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June 28, 2005

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Torridjoe

there are several problems there, without even diving into their numbers:

*a 'record' expressed in raw population doesn't help much; we set a 'record' for total US population every few minutes. What percentage of households now pay no taxes?

*paying no taxes has nothing to do with the burden on those who do pay them. The highlighted paragraph says tax cuts eased the burden on the middle class, then attempts to justify it by saying millions didn't pay any. The middle class DOES pay taxes, however. What they mean by "next to nothing" is another question--who are they asking? I assume that's raw numbers, not percentage of income they're talking about.

*furthermore, if we're talking about deductions and credits being taken, realize that at lower levels of income those are rebates for burdensome expenses, rather than breaks for investment income. It's an implicit acknowledgement that living costs (healthcare, childcare, etc) at the low end were high enough to wipe out their tax burden.

*it's totally misleading to talk about income taxes as the entirety of Bush's cuts. Dividend, capital and estate cuts are where the rich are making their hay, not income tax. Most of the truly rich don't make a whole lot of income in the first place.

Ugh. I can appreciate your philosophical position on taxation, but making even the smallest attempt to play the Bush cuts as anything but a big wet kiss to the superwealthy, is IMO quite unwise.

Zap

I think this was my main point: "Combine that with the myriad corporate tax havens, the loopholes for the extremely rich, and you arrive at a disproportional tax burden on the middle class, not the poor."

Of course, he has looted the treasury and handed it to the rich. I never said otherwise, but the very common grievance from say, Sojouners, is that he has deprived the poor to do so. No, this country is being underfunded on the backs of the middle class, which is breaking up into broad categories itself, by the way. I'm a big believer in Ayn Rand's quote above. The middle class is what made this country something wonderfully unique, and it is under attack and in desperate need of protection. I used the Kerry quote, because it was his tax policies that made me go from anyone but Bush, to actually supporting Kerry. I don't think we're near as far apart as you seem to think we are. Maybe calling him Robinhood was too much? :)

Torridjoe

"I think this was my main point: 'Combine that with the myriad corporate tax havens, the loopholes for the extremely rich, and you arrive at a disproportional tax burden on the middle class, not the poor.'"

Ah yes, you're right--we are closer on this than it appeared. Since you highlighted the part that said the tax burden is being assumed by the wealthy, that confused me.

John Edwards had this pegged: the cuts shift the tax burden from wealth to wages. Who has wealth? The rich. Who has wages? The middle class.

Zap

Actually, that was a bit of "partisanship wording" from the Tax Foundation. I didn't highlight the tax burden being shifted to the wealthy, and either did they. They went from discussing the poor to claiming the tax burden had been shifted to the-- wealthier-- and I concluded the wealthier is the middle class, not the wealthy.

Torridjoe

from where I sit, it says from the poor and middle income, to the wealthier.

Zap

Yes it does, but the middle income they describe is quite clearly the lowerlow middle income. It's very possible to make 30 grand, have a couple kids and pay no income taxes yet be labeled middle-income. Try that from 60 grand and it's takes some pretty nifty tax strategy.

I started thinking about this because I did several people's taxes this year and it startled me how many were not paying. Even our friend Gutter claims he did not pay this past year. More startling were those I knew, very closely, who were paying huge taxes. I've seen three returns for people who paid six figures in income taxes, but do not live in a manner I would consider a "wealthy lifestyle." This is the ever broadening top end of the middle class. A couple with two sweet incomes grossing around 300k really gets nailed with a massive tax burden compared to anyone else I know of in the country. Living off a net of 12-15 grand a month may sound lavish, but I've seen the budgets, the homes, the cars, the lifestyles. They are Southern California's upper middle class, not wealthy by any stretch, and being taxed... heavily by comparison. That may not be a group progressives care to protect, but Kerry did, and rightly so I think. We need a vibrant middle class, not one which the Tax Foundation calls middle income, pays little taxes, and is relatively poor.

Torridjoe

Zap, be serious. Nobody who pays 100K in taxes is anything but completely wealthy. What kind of middle are you talking about? 80% of households in this country make 75K or less in income. 100K is not middle class; it's rich.

12-15 grand a MONTH? Good god. That's well above what the top 5% in the country makes!

CA median income for a family of four in 2003 was $62,000.

Zap

I just noticed my response, fwiw, didn't post.

You seem to be agreeing with me, from an income tax standard anyway, that your perception of "rich" and my perception of "upper middle" are bearing the brunt of taxation. Considering, just from an income tax standpoint, one third do not pay (along with the associated millions getting rebates or paying little), and knowing the ultra rich have received massive cuts and other avenues to avoid taxation, then this group between say 50k and 350k are carrying the load. You think the top of that broad category is rich. In some cost of living areas it may well qualify.

Where I come from, pretty much where I have always lived, the cost of living makes a huge difference compared to national averages. In many many areas of the country, where incomes are very high, high enough to be called rich on average, the associated cost of living creates this not near wealthy upper middle class.

