$400K a year is the new 'rich'

The budget deal for tax hikes on America's upper crust sets the bar far higher than the previous $250,000.

By Jason Notte Jan 2, 2013 3:18PM

Image: Wealthy woman (Corbis)The fiscal cliff deal didn't solve all the nation's economic problems, but it did answer one pressing question from the debates that preceded it: Who, exactly, are "the rich"?


The answer, apparently, is an individual earning at least $400,000 a year or couples making at least $450,000. They're the only folks who qualify for the deal's new 39.6% tax bracket, and they easily clear the $325,000 bar the government uses to separate the top 1% of income owners from the unwashed plebes below.


They're also somewhat wealthier than the demographic President Barack Obama had in mind when he suggested Monday that raising taxes on "the wealthiest 2% of Americans" could help reduce the deficit. Back then, policymakers still seemed to agree that $250,000 in income was the dividing line between rich and poor. By raising the bar, Congress just cut off 28% of the income that could have been taxed at higher rates.


Sure, people making more $250,000 still account for just under 2% of all tax filers, or about 2.85 million households, according to the Tax Policy Center. But what's the use of being "elite" if 2.85 million others are being elite right alongside you?


Clearly something needed to separate the deep-pocketed swells tacking their sloops toward Newport from the nouveau riche bombing across Lake Washington on their cigarette boats. After all, there are fewer than 1 million households with annual incomes of $500,000 or more nationwide. They're 0.6% of all taxpayers and, by jove, should get some sort of special recognition for it.


The folks below that bar don't seem to disagree. Ipsos Mendelsohn earlier this year asked affluent Americans earning $100,000 or more annually to define who they felt was in the "1%" targeted by Occupy Wall Street. On average, they cited people making at least $1.4 million a year.


According to Ipsos, those $100,000-plus households are in the top 20% to 25% of earners, but think they're in the 38th percentile. Meanwhile, super-affluent households making $250,000 a year or more in the top 2% of earners think they're in the 16th percentile.


"That's a big difference from 2006 or 2007, when everyone kind of overestimated how wealthy they were, or at least they felt like they were going to get rich, so started spending according to their perceptions," Steve Kraus, chief insights officer in the Audience Measurement Group at IpsosCT, told Ad Age. "Today, I think it's more the opposite pattern."


They may not feel 1% rich, but the $250,000-and-above earners who just dodged a tax hike are still fairly confident that they're doing better than most. According to a Gallup poll released in late 2011, it would take a median of just $150,000 a year in income for most Americans to consider themselves rich. While those making less than $50,000 a year would make do with $100,000 a year, college graduates, city dwellers, inner suburbanites and those already making $100,000 would feel flush with between $200,000 and $250,000 a year.


That's some cute schoolyard daydreaming compared to how government's newly defined "rich" view personal finance. Back in June, Fidelity surveyed 1,000 millionaires with an average of $3 million in worth and asked what it would take to make them wealthy. The answer? About $5 million in investable assets, which is down roughly a third from the $7.5 million they felt they needed a few years back.


Increased income taxes for the $450,000-plus crowd left a lot of expendable income on the table and did little to address inheritance, capital gains and other income streams that keep the top bracket on top. But wringing some more cash out of the American elite gets a bit easier when both sides are comfortable with that club's admission price.


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323Comments
Jan 3, 2013 3:49AM
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OBAMA HAS MADE ME RICH!!!!!!!!!!!!!

I don't work - therefore I get unemployment!!!
I eat - so I get food stamps!!!!!
I talk - so I get free phones!!!!!
I'm an illegal alien - so I get to not pay taxes - and get great refunds!!!!!
I'm uneducated being from africa - so I get tuition!!!

WHEN YOU ARE ALL BROKE - I'LL MAKE A BIG FAMILY SO THEY CAN HELP ME WITH MY EXPENSES!!! (10 WELFARE CHECKS ARE BETTER THAN ONE)!!!!!!!!!!!!!!!!​!!!!!!!!

The American middle class has screwed itself!!!!!  Not only are you mediocre in your

accomplishments, but also in your mentality and voting intelligence!!!!!  


My cynicism is a result of obama's inept performance, the lack of integrity in the congress,

the 47%, the cockroaches in our society, the cockroaches trying to get into our society, and

our society's welcoming all of this into reality!!!!!

