$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.
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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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.
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.
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!!!!!
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.
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
The misinformation on here is staggering. You people truly believe what you
want to. Welcome to the bubble.
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.
Obamaville - where City Hall makes class warfare a public policy.
...mmm, mmm, mmm!
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