Look at median home prices in San Diego County: Very high. Far from the city or in places you probably would not want to live, prices range from 300k to 550k. The truly middle class communities are priced from 600-900k. People living in homes that valuable must be rich, no? NO! Those dwellings are nice sized tract homes (in many cases), cookie cutters, with neighbors fifteen feet away on both sides and small yards. Many if not most of the residents' dual incomes are grossing 150 and upwards to the mid 300s. It's a comfortable middle class lifestyle securing a sound retirement, but nowhere near the general perception of rich in any sense of Bush's handouts. These people pay exorbitantly in comparison to the rest of the country. 35% of 350k is over 120k in income tax. That's big. These are not people living lavishly in San Diego. Those would be the ones making twice that and more. The ones with the "need" to hire attorneys and offshore bankers to protect them from taxation.

These people I'm talking about are workers-- doctors, lawyers, accountants, upper management, business owners, realtors, and on and on. They're not living on investments protected from taxes, they're mortgaged to the hilt, deferring all the income they can, and living a middle class existence, while being asked to pay out their arses when no others are. You're right, "most of the rich do not make much income anyway." These folks sure do though.

I'm not particularly arguing anything but a misconception of "rich." The middle is getting hosed, and along with steady income growth. Long term inflationary principles have some thinking 200-300 is really massive income, but I've seen the budgets. Things are doubling every 12-15 years at current rates. In 85 when I graduated a little more than 20k was an expected and acceptable career start. Not anymore. My degree hits the market at about 50k here, as much as 75k in some cases, and the lifestyle is the same as what 20-30k was 20 years ago. The same applies to the bigger numbers. 100k was pretty nice in 85, but it was also pretty standard of SoCal's upper middle two income family. Nothing spectacular about the lifestyle it afforded. That's more than doubled in 2005. I could be wrong, but I'm witness to the things I testify.

Torridjoe

I accounted for cost of living by using CA's median income rather than the national standard, which is about 20K lower.

But any defintion of "middle" to me naturally has a mathematical component. Perhaps "middle" need not be a full 1/3 of the sample, but the incomes you are referring to represent something on the order of 1/10th, even 1/20th of the total. There is simply nothing approaching a central tendency regarding incomes of 100K or more, no matter where you live.

I am well aware of the enormous cost of housing on the West Coast and from DC northward on the East. But there are two points here:

1) Not everybody owns property; many rent. The fact that you have to pay 800 grand for a decent house doesn't make you un-rich; it just means you have to be rich to buy a house.

2) Many of these houses, particularly among older, longterm residences of the bubble areas, are either paid for outright or were purchased pre-bubble. I know people in Portland who bought less than 10 years ago, and have seen their home values triple in that time. So to say because they live in a hood where houses go for exorbitant rates, does not necessarily mean they are paying those rates to live there--especially where the real estate tax has been unpegged from market value, as in Cali and OR.

I hear what you're saying--big money doesn't necessarily buy what it used to. But that's a separate issue from the comparative earning power of different households, which is what we're talking about. As little as you think 300K a year may bring you in Vallejo, it's that much more than what 50K brings.

Zap

California's median gives as accurate or I should say, inaccurate, a picture as the whole nations. We are the country's microcosm. 300k combined household income is big bucks, upper class, in Barstow or Redding. It's a good living, upper middle, in San Diego. I also sense a huge disparity in the haves and have nots making medians a poor tool for analysis.

Torridjoe

Actually, medians are the proper tool for assessing disparity, at least compared to means. A mean can be skewed by extreme figures at either end of the spectrum; a median simply sets the point at which half exceed, half fall short.

300K is big, BIG bucks everywhere in the country, including San Diego. From the Census: in 1999 if you made 200K or more, congrats! Your household income puts you in the top 3% for the San Diego metro area. What about 150K? Top 6%. 100K? Top 15%.

I'm sorry, but you will never, ever convince me that those who are earning more than 85% of their neighbors, are somehow "middle class." And that's just at 100K. At 300K, we're talking about a level not achieved by 98% of the people in San Diego. That is the elite, my friend.

Zap

Come for a visit. :)

Torridjoe

I don't need to--the numbers speak for themselves. A family of four can meet basic needs for $50,000 in San Diego, according to Berkely CPI. Middle class is around 75K or so; anything over 100K is clearly upper class.

Zap

A husband and wife making 50k a piece with a couple kids is the middle of the middle class around here. Very Clearly. They're going paycheck to paycheck, barely saving for vacations and retirement, desperate to save for the kids' education. The house was too small, now it's too expensive. Maybe that's your view of upper class? It certainly doesn't fit the stereotype. Honestly, it isn't even remotely close to the stereotype. I'd hesitate to start labelling these hard working taxpayers as upper class. It's ignoring the assault on the middle, lowering our standards (very unfortunate), aiding and abetting class warfare, and missing the serious distance between them and those just a % or two higher in your stats who pay less. I know two such families with kids in college, income hovering right around 100k, and they are cash poor, struggling. That is not upper class by any realistic standard.