HITLER, LENIN, AND STALIN ARE WINNING!!!!!!!!!!!!!!!!!!!!!!!!!!!!



Jan 3, 2013 3:20AM
Jan 3, 2013 3:19AM
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I have never made more than 45000 a yr. I HAVE NEVER HAD A HARD TIME LIVING ON THAT. If i made 400000 a yr i would save 200000 ayr and have vet and a bigger house . Because iam richie rich. and in 20 yr i woud be a real rich  person. tax me big. I LL  BUY ME 1O VETS.

Jan 3, 2013 3:12AM
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I earned $180K this year, single, no kids and live in the Seattle area.  I don't know what to define rich as but I certainly would like to know what my fair share of taxes are as it appears I will have to pay $41,500 for an effective tax rate for federal taxes being 23% based on my final pay stub of 2012, my reported information from my brokerage firm and the latest 1040 forms from the IRS web site.  This is up from 22.2% last year and next year looks like it will go higher yet.  Just what does the government define as "fair share" as a percentage is what I want to know.
Jan 3, 2013 2:04AM
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  its time for a transaction tax on wallstreet .  End subsidies and tax loop holes to big corporations who obviously are making giant profits .
Jan 3, 2013 2:04AM
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Khalil Gibran: "The difference between the richest man in the world and the poorest man in the world is an hour of thirst and a day of hunger.

Jan 3, 2013 1:59AM
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All these freeloading wealthy people whining and holding their hands out for more tax cuts, do you think you deserve to pay less of your net worth in tax than the janitor? The corporate criminal Robme only pays 12% on his millions, my father makes 100k and pays twice that in taxes. Who the heck do you free loading entitled lazy Paris Hilton types think you are?

 

Pay up and Shut Up!!! Taxes are lower for the wealthy than they were under that commie Ronald Reagan. If you do not like paying for infrastructure, education, police, and the military then head to that Republican Utopia called Somalia. No taxes, no regulations, almost non-existent government and you can oppress and take advantage of the poor and weak as much as you want. It is a Republican Wealthy persons dream land, make your reservations now... your terrorist wonderland awaits and No Income Tax!!!!!

Jan 3, 2013 12:52AM
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Kinda depends on what you call "rich" doesn't it? Most people don't think they are rich when there is someone (aka. the Jones') who has more than them. Greed is quite often driven by simple jealousy and to that end Americans are some the greediest humans on the planet regardless of income level. There are many reasons for this not the least of which is the super hyped consumer driven ultra competitive culture we live in. Yet only 2% of us make over $250K. So by comparison to per capita %'s that is indeed "rich". And we won't even get into whether what we do or how hard or smart we work for it is "deserving" or not. That's a whole other bag of worms. Even 12% where I am is rich in that sense and I'm in debt up to my eyeballs after putting 2 kids through college. So again it depends on what you call rich. For most Americans if you can put your kids in private school at all ever you are rich! And so am I by comparison even though I won't retire and will die in debt... So cry me river people then hop in my canoe and I'll lend you my paddle!
Jan 3, 2013 12:37AM
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I'm tired of all this discussion about what "rich" is that doesn't take into account whether people are working or not. To my mind, being rich means you don't have to get up every day and go to a job - either you made a bunch of money in past years that now enables you to live off the interest and dividends generated by said money, or you inherited a large amount of money that lets you do that. There's more to being rich than income. Everyone will have a different idea of what a rich person's non-work income would have to be to qualify him/her as rich, but I'd suggest $500,000 a year. But if you work 60+ hours a week as a CEO and earn $500,000 by the sweat of your brow, you're by no means rich in the sense the person with the trust fund is.
Jan 3, 2013 12:33AM
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Typical Journalist "Genius"......Who OBVIOUSLY doesn't know A THING about small business...and with his display of intelligence, (lack of) never will.  This is how the media has "Dumbed-Down" America.  Get your facts FIRST.  You need to do a little research on "Sub-chapter S Corporations" and the method of taxation. Then come back tomorrow and re-write your story correctly.  $450,000/yr. for an "S Corporation" owner is NOT RICH !!!!
Jan 3, 2013 12:20AM
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Taxes pay for the things you wish the government did more of, so stop
Jan 3, 2013 12:19AM
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Everybody, shut the **** up about Obama
Jan 3, 2013 12:10AM
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Aguy...Pretty interesting story...Didn't give you a thumbs anything, don't do much of that, don't care...

