The Definition of "Rich"

The Hill ran a story today that makes us want to pull our hair out. The Democrats, the story goes, can't decide at what income level a person is rich and not in need of more tax breaks. Clearly, if we're going to address health care, education and other priorities, at very least we need to close some tax loopholes and let some tax breaks expire. But whose loopholes or tax breaks should be on the table? The common response is to say only those that go toward the "rich," but no one can agree on who is rich.

John Kerry, during his 2004 presidential campaign, often spoke of ending the Bush tax breaks only for those with incomes above $200,000.

According to IRS data, in 2004 only 2.3 percent of taxpayers had adjusted gross income over $200,000. Now some members have been talking about doing away with tax breaks only for families with incomes above $250,000. Based on the IRS data, we recently estimated that only 1.7 percent of taxpayers had adjusted gross income over $250,000 in 2004. Presidential candidates Obama and Clinton are apparently using $250,000 as their threshold now, whereas Edwards is sticking to the old $200,000.

But it gets worse. Senator Chuck Schumer of New York seems to think taxes should only be raised for people with incomes of over $400,000. (We're not even going to bother to estimate what fraction of a percent of the population that includes.) Some of the Presidential candidates really prefer to duck the question altogether when asked. Edwards told a reporter he didn't know what a rich person was, while New Mexico Governor Bill Richardson said that the term middle-class is “about a lot more than money” but is “anybody who has to work for a living.” This is quite possibly the most ridiculous thing we've heard from the Democratic candidates so far. (Well, I guess I'm not counting Gravel.)

Casual conversations with Hill staff suggest that there is massive misunderstanding on this issue. When you ask someone in Washington, DC, what percentage of the American public they think makes $200,000 a year or more, they're likely to give you a number vastly higher than the correct number.

Part of the problem is that many elites who are influential (either because they work on the Hill or write for newspapers) live in big cities with a high cost of living. I understand very well that $200,000 just "doesn't seem rich" to people who live in the most expensive neighborhoods of the most expensive cities like Washington and New York. Fine, these cities are expensive. But why the rest of America should have to accommodate our living in these cities is completely beyond my understanding.