In recent days, many people who make slightly over $250,000 have argued that it's unfair to tax them at rates similar to those making over seven figures. These high earners (who are wealthier than 98 percent of the nation) contend that they aren't so different from the squeezed middle class. Since many of them live in expensive areas of the United States, $250,000 doesn't go as far as it may seem. Moreover, if additional tax burdens are levied by the Obama administration, they argue that it gives them less incentive to stay above this tax threshold.
The New York Times reinvigorated this debate on Thursday by publishing an article entitled In Tax Cut Plan, Debate Over the Definition of Rich airing the complaints of congressmen and high earners who feel the that tax code should differentiate between those making $250,000 and $5 million. Needless to say, plenty of pundits are taking the Times to task on the finer points of the tax cut debate.
The Definition of Rich David Kocieniewski at The New York Times portrays the issue as unfavorable to Americans close to the $250,000 "cutoff" point who would suffer under a "far less precise" tax code that lumps them in the same category as millionaire and billionaires. These citizens (examples: "a couple in Westchester County, a police officer with a lot of overtime and a principal at a public school") usually live in expensive sections of the country and shouldn't be considered rich. This is also the opinion of some congressmen, including Sen. Judd Gregg, who has advocated for a "simpler" tax code that would reduce the number of tax brackets from six to three.
- But These People Won't Pay More Taxes The New Republic's Jonathan Chait takes the New York Times article to task, explaining that the article "presupposes that individuals making $200,000, or couples earning $250,000, will pay higher taxes. They won't. The tax hike only applies to income over that threshold. When you go from $250,000 to $250,001, you only pay a higher tax rate on that one extra dollar. Your taxes will go up by a few cents. If you earn $300,000, you will pay a slightly higher tax rate on the last $50,000 of your income -- less than a couple thousand dollars."
- Taxes Will Go Down for People Near the Cutoff, agrees Reuters Felix Salmon. Leaving aside the "fraught question" of whether those making $250,000 are year are technically rich, the blogger finds several problems in the Time's reporting: "when the NYT's David Kocieniewski starts talking about 'many families with income levels near the $250,000 cutoff', he’s making a serious error. If you’re anywhere near that cutoff, your tax bill is set to go down, even as the tax bills for those millionaires and billionaires are set to go up.The clear implication of Kocieniewski’s article is that the rich middle classes...are going to suffer the same tax hike as millionaires and billionaires. And that simply isn’t true, even if they’re making significantly more than $250,000 between them."
- But It Warps the Incentive to Work, writes The National Review's Reihan Salam, who defines the debate in terms of work incentives for higher earners: "the clear implication of Felix’s post is that the rich middle classes aren’t going to suffer all that much if their effective marginal tax rate goes up considerably. And that may be true in a sense — more leisure never killed anyone — but the disincentive effects of the marginal tax increase are as big as they would be if the increase applied to all income. So we don’t get as much revenue as we would if the average tax burden increased, but we get as big a decrease in work effort as we would if the average tax burden increased. That is what those of us who oppose marginal tax increases for high-earners are worried about. This is also true of marginal tax increases that only apply to millionaires or billionaires."
- It Makes Sense to Give Millionaires a Higher Rate, notes Michael Tomasky at The Guardian, who was happy that Times was discussing a more "common sense" approach to the tax cut debate. Tomasky contends that there is a real difference between someone making $300,000 and $3,000,000 a year and therefore they should be treated differently: "Maybe raise the top marginal rate on $300,000 and above to 42.5%. But raise the top marginal on income above something like $2 million to 55%. A little more. Work out the specifics so that the end result is at least deficit-neutral, or ideally better."