$250,000 a Year Is Not Middle Class
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HILLARY CLINTON has vowed not to raise taxes on the middle class.
It’s a pledge that has worked well for others on the campaign trail before her, a resonant assurance to voters who saw themselves as middle class or aspired to be. But it’s a bad promise.
Mrs. Clinton is using a definition of middle class that has long been popular among Democratic policy makers, from her husband to Barack Obama when he was a candidate: any household that makes $250,000 or less a year. Yet this definition is completely out of touch with reality. It also boxes her in.
The most recent Census Bureau data showed that median household income — what people in the exact middle of the American spectrum earn — is $53,657.
Those families who make $250,000 a year, on the other hand, belong to an elite group: Americans who earn enough to be in the highest 5 percent of the income distribution. That top stratum captures anyone who makes $206,568 or more — not everyone in the so-called middle class that Mrs. Clinton says she is dedicated to protecting, but too large a chunk of it.
This doesn’t matter just because the math is so off. In an era of deepening income inequality, those people in the top 5 percent who are being classified as middle class are pulling further away from the rest of us. Americans at the bottom or in the middle have experienced five years of falling or stagnating income; those in the top 5 percent have generally seen their incomes increase. Between 1967 and 2014, median household income went up by $9,400 while those 5 percenters are now making $88,800 more, all adjusted for inflation.
A policy response should give those who are sliding backward a hand up, most likely funded by the people who are doing so well. But under Mrs. Clinton’s pledge, some of the well off won’t be called on to help out, and are in fact lumped in for receiving a boost. (I should note that my spouse works on the technology team for the Clinton campaign, but is not involved in policy.)
Mr. Sanders, as well as Martin O’Malley, who is also running for the Democratic nomination, have avoided any pledge against middle-class tax increases. The paid family leave program both support is designed as social insurance much like Social Security, funded by a 0.2 percent payroll tax increase.
Mr. Obama, who also made a pledge not to raise middle-class taxes, has seen how limiting it can be. Early last year, he made an effort to levy some taxes on 529 college savings accounts, given that 70 percent of account balances in those and similar accounts are owned by families who make more than $200,000. The revenue from the tax would have been plowed into college subsidies that would reach low- and middle-income Americans.
It was a doomed idea. Some families with closer to median income do use 529 accounts. So adding a tax would, technically, increase some middle-class people’s burden, thus violating Mr. Obama’s promise. Backlash erupted not just from Republicans, but fellow Democrats, and he dropped the idea less than a week after floating it.
… the spell this arbitrary limit has cast over the Democratic Party …[i]s one it needs to break. The middle-class pledge has not just been outpaced by Democrats’ policy ambition. It’s been outpaced by voters’ reality.
Over the last decade and a half, fewer and fewer Americans are identifying as middle class, and a growing share says it is working or lower class. Income inequality compresses many downward and lifts up the sliver already at the top.
That shifting identity should relieve candidates of the sense that there is a political urgency in spouting the phrase “middle class,” and it demands a new framework — one that is honest about the class divisions in the country.
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