Come tax time, 'soaking the rich' is difficult: Just who are they?

October 21, 1990|By Dan Fesperman | Dan Fesperman,Washington Bureau of The Sun

WASHINGTON -- If a tax-hungry Congress ever decides to soak the rich in Lizard Lick, N.C., lots of people everywhere will be in trouble come tax time.

"If you live in Lizard Lick, you're rich if you make $25,000," surmises semiofficial mayor Charles "Woody" Wood, who is something of a town tycoon with his wrecker service, welding shop and "the world's smallest TV studio" in his van, where he produces a one-hour weekly show for local access cable in the nearby metropolis of Smithfield.

Mr. Wood's definition of wealth, if perhaps a bit whimsical, points to the question at the center of debate right now among lawmakers and anyone who pays taxes: How rich is rich?

The answer may well determine whose taxes get raised.

To the Internal Revenue Service, the answer is a cut-and-dried matter of tax brackets, which say that, for the 1990 tax year, the rich are individuals making more than $97,620, and married couples and families making more than $162,770.

But not so fast. Those numbers can be deceiving when used in arguments because they represent income after deductions and personal exemptions.

A home-owning Baltimore family of four with an income of $200,000, for instance, would get $8,200 in personal exemptions this year, and might typically deduct $12,500 for state income taxes, $10,500 for home mortgage interest payments, $6,000 for real estate taxes and $800 for charitable contributions and other deductions.

Those totals bring the family's taxable income down to $162,000, meaning that this $200,000-a-year household would barely escape being labeled rich by the government's only statistical definition.

It is the over-$200,000 families, then, that the House of Representatives proposes to"soak" by raising the tax rate for their income over that amount to 33 percent. The Senate would leave the tax rate on that income at 28 percent, although it would reduce by 5 percent the amount of deductions that a family can take on any of its income that exceeds $100,000.

For most of the wealthiest taxpayers, the House plan would produce a bigger tax increase than the Senate plan.

So, then, are families making above $200,000 per year rich?

Maryland Sen. Barbara A. Mikulski thinks so.

On Thursday she proposed an amendment to the Senate bill that would have raised their tax rates the same as the House bill.

"Let's go and get it from those who've got it," she said. "I think that if you have the opportunity in this country to make over $200,000, then you ought to accept the responsibility to make sure that this government works."

Jean Adamski, a waitress at the cramped, low-priced Bridge Restaurant in downtown Baltimore, would agree with that definition, and then some.

"When you have $50,000 in the bank, I assume that's being rich," she said. What about annual income? "In this economy," she said, "you'd have to make at least $100,000."

Her opinion and a sampling of others from people with varying incomes illustrate a truism about the way people decide who is rich:

It is almost always whoever makes more money than they do.

Tell a family living in Manhattan that $200,000 a year is rich, for example, and they might disagree. "Of course, in a way it is rich, because it's definitely at the upper end of the income scale," said a Manhattan real estate agent. "But in terms of living well, by the time you buy a home and send two children to private school, it probably doesn't feel that way."

She should know. She's handling the sale of a five-room, two-bedroom apartment with a terrace in a "full service building." Asking price: $875,000. And that's in the midst of a horrendous price slump in the Manhattan real estate market.

The majority of the members of the Senate probably would agree with her assessment. They voted down Ms. Mikulski's tax-the- $200,000-and-over amendment, 55-45.

Perhaps next time around Ms. Mikulski can get them to look at housing prices in Lizard Lick, where Mr. Wood said one can get a comfortable three-bedroom home on a pleasant one-acre lot for about $75,000. If you really want to show off, you can get a huge place for maybe $100,000 to $125,000.

The more Mr. Wood talks about the question of who's rich and who isn't, the more philosophical he gets. For him, he concludes, wealth means staying happy and healthy. But if you're just going to consider income, he said, then the rich are those people "rich enough to be able to hire enough lawyers to keep from paying any taxes."

But the most telling answer to the question "who is rich?" may have come from the Gucci store in Beverly Hills, Calif., on fashionable Rodeo Drive. (Attention, K mart shoppers: That's pronounced "Roe-DAY-oh.") This is a place that deals all day long with rich people.

A store employee named Stuart Lighton fielded our question. "Let me refer you to someone else," he sniffed. "Or you might try Louis Vuitton." (That's another highbrow shop down the drive). He then gave us the phone number for a Gucci public relations woman in New York, who decided she didn't want to answer the question.

Which only goes to show: People who know what rich really is don't want to talk about it.

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