So, What’s Middle-Class Income These Days

According to Ron Lieber, a NY Times columnist, under the new tax agreement reached by the Congress, individual taxpayers earning $250,000 or more and married taxpayers earning $350,000 should be prepared to pay higher taxes (http://www.cnbc.com/id/100351003).

During their election campaigns, both President Obama and candidate Mitt Romney used the $250,000 amount as their “middle class” cut-off when discussing their tax/deficit-reduction proposals. And that $250,000 cut-off seems to have held, despite President Obama pushing for tax increases for those “above $1 million”, after the election.

This proposed cut-off begs the question, what is a proper middle-class cut-off amount and what would one define the $250,000 level proposed by the Congress in its tax/deficit-reduction agreement.

Well, according to the data collected by the Census Bureau (www.census.gov), the median inflation-adjusted income for 2011 for all households was about $50,000.  That amount takes into consideration about 115,000 U.S. households.

For the same period, median income for families was $61,000, which considers about 75 million U.S. families.  Included in that category are: Married couple families ($75,000 in median income) and single-parent only families ($41,200 for male-only parent families and $30,000 for female-only parent families).

In an article discussing President Obama and Governor Romney’s election proposals, Catherine Rampell used data from the Tax Policy Center in reaching a similar conclusion regarding the income definition of “middle-class” (http://economix.blogs.nytimes.com/2012/09/14/defining-middle-class/).  In her article, Ms. Rampell points out that “households earning $250,000 fall somewhere just above the 96th percentile.”

From the perspectives above, Congress’s tax/deficit-reduction agreement is aimed at the affluent, rather than the middle class.

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About docjonz

I am an Associate Professor of accounting at Hofstra University in Hempstead, NY. Additionally, I have more than 30 years of professional accounting experience in various capacities including auditing, accounting standard setting and corporate accounting policy.
This entry was posted in Income taxes, Tax policy and tagged , . Bookmark the permalink.

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