Who exactly are "the rich?"

by pittcaleb Email    512 views

As with every presidential campaign, we're putting American's into two camps - "The Rich" and the "Not Rich." I once read a poll that everyone, both poor and rich, believes they themselves are "middle class" and very very few people identify themselves as either poor or rich. So the question is, who are these "rich" people and how much should they be charged in taxes.

We recently moved from Southeast Michigan (Ann Arbor). We did well for ourselves, earning a good living, living in a nice house, good schools, 2 cars, etc. I certainly would not consider ourselves "rich" but certainly not middle-of-the-road middle class either. We paid our taxes and life was good.

We moved about 13 months ago to Central New Jersey. The local real estate taxes on my house are more per month than my mortgage was in Michigan. Our state income tax is also much higher than in Michigan. Obviously to maintain the same standard of living, we are paid commensurately higher.

So much so that a few months back I read that one can receive food assistance form the state of New Jersey if you're a family of four living on less than $75,000 annually. Yeah, you read that right. A salary that in Michigan would be upper-middle-class gets you food stamps in NJ!

A recent study claims that 20% of Ner Jersians can not afford "the basics." It proceeds to state that you would need to earn over $70,000 in the counties where I live in order to afford said basics.

Which brings me back to "the rich." This past tax year we got slammed with AMT - we paid an additional $8,000 in tax over and above the formula's simply because we pay so much in local taxes (and thusly deduct them on Schedule A). Are we rich simply because we take more money home every month? Our standard of living hasn't changed, if anything, it has gone DOWN since moving here, but now the government considers us rich because we are paid more to afford this lifestyle.

Democratic candidate for president Barack Obama wants to extend who pays the social security tax. You know, that chunk that comes out of the first $102,000 of your pay check. From that "first" (all for most people not living in NJ) $102,000 of your pay, 6.2% goes to FICA and your employer sends another 6.2% to them (matching contribution). If you make any money over $102,000, you pay no social security tax on the marginal income. For Example, if you earn $150,000, you pay 6.2% on the first $102k ($6,324) but no more. Your take-home pay on the final $48,000 is greater with the lower marginal tax rate. You are "saved" from paying $2,900 in FICA taxes!

So Obama wants to re-phase in this tax for "the rich." He wants to phase it back in for those earning over $250,000. So you'd pay FICA on the first $102k, get a freebie from $102 till $250, but every penny you earn over $250,000 would again get hit with the FICA tax of 6.2% for you and 6.2% for your employer. Just to set the record straight, that 6.2% your employer pays could be coming to you, it's factored into your pay and benefits, so it IS money you're not getting!

So what's the problem you ask, only 3% of tax payers will be hit with this and they certainly are the "richest" people in the country, they can "afford" to pay the tax, lay off...

Here's my problem - I would like to see a change in the federal tax schedule such that your home state/region is factored into the rates, deductability limits, etc. Earning $250,000 in high cost of living, high taxed and dense states such as New Jersey, New York City, Connecticut, Boston Metro, Los Angeles, San Francisco and San Diego regions is barely middle-class!

My point being that phasing out benefits or phasing in taxes based on real numbers rather than region-adjusted numbers is unfair to those of us who live in these regions. Our standard of living hasn't changed, and again I argue it may have gone down, but we were hit with AMT, had our charitable deductions and local tax deductions limited and now one candidate for president wants to hit us up with more FICA taxes.

Photo Credit: Flickr user Juanathan G