Today, the President will unveil his new debt and deficit reduction plan in the White House’s Rose garden. It calls for $1.5 Trillion dollars in new taxes . In sum, as summarized by ABC, the package will include $1.2 trillion in discretionary cuts that were already enacted in the Budget Control Act passed by Congress; $580 billion in cuts and reforms across all mandatory programs; $1.1 trillion in savings from troop draw downs in Iraq and Afghanistan; $1.5 in tax reform — $800 billion from allowing the top rate Bush tax cuts to expire; $700 billion in closing loopholes and limiting deductions many of which he has discussed publicly before; $430 billion would be additional interest savings.
The Republicans are saying that the effort will be D.O.A. (dead on arrival) because they are of the position that in this economy, any effort to increase taxes on the so-called “job creators) (e.g. millionaire and billionare business men and women) would be tantamount to halting economic recovery.
The plan will include the so-called, “Buffet Rule”, a proposal that ould establish the principle that anyone earning more than $1 million a year should not pay taxes at a lower rate than middle class Americans. The rule is named for investor Warren Buffet who wrote in August that the wealthy are being “coddled.”
Alas, I have NOT seen the bill yet however, I have heard rumblings that the bill will start with eliminating tax cuts at the $250,000 threshold level which is considered high income but certainly and by all means NOT RICH. On several occasions, law makers and the President himself have described people in this group as rich.
I had this debate with a friend of mine online and in various digital spaces recently about how it is misnomer to refer to those earning $250,000 per couple rich.
A couple earning $250,000, while making a substantial amount of money compared to most in the country – heck the world, have more obligations by circumstance of their affluence and choice, but still cannot be classified as rich, necessarily.
Consider this scenario:
The take home monthly salary after taxes at the 34% tax bracket is $13,750 monthly.
$4,000 mortgage payment
$900.00 lease or loan for two cars
$6,000 private school tuition for two children
$1500 Automobile Insurance, utilities, phone, gas, petrol,
$1000 Miscellaneous (grocery, dry cleaning, travel)
$1050 School loan/Life & Health insurance payments
$300 Savings/Rainy Day fund or Credit Card payments
And if the adults in this hypothetical scenario are not employed by anyone, but are small business owners, their take home may be even less depending on their business expenses. They may opt to draw a reduced salary to offset costs. Thus, even with tax incentives and tax breaks available to help sustain the business, they still have more outlay than the average wage-earner.
This hypothetical household described above is (1)rich perhaps in education and income potential that comes from being educated; (2)rich in home ownership; (3) rich in knowledge that their children are getting top quality care; (4)rich in having the luxury of having left over a modest monthly savings; and (5) rich in the home equity accrued in their house (though in this market so many homes are under water that this may not hold true for all).
It’s not all gravy as people seem to think. While folks in this income bracket may appear wealthier than others, a person with less obligation, with his/her children in public school; who is without a car and did not attend college on loans and is not saddled with college loan payments may have more left over each month for discretionary spending to stimulate the economy than some high income earners.
Thus, the definition of rich, in my opinion, should be: having substantial liquid and assets in reserves from which one can draw and the luxury of not having to work because one has sufficient real estate, assets and investments that are earning enough revenue, interest and residuals that would absolve one of the need to work. I may be describing the angel investor who lives off the interest of his trust fund investments here.
The answer is not to say the $250K couple that they should pay MORE in taxes or else downgrade their home, take their kids out of good schools or close their businesses because that would be penalizing people for working hard to get the best. We don’t want to be a nation that discourages hard work, education and perseverance. (though in this economy, I have seen people have to make these exact drastic cuts)
Understandably, it may seem ludicrous to those who say the GOP does not want to tax the wealthy to make them pay their fair share in helping the nation reduce its deficit and to force beneficiaries of entitlement and social programs to bear the brunt via tax cuts.
But, in reality, everything isn’t black and white. It’s easier when you are on one platform to look over at another group and point fingers. It is important that the definitions and language stay clear of these artificial thresholds that create division unnecessarily among various income tax brackets.
Otherwise, the budget and deficit talks will indeed create a micro-version of class warfare.
The President is the president for all income-brackets not just the middle class.
Jay Jay Ghatt is also editor at Techyaya.com, founder of the JayJayGhatt.com and JayJayGhatt.com where she teaches online creators how to navigate digital entrepreneurship and offers Do-It-For-You Blogging Service. She manages her lifestyle sites BellyitchBlog, Jenebaspeaks and JJBraids.com and is the founder of BlackWomenTech.com 200 Black Women in Tech On Twitter. Her biz podcast 10 Minute Podcast is available on iTunes and Player.fm. Follow her on Twitter at @Jenebaspeaks. Buy her templates over at her legal and business templates on Etsy shop!