There is a class war brewing (or is it already erupting?) over the proposed extension/expiration of the bush tax cuts for the wealthiest individuals. I’ve seen dozens of articles, and had a fair share of personal conversations. The most recent was this article, talking about a professor and his doctor wife who are “having trouble making ends meet” while making $400,000/yr.
Now, I am going to avoid the merits of either side of this debate at the moment—the arguments for either side are both interesting and oftentimes flawed—and it’s not a war I have the time to wage.
However, the question I had is why?—Why is this debate taking place? A large number of people making $250,000-$500,000 are rejecting the label of ‘rich,’ and feel as if they are being “vilified” and “punished” by the proposed cancelation of the top-tier Bush tax cuts. (With great restraint I am avoiding the arguments for either side here in this post…) but my question is—who decided that at someone making $250,000-$500,000 was rich?
In previous blog posts, I did quite a bit of research crawling through tax code data from 1920 to the present, and I noticed something—there was some serious fluxuations in the total number of income tax brackets:
Now, from the 1930’s to the mid 1970s, we had over 20 tax brackets. We had a gradient tax structure. There was no threshold where the tax code decided “that guy is rich, let’s tax him more!” If you are going to have a graduated tax structure (AKA non-flat tax) then a gradient tax structure is what makes the most sense for a wide variety of reasons—not the least of which being that a gradient tax structure avoids creating a divisive threshold at which one segment of the population is taxed more or less than another.
So, what happened? Between 1978 and 1987 the total number of tax brackets plummeted from 25 to 5 and continued to sink down to just 3 in 1991. What the hell!?
First, let’s break it down. The first drop from 25 to 16 took place under Carter’s administration, and then in 1986, under Reagan, the tax code was further sliced down from 16 brackets to 5… effectively creating “tax bubbles.”
The “Tax Reform Act of 1986” which caused this, was sold as a “simplification of the tax code” and hailed as the second half off the famed “Reagan Tax Cuts,” which were based firmly in the mythology of Trickle-Down economics.
So what?
Well, here’s the thing, it created a social-bubble where there wasn’t one before. It drew a line between income rates that has created an adversarial relationship between those making over $250,000 and those making under.
Though the Tax Rates call them “top tier earners,” families who are in the $250,000-$500,000 income range self-identify as “middle class” and feel that they are being miss-categorized as “rich” and do not feel as if they should have their taxes increased. They are living the dream of the American Middle Class.
However, there is another truth which our nation is struggling to accept—the Middle Class has proven to be just as mythical as trickle-down economics. Families making $250,000-$500,000 have access all of the things we commonly associated with the middle class: mobility, money for vacations, college funds, a nice house with a picket fence… however, there is nothing “middle” about making $250,000-$500,000.
The Median Household Income in the US (as of the 2010 Census) is around $48,000. Families making around $48,000 today live lives of financial instability. They have stay-cations, college loans, and overdue mortgages. If you look at the how those who live in the median income range in the US, there is nothing “Middle Class” about them.
The Crux:
Okay, I will try to wrangle back to my topic—the division of wealth is a rant for another day. What we face today is a rising conflict in which the $250,000+ income tax bracket has become a flashpoint for the conflict. It has become an-us-versus-them cultural war about who is rich, and who is not. Both sides are being vilified.
The top earners as greedy capitalists who are out of touch with society and the other 95%+ of the country are being portrayed as an entitlement-starved proletariat.
What I want to know, is which is the cause, and which is the effect. Our country was once an economic gradient. From poor to middle to rich, we used to have a society that harbored a degree of mobility—there was a middle-class, and if you worked hard and had a bit of luck, you could obtain that life.
Today that gradient is fading, fast. So fast that those who are in the old “middle class” have yet to notice that the ground has shifted and that they are now the nouveau riche. And the rest of society has yet to realize that the conceptual “American Dream” is quickly becoming a memory.
