Upper Middle Class Under Attack

DarthDubious's picture

Obama, through his public relations team has made it look as if his trillion dollars in higher taxes will fall only on “the rich.” Obama emphasizes that his tax increase is only for the 5% of top income Americans while the other 95% receive a tax cut.

However, we must realize that the income differences within the top 5% are much wider than the differences between the lower income tax brackets and the so-called “rich” Americans beginning at 96%.
For Obama, the bottom rung of the top 5 percent being “rich” begins with $250,000 in annual income. For example, let’s compare this “rich” income to that of oh, say Hank Paulson, President George W. Bush’s Treasury Secretary when he was the head of Goldman Sachs.

Paulson was paid $38.3 million in salary, stock, and options in 2005. That is 153 times the annual income of the “rich” $250,000 person.

Paulson, despite his massive income, was not even close to the super rich of that year, when a dozen hedge fund operators collectively made $1 trillion. The hedge fund honcho’s incomes were 26x greater than Paulson’s and 4,000x greater than the “rich” man’s or family’s $250,000.
$250,000 of income would be a godsend for most Americans, but envy can make one blind. A rich lifestyle will not be supported by a $250,000 income. Another consideration is this: many people prefer lesser incomes to the years of education, long work hours and stress of personal liability that are associated with many $250,000 incomes. As a matter of fact, those with $250,000 gross incomes have more in common with those at the lower end of the income tax bracket than with the rich. A $250,000 income is ten times greater than a $25,000 income, not hundreds or thousands of times greater. After-taxes, the difference shrinks to about 6 times.

The American tax code taxes the $250,000 income at the same rate as it taxes a $100,000,000 or higher income. After taxes, after IRS grabs 30% in income taxes and state government grabs 6%, the “rich” man, woman, or family earning $250,000 has $160,000. In New York City, there is a city income tax in addition to state and federal, this sum diminishes further. Sales taxes take another 6% or more of most consumer spending.

After the earning go through the tax mill, the value of a $250,000 income in New York City is about $140,000.

This might be rich in a small town in Alabama, but not in New York City. This “rich” person or family won’t be purchasing a Manhattan apartment, much less a brownstone. They won’t be driving a luxury car. Heck, they won’t be able to afford a parking garage for an economy car, and if they fly, it won’t be in first class.

Most $250,000 incomes are located in large cities where the cost of living is high. For example, a husband and wife who are associates at major law firms, each working 60-hour weeks and has no job security, earn $125,000 each. They might both have student loans to pay for. For Obama to lump these people in with Hank Paulson, or billionaire hedge fund operators is nothing but propaganda.

What is the difference between the $250,000 “rich” income and the $245,000 “non-rich” income? After Obama’s tax scheme goes into effect, the $245,000 income will benefit from a tax cut, and the $250,000 will have a tax increase. I bet people in the 96th percentile will ask for pay cuts that will drop them into the 95th percentile.

In America, the truly rich are those in the top 0.5% of the income tax bracket. These are the people with yachts, private airplanes, and who are still rich after they lose half their wealth in a stock market collapse caused by government policy that accommodated financial gangsters.

“Oh well, I was worth $600,000,000 last year and only $300,000,000 this year. Perhaps we should stop drinking $1,000 bottles of rare vintages and move down to $100 a bottle wines. Probably shouldn’t buy that new yacht or that villa in the south of France.”

The upper middle class with $250,000 gross incomes are major losers of the financial collapse. Many of the people in this income class are leveraged to the hilt in order to maintain appearances that can be swept away as easily as the very poor. Ahh, but those who were frugal and invested for their future have lost 50% of their savings. These wiped out people are the ones who will bear the brunt of Obama’s tax increase.

If the tax rate on a multi-million dollar annual income goes up by 5 percentage points, the cutbacks won’t really affect the lifestyle. But for those of a $250,000 gross income, it means no prospect of private schools, or Ivy League education for the children, who will be attending state colleges with the rest of the non-rich.

Obama is attacking the only income class that has any independence – the upper middle class professionals. The real rich are few in number and seldom present any opposition to government. Recently, the New York Times reported (March 23, 2009) that the 400 richest Americans’ “share of the nation’s total wealth has nearly doubled to more than 22 percent.” The average income of the 400 richest Americans is $263 million annually. That is 1,052x the income of the “rich” $250,000 income.

What the Obama administration is really doing is taxing ordinary people in order to bail out the super rich. The 95% of Americans who get the tax cut will find that it is offset many times by the depreciation in the dollar and the raging inflation that will result from monetizing the multi-trillion dollar budget deficits made necessary by the bailouts of the banksters.

In the United States, government has become expert at manipulating both left-wing and right-wing ideologies. It keeps those on both ends of the spectrum set at each other’s throats in order to ensure the government’s continuing independence from accountability.

Historically, the definition of a free person is a person who owns his own labor. Serfs were not free, because they owed their feudal lords, the government of that time, a maximum of one-third of their labor. Nineteenth century slaves were not free, because their owners could expropriate 50% of their labor.
Today, no American is a free person. The lowest tax rate, not counting state income, property tax and sales tax, is 15% Social Security tax and 15% federal income tax. The “free American” starts off with a 30% tax rate, the position of a medieval serf.

In medieval Europe, when tax rates reached beyond 30%, serfs rebelled and killed their masters.

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