Guess that is for children, nowadays?? You know reaffirmation thing, where everyone gets a trophy.

But I'll give you a thumbs thing here, now....Glad you and yours have more or less made it...

 

One of the problems with many Americans today as they have never seen or known adversity..

Or if they have, they may have never left it and been able to look back to see what they really left..

Some of our citizens will live their lives being poor and actually be happy with their situations...

There is nothing wrong with that, and many of them expect nothing, for free.

And there is certainly nothing wrong with attaining some goals or being successful either...

We shouldn't be jealous or show contempt for that.

One of the things, that surprises me is the Majority of Americans tend to have it fairly good...And I compare that to many,many other places in the World....Some just need to see the Worst.

Jan 2, 2013 10:47PM
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Serious? People bellyaching about increasing taxes on those earning

450k a year or more. That' 9k not counting write off's. I'm sure the people

slamming President Obama make more than 450k per year. And why

they actually care to protect those that do is beyond me. Do some of you

really think you will ever reach this level of earnings? Get real. As for small

businesses, as they grow it's obvious that they would then have more expenses

to write off as well. That 450k is for income after tax write off's of their expenes.

So by hiring more people it would give them an advantage with taxes not a

burden.

 

The misinformation on here is staggering. You people truly believe what you

want to. Welcome to the bubble.

Jan 2, 2013 10:34PM
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Income does not determine whether someone's wealthy or not.  Income, assets, and future pension / retirement benefits gives a much better picture of whether someone is wealthy or not.

One can spend 4 years in college, 4 years in medical school, and then 5 years of medical residency racking up debts up to $300,000+.  Then, they start making $250,000 / year which is taxed up to 45%.  According to the definition in the article these people would be labeled as the "super-affluent" despite being deep in debt for many years.  There has been 13 years of minimal income, and no contributions to pension plans, 401k's, etc.  Thus, in addition to having to dig out of a deep hole of debt, they are way behind the curve as far as saving for retirement. 

The same type of thing goes for others requiring many years of education before they making large incomes, or small business owners who had to endure years of building their business with minimal profits before they started churning sizable incomes.  And did I mention that very few people that make $250k/yr work less than 50 hours/wk, and it's probably 60+ hrs for a majority in this group.

I've heard enough of what's "fair" for the taxing of high income earners.  Where is the leadership, both republicans & democrats, in this country calling for shared sacrifice amongst everyone to help get out of this extremely serious predicament?  Why are the politicians not leveling with Americans on how dire the financial & economic situation is?  Instead, all we here is how things are recovering, they saved us from the fiscal cliff, etc., etc.

Jan 2, 2013 9:51PM
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Obamaville - where City Hall makes class warfare a public policy.

 

...mmm, mmm, mmm!

Jan 2, 2013 9:32PM
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Please tell me why we pay women to have babies and not get married!  Need more money?  Sure, have another!  I see it every day in NYC.  Entitlements are destroying us.  
Jan 2, 2013 9:21PM
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I used to make 135,00 with my wife working and was not rich by any means, unfortunately we both worked in construction and now only make 50,000 so when you feel like feeling sorry for yourself because you have to pay more taxes, don't.  Luckily we had a savings but so much for retiring and now their going to cut ss again?  This may be the only thing we have to retire on and thanks to the Ill responsible corp america who wagered everyone's future this is where we are at.  Corp America can burn in hell as far as I'm concerned and all their politician friends who say they are working for all of us, can burn right with them.  These idiots have sold us out to Corp America who have sold us out to China and they will want our children to fight the war far them against China when China gets to big for their britches militarily.  We have the stupidest bunch of idiots in government right now, I can only guess this is what happen to the Roman Empire when it fell.  Neither the Democrats or the Republicans are worth one penny we pay them and should all be convicted as traitors.
Jan 2, 2013 9:19PM
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Rich is a mater of location............ In Longisland NY where the taxes on my 1500 Sq foot ranch house are 14K a year   100K income is having a few nice things no money in the bank savings wise and check to check ........F it im Hood rich i guess
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