But one thing I do know—is that Reagan’s tax structure is not, at all, helping the problem. It’s dissolving our social constructs and dissolving the concept of the American Dream—as we now see the things of the “middle class” are reserved for the top-earners—earners who often times, don’t realize how much they actually have.
Now, I am going to avoid the merits of either side of this debate at the moment—the arguments for either side are both interesting and oftentimes flawed—and it’s not a war I have the time to wage.
However, the question I had is why?—Why is this debate taking place? A large number of people making $250,000-$500,000 are rejecting the label of ‘rich,’ and feel as if they are being “vilified” and “punished” by the proposed cancelation of the top-tier Bush tax cuts. (With great restraint I am avoiding the arguments for either side here in this post…) but my question is—who decided that at someone making $250,000-$500,000 was rich?
In previous blog posts, I did quite a bit of research crawling through tax code data from 1920 to the present, and I noticed something—there was some serious fluxuations in the total number of income tax brackets:
Now, from the 1930’s to the mid 1970s, we had over 20 tax brackets. We had a gradient tax structure. There was no threshold where the tax code decided “that guy is rich, let’s tax him more!” If you are going to have a graduated tax structure (AKA non-flat tax) then a gradient tax structure is what makes the most sense for a wide variety of reasons—not the least of which being that a gradient tax structure avoids creating a divisive threshold at which one segment of the population is taxed more or less than another.
So, what happened? Between 1978 and 1987 the total number of tax brackets plummeted from 25 to 5 and continued to sink down to just 3 in 1991. What the hell!?
First, let’s break it down. The first drop from 25 to 16 took place under Carter’s administration, and then in 1986, under Reagan, the tax code was further sliced down from 16 brackets to 5… effectively creating “tax bubbles.”
The “Tax Reform Act of 1986” which caused this, was sold as a “simplification of the tax code” and hailed as the second half off the famed “Reagan Tax Cuts,” which were based firmly in the mythology of Trickle-Down economics.
So what?
Well, here’s the thing, it created a social-bubble where there wasn’t one before. It drew a line between income rates that has created an adversarial relationship between those making over $250,000 and those making under.
Though the Tax Rates call them “top tier earners,” families who are in the $250,000-$500,000 income range self-identify as “middle class” and feel that they are being miss-categorized as “rich” and do not feel as if they should have their taxes increased. They are living the dream of the American Middle Class.
However, there is another truth which our nation is struggling to accept—the Middle Class has proven to be just as mythical as trickle-down economics. Families making $250,000-$500,000 have access all of the things we commonly associated with the middle class: mobility, money for vacations, college funds, a nice house with a picket fence… however, there is nothing “middle” about making $250,000-$500,000.
The Median Household Income in the US (as of the 2010 Census) is around $48,000. Families making around $48,000 today live lives of financial instability. They have stay-cations, college loans, and overdue mortgages. If you look at the how those who live in the median income range in the US, there is nothing “Middle Class” about them.
The Crux:
Okay, I will try to wrangle back to my topic—the division of wealth is a rant for another day. What we face today is a rising conflict in which the $250,000+ income tax bracket has become a flashpoint for the conflict. It has become an-us-versus-them cultural war about who is rich, and who is not. Both sides are being vilified.
The top earners as greedy capitalists who are out of touch with society and the other 95%+ of the country are being portrayed as an entitlement-starved proletariat.
What I want to know, is which is the cause, and which is the effect. Our country was once an economic gradient. From poor to middle to rich, we used to have a society that harbored a degree of mobility—there was a middle-class, and if you worked hard and had a bit of luck, you could obtain that life.
Today that gradient is fading, fast. So fast that those who are in the old “middle class” have yet to notice that the ground has shifted and that they are now the nouveau riche. And the rest of society has yet to realize that the conceptual “American Dream” is quickly becoming a memory.
But one thing I do know—is that Reagan’s tax structure is not, at all, helping the problem. It’s dissolving our social constructs and dissolving the concept of the American Dream—as we now see the things of the “middle class” are reserved for the top-earners—earners who often times, don’t realize how much they actually have.
No comments:
Post a Comment