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Middle Class

When democrats talk of the middle class they mean grassroots families, mostly blue collar, who earn enough to own a modest home in a safe neighborhood, have a couple of cars, can save for their kids’ college and put something away for retirement.

This is an over-simplification, for I’m sure this label means more. Some would say it’s a state of mind, a path or condition leading to better things. It could be a modest & growing contentment about one’s place in life. Basically, we all like thinking of ourselves as middle class.

Describing it in terms of income varies, but for a family of 4 in an urban setting assume it’s $50K > $95K. Everything above that is upper middle class/upper class and rich, according to most economists. Trouble is, and as I said, most of us really do consider our-selves middle class.

To press this point further, I’ve been a tax guy for 32 yrs and I can tell you many of my clients earn well above $250K, but even these higher range folks don’t consider themselves rich. They say they’re solid upper middle class. They also think when the president brags of protecting/helping the middle class he’s including them, which of course isn’t true.

We know those under $100K are not expected to get a tax increase, and those up to $125K only a modest one. One pundit claims those making $125K > $250K can expect a combined increase of about 20-25%, and those making $250K+ may suffer up to a 40% hike! Anyone that was confused can look at these numbers and begin to fully appreciate who this president and the democrats are speaking to when they say middle class.

President Obama likes to casually (carelessly?) use this term when boasting these are the people that make America great! In reality he’s referring to a group that pays very little tax, most of whom are on some kind of governmental assistance. In shear numbers I reckon there are about 100 million in this category, roughly one third of the entire population.

Statistics/demographics show about 98% of us make less than $250K. Supposedly none of these will see a tax increase, but it’s already established those over $125K will, of at least 20%, so I guess they aren’t the middle class of whom he speaks, although every last one of them would tell us – yes they are! So he’s helping some, and hurting others.

Referring to 98% of the population, or about 294 million, we know roughly 100 million are spoken for, leaving 194 million in tax city.

These folks, recall, still consider themselves middle class, but evidently are not covered in the president’s use of the term. They’d like to think they are, but they’re not.

So out of 300 million, 294 million are under the $250K threshold between middle class and rich. Here it gets interesting. How many times have we heard Obama’s rhetoric about millionaires/billionaires in their private jets, yachts and mansions? Who do we think he’s talking about? Millionaires/billionaires, of course, but as we see, that isn’t true.

He wants to raise tax on everyone over $250K by 35-40%, including rate hikes, loss of deductions, limiting credits and paying full freight on social security, meaning no cap on earnings.

Now, of 6 million making over $250K only about 1- 1 ½ million make $1Mil+,  leaving between 4 ½ – 5 million under. Remember, he’s calling all of these rich, millionaires/billionaires, but about 85% make less than $1Mil, so can hardly be called rich, whatever.

These folks, lest we forget, wake up in the morning and go to work. They have responsibilities, not to mention bills to pay. The rich don’t have that. They’ve got people taking care of it, and as for working and stress, that’s delegated too. The really rich have no such worries, other than the normal variety coming with the human condition.

A final point. Notice that, logically, more people are in $250K > $350K, than in $350K > $450K, and so on. Given a non-linear rate of diminishment, something like 45% of the 5 million, or 2 ¼ mil- lion, make under $350K, the next 30% , or 1 ½ million, make under $450K, the next 15% , or 750,000, make under $550K, etc.

This means 90% of everyone making between $250K – $1Mil are actually making under $550K. Is it reasonable to characterize these folks as having private jets and so on?

Remember, these are doctors, lawyers, architects, engineers and other professionals, business owners and entrepreneurs. Notice I don’t use terms like independently wealthy, or millionaire to describe them. A few may be, but generally these are 4.5 million hard working people with worries, responsibilities and so on.

To come down hard on such a finite group, raising their tax by almost 40%, is a redistribution of wealth and class warfare. It’s an overt attempt to squeeze/downsize what I call the true, real middle class, or everyone making less than $550K. These, the successful Upper middle class, make America great, stoking its fires of free enterprise, driving its economic engine.

Again, these are the movers and shakers of our society, the back bone of our capitalistic system, employing upwards of 55% of the labor force.  That extrapolates to over 50 million workers!

Right now the top 5% of all taxpayers based on income, including these folks, the rich and the super-rich/super-wealthy pay 60% of all the tax. Do we really want to raise that?

Wouldn’t it make more sense to ramp up the tax rates in a linear fashion, so that people paid incrementally more as they made more money? Treat the 98%+ of us as one taxation block, all the way up to $550K? In other words, at the lowest end, set an entry point at which even the poor begin paying something. For instance, a single person making $20K+, or a single parent making $30K+, or a married couple making $40K+. Not a lot, and they’d still get all their credits, benefits and so on.

From those entry points, you draw a line ramping up from left to right, one for each filing category, smoothly and at a constant rate of increase up to $550K. Then you begin the tax the rich stuff, putting a surcharge or extra tax on all income over $550K.

The 298+ million of us would be happier with that, and not feeling like those entering upper middle class suddenly get hammered. It would also buy huge goodwill for those who pay little or nothing, from those who pay the most. We’re all on the same team, here in America, and should all want to pull our weight, if we can.

This country became great and will remain great because it harbors a large percentage of its people, protecting them from the ravages of their circumstance and providing them with a lower middle class lifestyle higher and better than anyplace else. We have the richest poor on the planet, and should be proud of it!

But the greatness depends on more, the ability and reality that a robust number of lower middle classers climb into upper middle class. This is key to the entire enterprise: providing an economic environment where all enjoy life above bare subsistence, and all aspire to improving their lot, climbing the economic ladder and achieving their dreams. Putting too great an emphasis on helping the poor, at the expense/demoralization of over-taxing the upper middle class, is government intrusive and counter-productive to the essence behind the purpose, which is to remain great.

Those who insist on more heavily taxing the upper middle class to provide more and more benefits and entitlements to the lower middle class do so at great risk. When government makes it too easy to enjoy its goods and services, it destroys incentive and kills self-esteem, two of the primary agents for success.

Furthermore, when it demonizes those who struggle and work hard to earn our credentials and/or build our practices and businesses, it is exacting a usurious pound of flesh; creating disincentive for such achievement, jeopardizing the entire edifice of America’s success.

Again, the poor and lower middle class don’t make this country great: they define why it’s great. They are the beneficiaries of its greatness. Others before them toiled as well, labored and struggled to build the free enterprise structure we have today, providing the jobs, paying the taxes, embuing this country with the excitement/ enthusiasm of their accomplishments. This is the essence of our success, and therefrom came/comes our greatness.

The private sector is what America is about, making it the land of opportunity. The lower middle class should depend on that, and not government. Handouts are not the way out. Over-taxing a tiny few is biting the hand that feeds. It won’t bode well for America’s future.

When Washington speaks of middle class, let’s be sure we know who they’re talking about. Let’s hope they mean the vast majority of us, the 298 million. All those who want to achieve, and all those who have achieved. In spirit and reality, we’re all Middle Class!

 

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I’m Al Shane

Alvan I. Shane Author, The Day Liberty Wept 2270 N Euclid Ave Frequent Op-Ed Contributor Upland, Calif 91784 Political Donor to Cons Grps / Causes (909) 946-5104 Ex-Marine / California native info@shaneview.com Tax Accountant / Mar 43yrs / 1 son
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