Monday, June 16, 2008

Where does the "middle class" begin and end?

I have written about poverty and money before on this blog. When I have more time, I'd like to take up the issue of taxes, tax cuts, etc. A story yesterday said that Barack Obama was promising a middle-class tax cut (while raising rates on "the rich.") What I'm wondering, and I'd really like some comment feedback, is where do most of us consider to be the break-points between middle class and rich (and also the lower limit that separates middle class and poor)? I remember watching the old Dan Akroyd and Eddie Murphy movie Trading Places on cable several months ago, and laughing when Murphy's character is offered the HUGE salary (in 1983) of $80,000 a year. His character was a big-time commodities broker, was driven around in a limo, wore a rolex... and $80k would cover that. Nowadays, if you "only" make $80k, you'd qualify for financial aid at my school. That salary could be two teachers, or a cop married to a secretary, or a garbageman married to a nurse, or any other combination of two people who both work what we might consider "modest" jobs. (I'd say if you make $80k by yourself, you're probably doing OK).

I think most of us define "rich" as "somebody who makes significantly more than me." But I'm looking for a number. Once I have a little feedback, I'll try to incorporate that into my piece on taxes. I'll start... just as a guess, I'd say that for a family (mom, dad, 2 kids), it would be a struggle to make less than about $50k (which is right at the national median income). Let's say $4000 a month before taxes. And I'd say that once you hit about $120k ($10,000 a month before taxes), you shouldn't be hurting too badly. Both of these numbers assume reasonable expenses (i.e. a mortgage about 25-33% of your take-home pay, maybe a car payment... obviously, if you stir in either especially frugal management or expensive toys like boats or luxury cars, that throws things off a bit). What do you think?

PS-I'm talking about gross income here, not taxable income... it may very well be that if we call $120k the start of "rich," they may only have to pay tax on $90-100k; likewise, the family making $48k may only have to pay tax on $25k or so when all deductions, exemptions, etc. are taken into account.


MichaelPolutta said...

My opinions.

Rich starts at 200K.

Middle class starts at 70K.

bekster said...

Hmmm, those numbers seem a bit high to me. However, I think a lot probably depends on where you live.

In general, I'd say that "rich" is not measured in an actual concrete integer; it is displayed as more of a ratio. If your income is significantly more (maybe 50% more?--just a guess) than your outgo (where you bring in 75K but spend 50K, banking 25K), then you are rich. However, if you spend the same as what you earn (bring in 75K, spend 75K), then you are middle class. If you spend more than you earn (bring in 75K, spend 100K), then you are poor.

Although, for the purposes of your discussion, maybe the low end of middle class is 40K, and the low end of rich is anything over 100K. I don't know; it's really hard to say.

Anonymous said...

This worries me too... I struggle to meet my bills just like I believe a lot of "poor" as well as "rich" people do too. It is more than that; I am slowly going under financially. Not because I've jumped into any of those speculative investments. It is just simply average Joe American trying to keep my bills paid regularly. And I worry that if I'm not in Obama's "middle class" I will have to pay still more taxes to which I feel I really can't afford. As I have just this year watched "poor" people/kids get provided college for free as I, a person who has worked very hard to go to school, get a good job, and go to work every day for over 26 years had to take out a loan that I will now have as additional debt. So because I worked hard, I have to bear the burden of this debt while others who didn't pay the price I have get their kids sent for free. It is not fair. I don't want to take away from poor kids, but if I have to pay it back, so should they have to pay it back. How does this apply to taxes and the question of where does the middle class begin and end? If we had a flat tax, that EVERYPERSON and EVERY business paid the same % of their gross income, (the "people rate" would be different than the "business rate") with no deductions what so ever, then it would be truly fair for everyone... no matter how much you made. If you want to work harder to make more... fine. If you don't want to work hard and pretty much just coast through like, fine. It don't matter... we all pay the same %. The only problem with this good plan is it can never happen because the fat cats in control do not want it to happen. The truly "rich" would suddenly have to actually pay taxes and it would cause nearly a complete reduction of the IRS to a matter of just a small fraction of employees it currently has mot to mention the entire tax accountant industry would dry up and go away. Most everyone can calculate X% of their gross income and wouldn't need a tax man/women to interpret all the tax laws for them.

For the record, I make a little over $120,000 per year. And while I can understand how many people would call me rich... that isn't rich. Trust me. It is my opinion it is somewhere near the center of middle class.

Also, I plan to vote for Obama... I just can't take any more of the last eight years. Like it or not, Bush has damaged the USA more than people even yet know. It will take years for our country to recover from what he has done or allowed others to do while he was on watch. I am so angry at his I've actually started feeling sorry for him. He was simply in over his head. Or, maybe he is indeed truly sly as a fox and will be laughing all the way to the bank as he leaves office. May God bring him all that he deserves. Be it good, or be it not.