Taxes: A Question for Kerry Supporters

[MMMMMM]

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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

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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]

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]

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

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

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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.

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They are "upper class".

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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.

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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]

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
Definition of Middle class (same site)

Highlights:
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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.

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Much of this thread seems to revolve around this:
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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.

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[1111]

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]

While the direction this thread has taken is interesting, let me throw a few figures out there. These are lifted from this CBO report.

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]

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While the direction this thread has taken is interesting, let me throw a few figures out there. These are lifted from this CBO report.

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.

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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]

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

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

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

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

[MMMMMM]

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]

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.