Taxing the rich - what is the cutoff?

Interesting article about what constitutes "rich" from a practical standpoint as opposed to the political rhetoric about top percentiles.
Taxing the 'Not-So-Rich' Rich (http://www.businessweek.com/magazine/content/08_24/b4088081624555.htm)

The gist is that many people who fall in the top 2% of household incomes (projected to be about $250k/year for married couples) aren't basking in luxury. Often they live in areas with high costs of living and some are repaying school debts, which were required to allow them to get to the higher salary. These people would feel the squeeze of an extra 3-4% in taxes.

I don't have a feel for whether those in this situation are a significant percentage of that "top 2%" population or not. I do think that $250k/year puts most married couples in their 30s with 2 kids and a mortgage living in a top 20 metro area in the "comfortable but not secure" range.

I wonder what these people would do if they actually had to go live the life of someone who is actually working class? I think they might just shrivel up and die, the strain would be just too much for them. "I can't put 15% in my 401k and Junior might have to go to a state school. Whoas me!"

Notice also that among the costs that are putting the 'squeeze' on these poor folks are health care and education. Let's think about that one for a second.

I will have to agree $250K a year if you are manging your money correctly that tax squeeze should mean nothing to you. the problem is a lot of those people are living like they make $300K or $400k a year. Basically above their means.

It depends on where you live. A $250,000 salary goes a lot farther in the middle of nowhere than it does in downtown Manhattan. Unfortunately, I think it's hard to implement a tax scheme with COLAs.

I wonder what these people would do if they actually had to go live the life of someone who is actually working class? I think they might just shrivel up and die, the strain would be just too much for them. "I can't put 15% in my 401k and Junior might have to go to a state school. Whoas me!"

Notice also that among the costs that are putting the 'squeeze' on these poor folks are health care and education. Let's think about that one for a second.I'm pretty sure the folks making this type of income will survive. Contrary to popular belief, most families making that type of money did not get it handed to them through trust funds or Mommy & Daddy paying all their bills until they were in their 30s. I would argue that their good judgement in putting 15% in their 401K and sending their children to private schools is also, in the long run, much better for the economy.

A majority of them worked their hind-quarters off to try to make a better life than what they came up in, even if it meant making sacrifices like studying in high school so they could get into a good college while their friends were at parties and getting drunk/high, studying and working internships while in college rather than blowing off class and partying, or spending years in the military to attend or pay for college at night, working 50-60 hour weeks, spending time on the road away from their families, answering pages, texts and cell phones in the middle of the night to deal with business responsibilities.

I've posted the numbers before, the top 10% of earners pay approximately 67% of the taxes in this country, the bottom 50% pay about 3%. The rates for income earned vs. tax rate is disproportionate.

WTF right does the government have to increase the tax rates on the "wealthy". It's flat out wealth confiscation and redistribution. The money earned by the American people is THEIRS it is NOT THE GOVERNMENT'S. Unfortunately, so many people have the attitude of "well they can afford it".....until they move into a higher tax bracket and their tax rate goes up. It doesn't matter if the "wealthy" can afford it, why should they? The "raise taxes on the rich" argument is class warfare at its worst. How does the "top 2%" fight this? They can't because the folks voting in November outnumber them by a vast majority and don't recognize or don't care that what is being proposed is wrong.

Not only is this approach flat out wrong, it will stiffle the economy. It has been proven time and again, when the government raises taxes the economy slows down. Like it or not, that "top 2%" is not just ambulance- chasing lawyers, professional athletes, and overpaid CEOs of major corporations. It is mostly your local doctor, dentist, salesperson, or small business person who owns the local restaurant or store at the mall. Most of these folks go to the same stores, drive on the same roads, go to the same churches and work their asses off like everyone else. And they almost never qualify for or take advantage of any government entitlement programs.

And I don't want to hear the "Warren Buffett paid 15% or 17%" argument. Buffett is in the crowd that can live off investments and has a team of accoutants/tax attorneys making sure he pays the least amount of taxes he can. Most of the people in the $ 250-300K range make a vast majority of their income through salaries and business income that isn't taxed at the lower capital gains rate.

I don't think anyone is saying this is going to break the bank or push someone to foreclosure. The point is more that politicians speak of the top 2% as if they fly private jets around the world for dinner. 3% for a $250k income family probably does make a difference.

I will have to agree $250K a year if you are manging your money correctly that tax squeeze should mean nothing to you. the problem is a lot of those people are living like they make $300K or $400k a year. Basically above their means.

People at all levels live "above thier means" Such as the person working the overnight drive-in shift at Wendy's wearing the $200 Nikes and playing on their iPhone.

People at all levels live "above thier means" Such as the person working the overnight drive-in shift at Wendy's wearing the $200 Nikes and playing on their iPhone.Leave me out of this.

Sorry, I have no place in this thread, but I'm really bored.

I'm pretty sure the folks making this type of income will survive. Contrary to popular belief, most families making that type of money did not get it handed to them through trust funds or Mommy & Daddy paying all their bills until they were in their 30s. I would argue that their good judgement in putting 15% in their 401K and sending their children to private schools is also, in the long run, much better for the economy.

A majority of them worked their hind-quarters off to try to make a better life than what they came up in, even if it meant making sacrifices like studying in high school so they could get into a good college while their friends were at parties and getting drunk/high, studying and working internships while in college rather than blowing off class and partying, or spending years in the military to attend or pay for college at night, working 50-60 hour weeks, spending time on the road away from their families, answering pages, texts and cell phones in the middle of the night to deal with business responsibilities.

I've posted the numbers before, the top 10% of earners pay approximately 67% of the taxes in this country, the bottom 50% pay about 3%. The rates for income earned vs. tax rate is disproportionate.

WTF right does the government have to increase the tax rates on the "wealthy". It's flat out wealth confiscation and redistribution. The money earned by the American people is THEIRS it is NOT THE GOVERNMENT'S. Unfortunately, so many people have the attitude of "well they can afford it".....until they move into a higher tax bracket and their tax rate goes up. It doesn't matter if the "wealthy" can afford it, why should they? The "raise taxes on the rich" argument is class warfare at its worst. How does the "top 2%" fight this? They can't because the folks voting in November outnumber them by a vast majority and don't recognize or don't care that what is being proposed is wrong.

Not only is this approach flat out wrong, it will stiffle the economy. It has been proven time and again, when the government raises taxes the economy slows down. Like it or not, that "top 2%" is not just ambulance- chasing lawyers, professional athletes, and overpaid CEOs of major corporations. It is mostly your local doctor, dentist, salesperson, or small business person who owns the local restaurant or store at the mall. Most of these folks go to the same stores, drive on the same roads, go to the same churches and work their asses off like everyone else. And they almost never qualify for or take advantage of any government entitlement programs.

And I don't want to hear the "Warren Buffett paid 15% or 17%" argument. Buffett is in the crowd that can live off investments and has a team of accoutants/tax attorneys making sure he pays the least amount of taxes he can. Most of the people in the $ 250-300K range make a vast majority of their income through salaries and business income that isn't taxed at the lower capital gains rate.

You are my hero... great post.

It's really difficult to throw out a hard number/range without serious research and analysis. It's complex...you have to take locale and inflation into consideration. The number certainly can't be a hard figure because we'll eventually run into AMT tax like issues. One thing is for sure though, the well off won't be starving and will certainly be benefiting from all that this country has to offer.

Finally I'd like to add that our tax system is a progressive tax system which means the tax brackets can be adjusted. The question then becomes "what's a reasonable tax bracket structure?" If you don't like the progressive tax system, that's entirely a different matter.