"Middle class" is now the wealthiest 7%, says DetNews

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The DetNews today rails against suggestions for a graduated State income tax, saying,

Under one scenario, that highest bracket would kick in once household income hits $150,000. . .Democrats will try to sell this to voters by convincing them it hurts the evil rich and not good, wholesome working families. But look at the chart -- you don't have to make all that much money before your taxes go up substantially. Like every other tax hike, this one will rob the middle class, because that's where most of the money is.

Robbing the middle class at $150,000 and up, eh? Let's check some facts. (This is where it's especially nice that the Census Bureau's website is called "American Factfinder".)

In 2005, according to the Census Bureau the median family income in Michigan was $57,277. So the top-tier bracket that the News thinks will "soak the middle class", hitting those people struggling to pay their mortgage and kids' college tuitions, will only affect those families making 3 times what the typical Michigan family makes - families who make, every year, more than what my house is worth.

And, how many families would that be? Well, again from the Census, in 2005, there were about* 102,949 Michigan families making between $150,000 and $200,000 annually; a further 81,786 families made more than $200,000 annually. There were a total of about 2,594,228 families in Michigan in 2005. That means that only the wealthiest 7.1% of Michigan families would be affected by this top rate.

In fact, since the proposal doesn't include any increase in the tax rate at all until an annual income of $86,000, the majority of Michigan families would see no increase whatsoever!

To bring it closer to home, here in Ypsi there were only 127 families in 2000** who would pay that top rate - the wealthiest 3.7% of the population. And that's supposed to be "middle class"? With a median family income in Ypsi of only $40,793, in fact, a family could make twice as much as the typical Ypsi family before seeing any increase in rate.

Because of budget shortfalls created largely by the past decade's tax cuts, the State has drastically cut revenue sharing to local cities - money which could pay for local police and fire departments, parks, and economic development. The State has cut school funding, higher education funding, arts funding. Are we supposed to continue suffering the results of these cuts to protect the wealthiest 7%?

I don't expect to make $150,000 ever in my life - but I do expect to use parks, fire departments, and police departments, because I can't afford to live in a gated community with private security and belong to a country club. I expect to send my kids to public schools, rather than paying private school tuition. Probably most families in the State are in the same boat I am, and, hopefully, being told that their school and police funding is suffering for the sake of the richest 7% makes them angry, too.

* Since numbers are from the American Community Survey, rather than the decennial census, there is some margin of error, which is why I say "about".
** ACS numbers won't be available for Ypsi City until 2008; so these are 2000 Census figures.

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Putting kids through college

Conveniently enough, today's A2 News tells us that Declining state aid intensifies need - Tuition, fees up 57% in past 5 years. Wonder where those tax cuts of the past are coming from? That's right - straight out of your pocket when your kids go to school. (Or, for those of us young enough that our own student loans are more salient than our kids' loans - straight out of our pockets, every single month, for the next ten years.)

But that's the way it should be, says the DetNews. We need to pay more for tuition, because the wealthiest 7% can't afford to pay taxes.

I recall

at WMU in the earlier part of the decade that there were the incomprehensible simultaneous complaints from significant parts of the student body that (a) tuition costs were too expensive and rising too fast and (b) at tax time taxes were too high and, (c) as a kicker, they had to shop at Wal-Mart because they were poor students and every other store in town was a rip-off. God, it was frustrating trying to explain that, when you advocated for reducing collective payment for things like university education, individually you'll have to pick up a bigger tab.

Upside Down Cake

"Run the schools and cities like businesses. Let them live within their means. Cut, cut, cut. Balanced ... blah, blah, blah."

What would restore our fair city of Ypsilanti to near-solvency, and our state to surplus, and our federal government to (won't go there) ... would be a system of flat tax levies on income. And as far as the city goes ... no income tax. As far as the state goes, a flat rate of 4% - 6%, PLUS the same sales tax, but no more property tax. Ypsi and our schools would get back all they need from a resumption of State revenue sharing (so muuch per individual, per pupil, etc.). Other local needs could be managed by the county (via voter-approved bonds, etc.) As far as the federal goverment is concerned, a flat tax of 12% - 14%, plus social security/medicare ... but no capital gains and all that other c--p.

I don't like graduated taxes. Although I agree with this thread that $150,000 to $175,000 is about right in such a system for the highest rate to kick in. With a flat tax, I'd pay the same rate and the top guy in the state. That's fair to me.

As the official "Thread-bearer" pointed out above, we all either share, benefit or require the many city, county, state and federal services to keep us safe, free and pursuing our happinesses. Therefore, we should all contribute. Flat rate. Safety net at the very bottom, but no cap. And toss the rest.

As for business, the same. Flat tax on net income and a small percent of retained earnings, any other monies invested back into the business (benefits, equipment, pensions, etc. become deductions before hitting the net). And no business-to-business sales taxes.

$150K per household is the middle class?!?

That lets us out!

Americans consistently

Americans consistently underestimate how poor Americans are. Partly, I suspect, this is because increasing income inequality has made per-capita or mean income increasingly useless as a descriptor of central tendency. Related to that, increasing social inequality--evidenced inter alia in increasing residential and educational segregation--means that people see a narrower range of the income distribution in their daily lives than they would have twenty-five years ago. Furthermore, media depictions of American households, especially on television, routinely portray families whose lifestyles would require far greater incomes than the median. (Someday they'll do a New York sitcom set in a real New York apartment. They'll have to use fisheye lenses for all the interior shots!)

I have sat in department meetings at MIT and heard faculty members complaining about "the richest 1 percent" of the population. I look around and think, several of the tenured faculty in this room make more than $250,000 per year. They are in the richest 1 percent! Yet they still see themselves as members in and champions of the middle class. It's frustrating.

...All of which is a way of saying that the Detroit News could be being stupid rather than intentionally disingenuous.

"More than what my house is worth"

Also, renting in Boston, it pains me to see the phrase "more than what my house is worth" associated with the number $150,000.

housing costs

The author of the cited editorial argues that having an income tax (any income tax) makes it hard for Michigan to compete for "talent" with places like New York and California. I'd say housing costs probably equal things out pretty nicely.

Especially because people are only sort of kidding when they say, "I got tired of paying rent in Ann Arbor, so I bought a house in Ypsi."

"having an income tax"

Who is this author kidding?

The cost of living and the taxes in New York City are phenomenal! Recent "pop-ups" in property values thanks to rehabbers in Harlem, for instance, have actually forced some owners back out into the streets or into otherwise foregoing having more than one or two units for rent. There are actually fewer and fewer "rough" neighborhoods, even in the outlying boroughs, for the artists and street types to squat.

As for buying a house in Ypsi ... there are many foreclosures availble at the moment and there are some very aggressive bank programs available to get rid of the glut. These listing price discounts are certain to help soften the "pop-up" tax issue on many of these homes ... just be sure to get an accurate property value assessment and a conservative estimate of what the taxes WILL BE after you close.