. My parents also do not have large retirement funds because, again, it was not really feasible. They drive modest cars that they keep for 5-6 years. This is a fairly normal middle class lifestyle which a huge percentage of people share. Adding even an extra 20k per year would have been enormous in our longterm prosperity. Compared to either my Uncle or Aunt from above, we are fighting to get by, while both of them are living the good life. And all of the people in this story work hard, so that is not the question here.

IrishHand

10-12-2004, 10:21 PM

[ QUOTE ]
He owns 5 sports cars, a plane, and has a very nice home. He also recently built a 2 million dollar vacation home.

[/ QUOTE ]
He is in that "insanely wealthy" stratosphere, but still technically "upper class" until you create a new class.

[ QUOTE ]
His sister and her husband make 175k per year. They live in a nice golfing community in a rather nice home, with many great amenities. They can save for college for their daughter, who is getting a very good education at a local private school. They can save for retirement and take nice vacations. They drive fairly modest, but new vehicles. They live very well.

[/ QUOTE ]
They are "upper class".

[ QUOTE ]
I grew up in a family with 3 kids that made around 45k per year. We did not take nice vacations, nor did we go to private school. My parents did not save for college because they quite simply could not afford to, and so myself and my older brother went to the state univerisity, and borrowed money to do so.

[/ QUOTE ]
You were "middle class".

I'm not sure why any of that is being disputed by anyone...seems pretty clear to me, as I believe it would to the vast majority of Americans.

IrishHand

10-12-2004, 10:31 PM

FWIW, I decided to Google "definition class upper middle" and got the following:
(Disclaimer: No idea what the site is or if it's biased - nobody shoot the messenger on this one.)

Definition of Class in the United States, circa 2004 (http://www.wordiq.com/definition/Class_in_the_United_States%2C_circa_2004)
Definition of Middle class (same site) (http://www.wordiq.com/definition/Middle_class)

Highlights:
[ QUOTE ]
An entrenched upper class. Extreme wealth or good fortune can bring an individual into this class, although most enjoy membership as a legacy. Members usually sustain themselves, and secure continued advantage, through social connections and networking rather than hard work. While demonstrated by some members of the American elite, hard work is clearly of secondary importance, and completely elective. On the job market, members often exploit their connections to secure coveted and prestigious occupational positions with salaries in excess of $500,000 per year. However, it is possible for a person to be upper-class without being exceptionally wealthy.

A largely professional upper-middle class. Individuals within this class rarely have the social advantages or envied corporate positions lavished upon the upper-class, but normally have access to the best education and occupational training in American society. Individuals within this class typically make between $40,000 and $500,000 per year, but there is much variation.

[/ QUOTE ]

Much of this thread seems to revolve around this:
[ QUOTE ]
Class delineations are somewhat artificial, and whether or not the divisions within the middle class (upper-middle to lower-middle) exist is a matter of debate. "Upper-middle" class individuals lead dramatically different economic lives from "lower-middle" class individuals, but whether or not these groups are separate as classes is in question.

[/ QUOTE ]

1111

10-12-2004, 10:46 PM

My points exactly. I was simply trying to better illustrate to MMMMMM the gulf that exists between those in my situation growing up compared to those making substantially more money on a yearly basis. I also agree that this is fairly straight forward stuff and am surprised there is much of a debate.

vulturesrow

10-12-2004, 11:17 PM

While the direction this thread has taken is interesting, let me throw a few figures out there. These are lifted from this CBO report (http://www.cbo.gov/showdoc.cfm?index=5746&sequence=1).

The top 3 income quintiles (thats 60 percent for those that suck at math like I do), pay 103% of individual income tax. Another interesting fact is that if project these numbers without the Bush tax cuts, you find that under the tax laws before the cuts, the top 60% pay 99%. Additionally if you look at the top 10% in both siuations, under the Bush tax cuts the top 10% pay 67.9% vice 63.9% without the Bush tax cuts. Just some food for thought.

lastchance

10-12-2004, 11:30 PM

[ QUOTE ]
While the direction this thread has taken is interesting, let me throw a few figures out there. These are lifted from this CBO report (http://www.cbo.gov/showdoc.cfm?index=5746&sequence=1).

The top 3 income quintiles (thats 60 percent for those that suck at math like I do), pay 103% of individual income tax. Another interesting fact is that if project these numbers without the Bush tax cuts, you find that under the tax laws before the cuts, the top 60% pay 99%. Additionally if you look at the top 10% in both siuations, under the Bush tax cuts the top 10% pay 67.9% vice 63.9% without the Bush tax cuts. Just some food for thought.

[/ QUOTE ]
Umm... You can't pay 103% of income tax. That's like saying someone is paying $50 of $49.99 bill. It's impossible.

To make those numbers really mean something, why not add in how much those people make?

And, the top 10% are paying 67.9% right now, right?

vulturesrow

10-12-2004, 11:37 PM

[ QUOTE ]
Umm... You can't pay 103% of income tax. That's like saying someone is paying $50 of $49.99 bill. It's impossible.

