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Are You Comfortable?

Once again, I’ve sat too long on a topic I meant to write about. Maybe I’ll give it a shot before the issues fade completely from my mind. The starting point was James Surowiecki’s economics column in the August 16 issue of the New Yorker, dated a week ago but now two weeks old. In the context of Congressional discussions on whether to extend the Bush tax cuts that are set to expire at the end of the year, he asks,

who counts as rich? The Obama Administration’s answer is that you’re rich if you make more than two hundred thousand dollars a year as an individual or two hundred and fifty thousand dollars a year as a household, and therefore you should have your taxes raised. Conservatives suggest that this threshold is far too low, and argue that Obama would be taxing mostly small-business owners, or the people a Fox News host has referred to as “the so-called rich,” rather than fat plutocrats. You might think this isn’t really much of a debate. An annual income of two hundred and fifty thousand dollars puts you in the top three per cent of American households, and is more than four times the national median. You’re rich, and a small tax increase isn’t going to rock your world.

Surowiecki goes on to note that “from surveys of how Americans describe themselves, most of the privileged don’t feel all that privileged.” He then reviews why this might be the case, with reasons ranging from the high cost of housing in certain parts of the country to the fact that those earning “a few hundred thousand dollars a year have done much worse than people at the very top of the ladder.”

Surowiecki proceeds to explore this last point in more detail. He observes, for instance, that “People in the ninety-fifth to the ninety-ninth percentiles of income have represented a fairly constant share of the national income for twenty-five years now. But in that period the top one per cent has seen its share of national income double … So at the same time that the rich have been pulling away from the middle class, the very rich have been pulling away from the pretty rich, and the very, very rich have been pulling away from the very rich. … there’s a yawning chasm between the professional and the plutocratic classes.”

Surowiecki concludes that the tax system should reflect this chasm, with the super-rich paying higher rates than the very rich. He concludes that doctors, lawyers, accountants — what one might call (and Matt Miller does call) the “lower upper class” — inhabit a different world from the ultra-rich and should inhabit a different tax bracket as well.

In a commentary at CNN, John Avlon made much the same point two weeks ago, perhaps influenced by Surowiecki’s article, though he doesn’t refer to it. Avlon writes,

There is another issue . . . beyond the increasing gap between rich and poor in the United States.
It is the gap between the “super rich” — who really do have more money than they know what to do with — and what might be called the “working wealthy,” who are taxed as though they’re rich enough to able to give away half their money.

These are individuals whose household income might bring them into the top tax bracket of $250,000 a year but who, with two parents working, might still find themselves struggling to stay in the stability of the upper-middle class in the expensive urban areas where they often work.
Much of the anger about the scheduled sunset of the Bush tax cuts for the increase in top-bracket taxes comes from this productive group of Americans.

The super rich are looking for charitable donations to deduct from their taxes each year, while the working wealthy are still trying to pay all their bills. But they are taxed at the same rate as the private jet set (what a few years ago might been called the Bernie Madoff crowd).

Avlon concludes with mention of “the growing gaps in our society, not just between the rich and poor, but between the super rich, the working wealthy and the forgotten middle class.”

At the Atlantic, Derek Thompson replied to Avlon’s piece, granting that “it can be challenging to put two kids through private school and pay a mortgage on $250,000 a year in an expensive urban area,” but disagreeing “that those families’ experience should guide our tax policy.” He ends up drawing the same conclusion as Surowiecki:

Avalon’s [sic] piece strikes me as an argument for more income brackets. If we acknowledge the country is getting ever more stratified between the wealthy, the super-wealthy and the sweet-lord-they-must-use-their-money-as-napkins wealthy, why not build an attic on top of income tax system to catch extra money at higher rates?

Thompson also takes exception to Avlon’s description of the struggling earners of $250,000 as upper middle class: “I know it’s polite to say we’re all middle class until our yearly income adds a seventh digit, but really. If the 95th percentile is the middle class, does that make the median income earner upper-lower class? Or is America’s middle class more like the stuffing in a three-story Oreo?”

Thompson has a link to a very useful document from Tax Policy Center, from which we can see that about .4% of the population earns over $1 million, whereas another .7% are in the $500,000 to a million range and 3.9% are in the $200,000 to $500,000 range.

Can someone really make $250,000 and be middle class? A week ago, at Andrew Sullivan’s blog site, The Daily Dish, Sullivan’s assistant Patrick Appel quoted from Thompson’s post and then addressed this question. (Sullivan is on vacation and his staff members are running the show.) Appel posits, “families tend to socialize with families who make a little more and a little less than they do. A family earning $250,000 a year likely has a number of friends that make around that amount. They probably also know a number of families making $300,000 to $400,000 a year and number of families making $100,000 to $200,000 a year. Even if an American is in the 95th percentile nationally, they are likely to feel middle-class in relation to peers.” A debate ensued among readers, which you can follow by going over to The Daily Dish.

The notion that we’re all middle class was impressed upon me very early through a joke my father used to tell. It’s a familiar joke, one that could perhaps work in any culture, but one that has come to be identified with American Jewish culture. Indeed, if one does a search on the joke, one finds that it is variously attributed to Henny Youngman, or told with instructions that the punchline should be spoken with a Yiddish accent, or written with Yiddish-accented words (“vell” for “well”) thrown in. Underlying the joke is the notion that one needs a euphemism for being wealthy, it being somehow unseemly for someone to actually admit to being rich. The particular euphemism used in the joke (and so, the euphemism I learned as a child) is that of “being comfortable.”

As for the joke, well, it goes something like this. A man (a Jewish man in some tellings, or more explicitly, a Mr. Cohen) is walking across the street when he is hit by a car. The driver (or perhaps a passing policeman) rushes out to the man, who is lying on the street, puts his sweater under the man’s head, and asks, “Are you comfortable?” The man replies, “Eh. I make a living.”

That’s my understanding of the issues. And yes, I make a living.

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Categories: Economics, Humor
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