One thing seems certain in the fiscal cliff negotiations: Income taxes are going up for the rich. But who are the rich?
President Obama initially said those earning at least $250,000 a year — or the top 2 percent — are rich. Now, he’s raised the bar to $400,000. Republican Speaker of the House John Boehner’s offer is higher taxes for million-dollar earners.
OK, someone’s getting higher taxes out there. But where’s the dividing line?
“$250,000 a year in many parts of the country is not rich,” says Douglas Besharov of the Atlantic Council, and a professor at the University of Maryland.
“I like the number $300,000,” says Edward Wolff, an economics professor at New York University.
“I think $400,000 is actually a really great number,” says James Puckett, law professor at Penn State University.
These numbers fall on either side of the top 1 percent of earners. Remember that? Those whose incomes are about $370,000 or more.
That’s one reason the $400,000 number President Obama floated this week might be more palatable. It’s not dragging in as many small business owners or working professionals with kids. It’s a very comfortable salary, says Puckett. “They can still afford to make political contributions. They can go on nice vacations,” he says.
But he says why stop at one dividing line between the rich and not-rich? Politicians could create more tax brackets for the wealthy.
“There is a difference between someone making $400,000 and $50 million,” says Puckett.
NYU’s Wolff doesn’t think higher marginal rates will have a big impact on big earners.
“Most people in this income group don’t actually care that much,” Wolff says.
And, for what it’s worth, the $400,000 proposal from Obama? That’s the same as his salary as president.