How Much Money Makes You Wealthy? Politicans, Americans Greatly Differ

by Wendy Simmons | December 12, 2011 3:22 pm

During the past three years, the debate about what constitutes a rich household has shifted markedly from discussing the tax fate of those that make more than $250,000 annually to the much richer over-$1 million club. A new poll suggests many Americans might set the bar lower than both Republicans and Democrats.

Amid the deficit cutting hysteria that has engulfed Washington in the past year, legislators desperately have been trying to craft ways to pay for middle-class tax breaks and economic stimulus. While Republicans (until very recently) have been considering spending cuts only, Democrats have been quibbling about how to raise taxes on those at the top of the income chain. But determining the boundaries of the top income bracket has a political dynamic of its own.

President Barack Obama had been consistently drawing a line at $250,000 per year. He advocated raising taxes on households that make more than that amount during his campaign for president in 2007-08. He included a 3.8% extra tax on investment income for those making more than $250,000 in his healthcare legislation. This fall, he continued to advocate for a return to Clinton-era tax rates for this group to pay for his jobs bill and reduce the deficit.

When talking about income over $250,000, Obama got complete resistance from the GOP and some pushback from moderates in his own party. These dissenters did not agree that a family earning $250,000 per year ought to be considered rich. Indeed, there are many families in affluent urban and suburban areas that might feel reasonably comfortable, but not rich[1], with that income. This conversation ended in great fanfare with the idea of a surtax on annual household income of over $1 million. Most of the Democratic Party seemed to be able to unite around the idea that these people truly were rich and could pay more.

Although the GOP has been accusing President Obama of inciting class warfare by focusing on the top 0.5% of taxpayers, some in the Republican Party are slowly joining their Democratic counterparts in looking to extract more income from top earners. Senator Tom Coburn, R-Okla., led the charge by releasing a report in November entitled “Subsidies of the Rich and Famous.” This analysis detailed the enormous amount of federal tax subsidies and credits that go to millionaires and billionaires and called for their repeal. The Republicans on the congressional supercommittee agreed at the end of the failed negotiations to limit deductions for the highest earners (although they also wanted to bring down the top rates). Susan Collins, a moderate Republican senator from Maine, recently proposed a 2% surtax on millionaires to pay for an extension of the payroll tax cut.

A new Gallup Poll suggests that focusing on income in excess of a million dollars is way off the mark for most Americans. Gallup asked people last week how much money one would need to make in order to consider themselves “rich.” The median answer was $150,000 per year. Only 15% of respondents said $1 million or more would make them rich. This helps explain in part why Democrats believe they have a winning argument on taxes. Not only do Americans consistently support raising taxes on the wealthy to pay for things, but their view of who is wealthy is much broader than the politicians imposing those taxes.

Gallup Poll
Just thinking about your own situation, how much money per year
would you need to make in order to consider yourself rich?
% mentioning
Less than $60,000 18
$60,000-$99,999 12
$100,000-$150,000 23
$150,001-$299,999 18
$300,000-$999,999 14
$1 million 11
More than $1 million 4
Median $150,000
Gallup, Nov. 28-Dec. 1, 2011
Percentages based on those giving a dollar estimate; 10% did not

The median answer of $150,000 places you somewhere in the middle of the third highest bracket, nowhere close to the top.

2011 Federal Income Tax Brackets
TAX
RATE
Single filers married filing jointly or qualifying widow/widower Married
filing separately
Head of household
10% Up to
$8,500
Up to
$17,000
Up to
$8,500
Up to
$12,150
15% $8,501-
$34,500
$17,001-
$69,000
$8,501-
$34,500
$12,151-
$46,250
25% $34,501-
$83,600
$69,001-
$139,350
$34,501-
$69,675
$46,251-
$119,400
28% $83,601-
$174,400
$139,351-
$212,300
$69,676-
$106,150
$119,401-
$193,350
33% $174,401-
$379,150
$212,301-
$379,150
$106,161-
$189,575
$193,351-
$379,150
35% $379,151
or more
$379,151
or more
$189,576
or more
$379,151
or more
Source: Bankrate.com

It’s no wonder President Obama and his allies have so fully embraced raising taxes on the very wealthy. The idea might have no chance of passing in the do-nothing Congress, but it does make great politics.

Endnotes:
  1. but not rich: http://investorplace.com/2011/10/obama-jobs-act-millionaire-surtax/

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