Well-to-do go to war over the U.S. income gap

October 21, 2008|By DAN RODRICKS | DAN RODRICKS,dan.rodricks@baltsun.com

For a moment the other night, as I was checking e-mail from readers reacting to Sunday's column about John McCain's "class warfare" whine, I lost my perspective. It was a temporary condition, brought on by an armchair economist named Mark who said my characterization of people who make more than $250,000 a year as "wealthy" was inaccurate.

"Can we stop with the notion that a family of four that lives in a major metropolitan area and makes $250,000 a year is wealthy?" wrote Mark, no last name given. "Granted, they are comfortable. But wealthy? After taxes, mortgage, health insurance, cars, gas, college education, food, they are lucky to be able to save anywhere from $5,000 to $10,000 a year. I would assume that all rational people would not call that wealthy."

Just what we need - a semantics cop trying to spare those who make a quarter-mil the stigma of being labeled "wealthy." And there were several other reader e-mails blasting me for describing the widening disparity of income levels in the United States over the past 30 years, with the wealthiest Americans, those over the $250,000 level, enjoying the most gains.

For a moment, I questioned the figure Barack Obama has set as the point for new taxes should he become president. But Obama knows that when he mentions $250,000 in a speech or debate, there are relatively few American households that can identify or sympathize with that figure.

Just how many Americans live where the air is rare?

Here's what the U.S. Census Bureau reports, based on its 2007 survey.

Of 116 million American households, 2.24 million had incomes of $250,000 or more. That's fewer than 2 percent of all households, and the highest bracket the Census Bureau tracks. The median income for those households was $418,000.

There were another 2 million households that made between $200,000 and $249,000, and 5.1 million at between $150,000 and $199,000. Neither group would be subject to Obama's tax increase.

The next bracket down the ladder is large, with more than 14 million households earning between $100,000 and $149,000.

The remaining households in the United States earned below $100,000 a year, with about 25 million households at or below what the government considers poverty level income for a family of four, about $21,000 annually.

That leaves about 68 million households with income between $22,000 and $100,000.

So anyone who doesn't believe $250,000 a year qualifies as wealthy doesn't have a good picture of the country, or they're uncomfortable with any discussion of who's living large and who's not. "Class warfare!" they shout, as soon as you bring it up.

"My family falls into what Obama calls the 'wealthy' category," a reader named Terence wrote. "Compared to most, we do OK. But to say we are wealthy is like saying the Orioles will contend for the AL title. Just because someone makes more than $250K does not make them 'wealthy' and therefore responsible to pay for society's woes. We struggle to pay tuitions for three kids in private schools, save for their college years and save for our retirement. The tone of your article generates class warfare."

I'm not interested in war. I'm just sick of McCain and others throwing the red flag whenever the discussion turns to income disparity and tax policy.

As I reported Sunday, the Center for Budget and Policy Priorities found, that, in the past decade alone, incomes have declined by 2.5 percent among the bottom fifth of American families while increasing by 9.1 percent among the top fifth. On average, incomes have grown by just 1.3 percent among the middle fifth during the same period. "The federal tax cuts of the early 2000s, which were targeted primarily on wealthy families, helped widen the income gap between the wealthiest families and those with low and moderate incomes," the CBPP said.

Warren Buffett famously condemned the tax policies of the Bush administration that left the receptionist in his office paying a higher percentage of her income - almost twice as much - to the government than the billionaire investor did. Buffett challenged any member of the elite Forbes 400 to show that he paid a higher percentage of income in taxes than his office receptionist did. No one has come forward.

"I see nothing wrong with those who have been blessed by this society to give a larger portion of their income to the society than somebody that's working very, very hard to make ends meet," Buffett said.

Which might explain why Buffet is supporting Obama.

Half of the e-mail I received about Sunday's column used the same old tired arguments to declare a discussion about what Americans make - and the disparity between rich and poor - off-limits. Talking about income disparity is bad for the nation, I was told. It's class warfare. It demonizes the well-to-do.

There were several other e-mails defending the right of the rich to be richer and to get another break on taxes in a McCain presidency.

I was scratching my head about the "quarter-mil is not rich" assertion when an e-mail arrived from a man named Joe, who just had a testy conversation with his son, a hedge fund executive.

"Last year, he was upset because he only made about $600,000, not counting his deferred income of about $200,000," Joe wrote. "This year he is upset because the fund has been liquidated, and I guess he will only make about $300,000."

If $250,000 isn't wealthy - and, in some eyes, just getting by - then $300,000 isn't much better. And if elected, Obama will make Joe's son pay another 3 percent or 4 percent in taxes. No wonder he's upset, poor guy.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.