[/ QUOTE ]

The bottom 40% pay negative income taxes due to the Earned Income Tax Credit.

[ QUOTE ]
And, the top 10% are paying 67.9% right now, right?

[/ QUOTE ]

Yes. Without the Bush tax cuts, the top 10 paid 63.9

MMMMMM

10-13-2004, 07:36 AM

The example of the guy with the $2M vacation home is "upper-class". The 175K family income example is "upper-middle-class". The 45K family income example is "lower-middle-class".

MMMMMM

10-13-2004, 07:54 AM

You guys aren't thinking really clearly about this. There is a much bigger gap between the guy with the $2M vacation home example and the 175K income example than there is between the the 175K income example and the 45K* income example.

Hence, the $2M vacation home example with 5 sports cars gets a separate category, "upper-class". The families with 175K and 45K incomes get the upper and lower ends of "middle-class" respectively and hence are "upper-middle-class" and "lower-middle-class".

Major gaps in any classification system should correspond to majot gaps in that which is being classified. Hence reserving the classification gap for the kind of difference between the $2M vacation home guy and the 175K income family is appropriate, conceptually speaking. The differences between 175K, 80K, and 45K* incomes for families are appropriate to SUB-classifications, that is, "upper-middle-class, "middle-middle-class", and "lower-middle-class".

Note: depending on how long ago the 45K example with three kids was, it might have been "middle-middle class". Today though, raising a family with three kids on 45K total income might possibly be "lower-class" as it would be really quite difficult to manage.

MMMMMM

10-13-2004, 08:00 AM

Thank you Irish Hand. The excerpts seem to support my position.

I agree that the class distinction is somewhat artificial, especially today. My purpose in arguing this thread goes back to my criticism of Kerry for claiming his tax cut rollbacks would affect the "rich only", which I feel is very disingenous since earning 200K does not automatically make one "rich" (or "upper-class").

tolbiny

10-13-2004, 10:14 AM

If there is an Upper middle, middle middle, a nd lower middle,
then why can't there be an Upp Upper, Middle Upper and lower Upper?

MMMMMM

10-13-2004, 01:16 PM

[ QUOTE ]
If there is an Upper middle, middle middle, a nd lower middle,
then why can't there be an Upp Upper, Middle Upper and lower Upper?

[/ QUOTE ]

There can. Earning say 500K/yr. is lower-upper. Being worth say 10 million is middle-upper. Being worth say 50 million or more is upper-upper.

Cashcow

10-13-2004, 01:54 PM

This discussion is very interesting.

[ QUOTE ]
I really don't see how 50K a year is a LOT of money

[/ QUOTE ]

I would love to make that much. My wife and I make about $40k between the two of us, and we have a 6 month old to feed and cloth. We are getting by ok, but we would get by much much easier with $10k more. Think of what that $10k can do...pay our rent for the year.

You also make a very goo point though. If you live in a major metropolitin are, you are not going to make it nearly as easily on what we make. We live in the Cincinnati area and prices aren't bad at all compared to areas like N.Y. and L.A.

I would think that the class issue has to be dependant on your local economy.

andyfox

10-13-2004, 02:16 PM

George Bush believes a person making $400,000, a person making $4,000,000 and a person making $40,000,000 deserved the same percentage tax cut as you did.

adios

10-13-2004, 02:22 PM

I can certainly appreciate your viewpoint. You wrote:

[ QUOTE ]
I would think that the class issue has to be dependant on your local economy.

[/ QUOTE ]

I agree with your statement. Yet the standard deduction is the same for everyone. It's the same for someone living in LA as it is for someone living in Tulsa. What is up with that? My understanding is that the original idea of the income tax was to tax income available for discretionary spending. Apparently the government is stating that everyone should be able to get by on $10,000 a year which is approximately the standard deduction and the personal expemption total. Every $ earned after that is available for discretionary spending? I doubt that in very many cases. Just my take. Yeah you can deduct mortgage intereset but of course not everyone owns their home and now we're really talking about different prices for different areas. There used to be a time when you could deduct all interest paid as well as sales tax paid. All these rules for what gets taxed and what doesn't seems arbitrary to me.

Cashcow

10-13-2004, 04:02 PM

Do you not think that there is a huge gap between $50k and $200k?

Cashcow

10-13-2004, 04:14 PM

[ QUOTE ]
Earning say 500K/yr. is lower-upper. Being worth say 10 million is middle-upper. Being worth say 50 million or more is upper-upper.

[/ QUOTE ]

50k (middle class) to 200k (still middle class)400%increase
200k(middle class) to 500k (upper class) 150% increase
Whey does the math not work?

I think you need to re evaluate what you are saying. If you make more money than 97% of the population, would you not be in the upper portion of the population. If you are in the 40% - 60% range, income wise, are you not in the middle?
Just because you may not be rich (200k), does not meen that you are not in the upper class.

