Is someone with an income of $250,000 considered “wealthy”? $400,000? These are the floor limits set by Presidents Obama and Biden on who would be affected by their proposed tax increases.
Every time such a debate takes place, we hear the same thing from a small but vocal and influential contingent. “It's not the rich!” So say the experts, and so do the people who will be affected by the tax hike. Lawmakers and their staffers usually say more quietly that income levels don't make people “wealthy” in their districts or states.
Of course, you can also address this problem with mathematics. The ITEP model reports that as of 2023, the starting point for the “wealthiest” 20 percent of the population will be approximately $138,000. The cutoff for the richest 5 percent is $298,000 and the cutoff for the top 1 percent is $737,000. The situation is different in high-income states, but not as much as many people believe. In California, the top 5% starts at $352,000 and the top 1% starts at $862,000. In New York, the top 5% start at $335,000 and the top 1% at $881,000.
These are statistical measures of “being wealthy” that different people may choose. Mathematics is usually a better basis for policy than emotion, and as in this case, emotions matter in political debates.
One reason people resist being called “wealthy” is that even if their income is high, many of them have to work for a living. They don't have enough wealth to quit their jobs and maintain a lifestyle they consider reasonable. Some of them may have a different definition of a “rational lifestyle” than I do. That might include private school for your kids (or at least a high cost of living in a good school district), two weeks in Europe each year, someone to clean your house, etc. , there's a lot of eating out. But they think that throwing their ideas and numbers at them won't change many minds about something so personal.
But from a tax policy perspective, whether people meet arbitrary criteria for being “wealthy” or whether those affected by a tax increase consider themselves “wealthy” is a false question. It's a discussion. First, people often note that tax increases are almost always small for people whose incomes are just at the cutoff level. But more broadly, the correct argument is not who is “rich” but who can afford to pay more taxes.
It doesn't matter whether someone with a household income of $800,000 a year thinks they're not wealthy because they can't quit their job and retire to a fancy house on the beach in Malibu. They can call themselves whatever they want. The point is that they are better off than 99 percent of the population and can afford to pay more.