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Reminder of Obama's Campaign Promise: A Net Spending Cut:

Obama, in the third debate, on the video below within the first minute: "what I've done throughout this campaign is to propose a net spending cut.... What I want to emphasize ... is that I have been a strong proponent of pay-as-you-go. Every dollar that I've proposed, I've proposed an additional cut so that it matches."

Also, I wonder how Obama's high-income supporters in high-tax, high-cost areas like NYC, California, and DC are feeling right now? According to an article I read today, the top 7% of taxpaying families make over 250K a year, while the top 1% make over 380K. So the vast majority of those affected by Obama's tax plans are in the 250-380K range.

If you live in DC, on your marginal dollar of you'll be paying 39.6% in federal taxes, 10% in DC income taxes (with no deduction thanks to the AMT), ... oh, and that 800K mortgage you took out in 2004, on which you pay 50K a year in interest? Instead of a 20K deduction, it will be 14K. And that's not counting the inevitable push to add 6% or so in social security taxes (really, 12%, half payed by the employer). Your other deductions with face similar limits. For a couple with adjusted gross income about 250K, I'm estimating a marginal tax rate without additional social security taxes of around 52%, 64%, including the employer share, if new social security taxes added.

Tax the rich?

My friends in this income bracket tend to have have high mortgages, work 60-80 hours a week, pay 40-50K or more a year for child care (a nanny is necessary when you often work into the late evening--and even day care for two kids in the DC area costs close to 40K a year), and have six figures worth of student loans, primarily from professional school, that they are still paying off. In other words, approximately 100K of their pretax income is taken up by their student loans and child care costs, which are the equivalent of "startup costs". Their mortgage costs may seem excessive, but you don't easily make six figures in low-housing cost cities like Des Moines, and living in outer suburbs is very difficult when you work 12 hour days.

If a hypothetical couple's initial income is a total of $300K, and they work an average of 70 hours each, and assuming two weeks vacation, they are in effect getting a grand total of $28.57 an hour for their labors, and a fair percent of that is going to pay interest on the mortgage. I'm sure they are glad to know that they are rich enough to be taxed at over 50% of their marginal dollar.

UPDATE: Of course, the situation described above only applies to some fraction of the relevant taxpayers, but in my experience, young professional couples in large urban areas were among the most enthusiastic Obama supporters. Yet they also find themselves lumped by his administration into the category of "the rich," when, because of scenarios like the one described above, they certainly don't think of themselves as such, and indeed, in practice are not, despite their high gross income.

For that matter, my friends and acquaintances in such situations who supported Obama tend to be somewhat fiscally conservative, but voted for Obama for other reasons. In part, I think his calming rhetoric on economic policy (see video above) persuaded them that he wasn't going to govern as a "tax and spend liberal," so they could vote on, e.g., the Iraq War, abortion, et.

Related Posts (on one page):

  1. More on the "Rich":
  2. Reminder of Obama's Campaign Promise: A Net Spending Cut:
540 Comments

More on the "Rich":

I caught some flack from commenters a couple of days ago after wondering aloud how purportedly "rich" Obama supporters who have a family income in the 250 to 380K range and who live in expensive, high-tax urban areas, especially those with hefty mortgages and large child-care expenses, feel about his tax plans. Some commenters suggested that even raising the question suggested I was an out-of-touch troglodyte.

So imagine my amusement to read the following today in that bastion of reaction, the New York Times:

The wealthiest stand to lose the most under President Obama's proposed budget, while individuals with lower incomes could gain in many different ways. But many of those in between β€” those with household incomes of $200,000 to $400,000 or so β€” may not see as much of a difference in their tax bills as they may have feared.

Plenty of people in this income range live in high-cost areas of the Northeast and California and stretched, rightly or wrongly, to afford their homes when real estate prices were higher. They may not consider themselves rich at all, laughable as that may seem to people earning far less in the middle of the country. But they've been worried sick as the president has persistently defined them as rich enough to pay more in taxes β€”at the exact moment when their jobs may be in danger or their small businesses or commission income may be suffering.