MMMMMM

10-13-2004, 05:59 PM

[ QUOTE ]
Do you not think that there is a huge gap between $50k and $200k?

[/ QUOTE ]

There is a significant difference but it is not as great as the gap between 200K and being wealthy, or the gap between 50K and being poor.

MMMMMM

10-13-2004, 06:04 PM

[ QUOTE ]
50k (middle class) to 200k (still middle class)400%increase
200k(middle class) to 500k (upper class) 150% increase
Whey does the math not work?

[/ QUOTE ]

Because at 500K+ you get a significant amount of money which you can invest and become a multimillionaire on. At 200K, especially with kids, most of the money will just be spent on living fairly well and on a higher level of necessities and taxes. At 500K+ you can accumulate net assets far more rapidly, and it is net worth that makes the biggest difference.

MMMMMM

10-13-2004, 06:14 PM

That is the only fair way, Andy. The money isn't the government's, it's the income-earner's. The government isn't giving anything back to you with a tax cut, they're just robbing you less. And people earning 40 million have the same right to not be robbed as people earning 40 thousand.

When the federal government cuts its budget--and taxes--by about 75% then maybe I'll change my mind. Until then I believe the government should not be playing favorites with whom they rob for money to waste and buy votes with.

IrishHand

10-13-2004, 07:35 PM

I would say that $50K is a fair number to use for "amount a family needs to live a good life (by industrialized worldwide standards - meaning modest home, 2 cars, health care, etc), on average". (Yes, this varies by location - but looking at the country as a whole, it seems in the ballpark.)

So, I'd say that $50K allows you to reasonably claim to be "middle class". The reason I'd rate $200 as upper class is that they've got $150K in money to do with as they please - none of it goes to necessities...it's all ultimately luxury items. Yes, a family making $5M a year has a LOT more of that luxury money ($4.95M as opposed to $0.15M), but you're still talking about an economic elite.

However, after reading that site, I agree that it's reasonable to call the $200K group "upper middle class" and the insanely rich "upper class" if only to preserve the value of the distinctions.

andyfox

10-13-2004, 08:02 PM

Given, then, that the government is stealing, don't you think that the theft hurts the person making $40,000 a year more than the person making $40,000,0000? I know people in both conditions, and the people making $40,000,000 have a much nicer life. Anecdotal evidence, to be sure, but I think we can agree that it's probably the case in general.

Given the fact that the $40,000 earners pay a much higher percentage of their income in other taxes, a progressive income tax serves to flatten out overall taxes. And since you seem to feel a flat tax (i.e., everyone, regardless of income, paying the same percentage) is the fairest system, a progressive income tax fits the bill (pun intended) perfectly and, thus, giving the lower income earners a larger tax cut would have been fairer.

MMMMMM

10-13-2004, 10:36 PM

Well I would argue that 50K is just about enough for a family to squeak by on today, and that if they earn 100K or even \200K most of the money will just be spent on saving for college expenses, living in a better neighborhood so the kids get in better public schools, better health insurance, better cars, etc. Sure a bit of it will be spent on things like better vacations too, but just because you can "get by" on 50K doesn't mean you can't find good non-frivolous non-luxurious use for that "extra" 50K or 100K. Really just living well and not even ostentatiously could take most of it for a family, especially considering planning for college.

As for preserving the value of the distinctions, I think it is important only because people like Kerry call those earning 200K "the rich" and thus promote a class warfare mentality. If he had said he wanted to roll back tax cuts for "the well-off" I really wouldn't have objected so much, but I just think it is divisive and disingenous to portray it as affecting only "the rich".

MMMMMM

10-13-2004, 10:59 PM

First off I only think it is stealing insofar as they waste a great deal of the money and use it to pander to special interests to buy votes. If the tax collected were actually what a very-trimmed down federal budget would require (more in keeping with my idea of the constitutional intention of the federal government's duties), I would not be objecting so nor calling it stealing. Just to get that out of the way.

[ QUOTE ]
Given the fact that the $40,000 earners pay a much higher percentage of their income in other taxes, a progressive income tax serves to flatten out overall taxes. And since you seem to feel a flat tax (i.e., everyone, regardless of income, paying the same percentage) is the fairest system, a progressive income tax fits the bill (pun intended) perfectly and, thus, giving the lower income earners a larger tax cut would have been fairer.

[/ QUOTE ]

Actually I think a consumption tax on non-necessity items in lieu of income tax would be the fairest and best system, but since we're talking about income tax...let's see...I don't quite agree with your line of reasoning because you are mixing two types of tax. Another way of looking at your argument would be to say that sales taxes should be modified somewhat according the purchaser's income if the goal is a flat tax structure. This will require further contemplation but basically I don't think it should even be the government's business what anyone earns, and a consumption tax would keep them out of our hair, pockets and private lives in a way that an income tax never can.

As for the ramifications of your argument, I agree you have a point in a way, and will think about it late when I don't already have a headache.