You should know that numbers like these never speak for themselves. They speak to whatever a person wants them to speak to. Is the census including the millions with no reported income, on welfare, illegal immigrants working under the table? That would certianly skew the numbers downward.

I'm curious what your opinion of an upper class lifestyle is. To me it's people who do not have to worry about money as long as they are reasonably prudent with it. At 100k a year around here, a family of four can be excepionally prudent with the income and in constant financial worry.

This holds true downward also. At about 50k a year around here, we're falling out of any normal middle class lifestyle and into the category below. Renting, struggling to pay insurance bills, cars being driven to death, no resources for kids eductions, no vacation money, etc. It's not the poverty level, but it isn't Apple Pie America, that's for sure.

Families need to make 135k to buy a median priced home here. That isn't upper class. It is the owner of a median priced home.

Torridjoe

the census includes all households of all types in the San Diego MSA. Obviously, adding homeless people and illegal immigrants only makes the people at the top even more elite, because the numerator stays the same and the denominator grows.

An upper class lifestyle is one that few can afford--one that is not lower, and not middle, but in the upper range of incomes. This seems so elementary, that either you're trying to trap me, or I don't understand the question. Any logical definition of middle suggests a relatively equal number of cases above and below.

I know you do community outreach, so I'm a little baffled that you think 100K represents people struggling to get by. Perhaps those people shouldn't own two cars and send their kids to private school, have ChemLawn come, get 200 channels of DirectTV, and go somewhere by plane as a family every year for vacation.

The hard and cold facts are that whatever you may think of the lifestyle and standard of living being afforded at the "upper class" level, "upper" is a relative term, just as "middle" is. It does not have a static definition; it shifts with the comparison to others.

A purely mathematical definition of "middle class" would be those who constitute incomes between the 33rd and 66th percentiles. If you want to imagine a broad middle class that is itself 50% of the households, that still only takes you to 75th percentile at the very top levels.

Now remember: if your household earns 100K in income per year, you are better off than 85% of your neighbors in San Diego. There is simply no normal definition of "middle" that includes members of the top 15%. To the contrary, the tragedy of income inequality is that the middle class shrinks.

Zap

Last comment and we need to close this one out. You get the last word no matter how much it incites me to respond. :)

Back to Berkely CPI's claim that 50k meets basic needs for a family of four. Is a home a basic need? Home ownership is the grand symbol of the American middle class. Is health insurance a basic need? Is the ability to take time off and not stress over money a basic need? Is providing for your children's education a basic need? These were all symbolic of the middle class. We are reducing our standards of basic needs, our standard of living, quality of life. The middle class, the true middle class is under assault.

My mom didn't have an income, my dad never made over 50k. They raised six kids in a nice four bedroom house, never worried about insurance and the small stuff, treated us to annual summer trips, and promised any willing to go a college education. It was a struggle, but it was doable. That same struggle now starts over 100k, especially with 6 kids, and it is harder now than then even with the 6 figure income. Under 100k, well, that's a different set of basic needs. We've somehow allowed the great expansion of the poor population to allow us to spin the statistics and change our opinion of what should and shouldn't be considered middle class. We've lowered our expectations. Middle class is a standard of living, an American way of life. It has nothing to do with medians. The median is not a class or a lifestyle or a standard of living. It's just a number relative of little.

Torridjoe

I'll have to find it again, but the "basic needs" formula included pretty much everything you list, except home ownership wasn't considered a basic need. Renting is just fine.

I see our fundamental disagreement with the term "middle class." You perceive it to mean the American Dream, I perceive it to mean those who are in the middle of the range at any given time. I don't think we disagree that the basic features of comfortable living are more expensive now than before, but I do believe that "comfortable living" has been pretty well upgraded. My family goes out to eat far more than when I was growing up. We pay for television channels now, didn't use to. We carry phones around with us now, didn't use to. Phones are answered for us when we're not home, didn't use to be. We drink lattes instead of coffee. We lurk on the internet. Our cars have computers on them and are much safer than before. Our homes are more fire and earthquake resistant. We drink water and get ice right out of the fridge door, instead of the tap and cracking plastic trays. We get an MRI for a pickup basketball injury, as opposed to getting some crutches. We go to a health club instead of lifting weights in the garage.

Thanks for the discussion, mate. Onward!

carla

It's a good thing you guys have your own room so I don't have to tell you to go and get one. :)

Hehehehe

Ron Rutherford

I have stayed out of this debate since the issue to me is so big that I now have 20 links and growing to discuss this throughly.

But TJ, your last remark is right on that we have a better standard of living now than any time in the history of mankind. Good link for median family income.
Your list is very good and many that I thought of were prior to 1985 (IE Color TV, Microwave Oven, GPS, Walkmans-MP3 Players,and VCR-DVD). In my opinion computers and the internet has greatly increased my utility (satisfaction) in my life.

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