The New Republic: Soak the Almost Rich

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(Original Post)

Will no one speak the truth about the upper-middle class?

Timothy Noah
December 7, 2012 | 12:00 am

A LITTLE-NOTICED finding from the 2012 exit polls is the rank ingratitude of America’s haute bourgeoisie. Although President Barack Obama pledged to raise taxes exclusively on family income exceeding $250,000, he lost the voting bloc that had the most to gain financially from that unreasonably high threshold: households earning between $100,000 and $250,000. Obama calls these folks “middle class,” but they aren’t. They’re “hautes.” The poorest among them earn more money than about 80 percent of their fellow Americans, while the richest earn more than about 98 percent.

The hautes may not dazzle you, dear reader, with their richesse (The New Republic’s demographic skews high). But when the Pew Research Center recently asked how much income a family of four would need to be wealthy, fully 39 percent of respondents said the haute salary range would do very nicely. These are, for the most part, college-educated workers, some of them doctors, lawyers, and other professionals. Most are in a position to consider sending their kids to private school or purchase a modest vacation home. They feel broke all the time, because just about everyone in the United States does, and in big cities like New York or Los Angeles, you seldom find them in the fancier neighborhoods. No one would mistake hautes for Masters of the Universe. But defining them as “middle class” does violence to any geometrically plausible conception of “middle.” If taxes on the rich need to go up in 2013—and they do—the hautes’ taxes ought to rise, too.

Of course, they won’t. Most conservatives consider Obama’s $250,000 minimum to be confiscatory. If the floor moves in any direction during congressional negotiations to avert the “fiscal cliff,” it will probably be up. House Speaker John Boehner last spring rejected an overture from Minority Leader Nancy Pelosi to raise the floor to $1 million (which would reduce the revenue raised by nearly half). In a postelection dispatch—filed, unselfconsciously, from a “large cruise ship”—the conservative columnist Mona Charen gamely suggested bringing the floor up to $5 million, because anyone earning less wasn’t “truly rich.” (For the record, a $5 million income puts you somewhere between the top 0.1 percent and the top 0.01 percent.)

Mitt Romney proposed cutting all six marginal income-tax rates by 20 percent, a particular boon for the rich. You might argue that Romney therefore outbid Obama for the haute vote. But Romney also pledged to pay for the cuts by eliminating tax loopholes, making it likely the hautes would end up paying more in taxes, not less. Even so, a majority of hautes voted for Romney. This is, in one sense, heartening. It disproves the vulgar Marxism of Romney’s belief—articulated in his notorious “47 percent” speech and in a grumpy postelection call with donors—that Democrats win by buying off key constituencies. The hautes, damn them, couldn’t be bought!

They couldn’t be bought in 2008, either, when Obama similarly promised not to raise taxes on income below $250,000 (though Obama got closer to winning them that time). That year, Obama further confounded the gods of economic determinism by winning the over-$250,000 crowd, despite his vow to raise their taxes. He lost them this time out, along with every other income group above the approximate U.S. median of $50,000, just as John Kerry and Al Gore did.

Obama is an intelligent man whose life and work experience sensitize him to class distinctions. We can therefore assume the president’s misclassification of hautes as middle class was driven by politics, not conviction. Yet Obama has not only failed to reap any clear political benefit from his faulty sociology, but also, in one small way, he has been harmed politically by it. In a postelection op-ed for The Washington Post, Romney’s chief strategist, Stuart Stevens, consoled fellow Republicans by affirming that, although Obama won the election, Romney “carried the majority of middle-class voters.” That was true only if you included the hautes. If you defined the middle class, more reasonably, as roughly the middle three quintiles—from, say, $24,000 up to the lower haute threshold of about $100,000—then Obama won the middle class. But when, in an e-mail exchange, I challenged Stevens on this claim, he was able to reply that his parameters were the president’s own.

The more obvious way Obama’s haute-coddling harms him is in dollars and cents. The president is trying to chip away at a $1.1 trillion deficit without throwing the country back into recession. That argues more for tax increases targeted at high incomes than for spending cuts, because cuts hit the middle- and low-income people on whose spending economic recovery depends.

If the economy were in better shape, the best option would be to let all the Bush tax cuts expire, as will occur on January 1 if no action is taken. That would immediately reduce the deficit by $297 billion. A typical family of four making $25,000 to $70,000 would pay a couple thousand more in taxes (at the lower range, typically in foregone refundable tax credits). Before you howl in outrage, please remember that, as The New York Times recently reported, people in all income categories above $25,000 have over the past three decades been paying a steadily smaller share of their incomes in federal, state, and local taxes combined (including payroll taxes), even as government spending has continued to rise.

Since the economic recovery is still shaky, it makes more sense to extend the cuts for most Americans. But it really isn’t necessary to extend them for the hautes. Because the top marginal rate is paid only on dollars exceeding the threshold, Obama’s $250,000 limit would actually benefit lots of households earning well in excess of $250,000. Obama’s tax increase would cut the deficit next year by $69 billion, which isn’t bad. But lowering the threshold to $100,000 would cut it by $93 billion, which is better. (Thanks to Citizens for Tax Justice, a labor-affiliated nonprofit, for working out these calculations.) Obama’s unwillingness to expel the hautes from the middle class will cost him $24 billion per year.

It may also cost him in another way. The United States is a country where practically everybody considers himself middle class. To the extent that it means Americans don’t put on airs and say they’re better than other people, this delusion is a great strength. But it’s a weakness when it enables relatively prosperous citizens to ignore their good fortune and pretend they’re just as put-upon as everyone else. When that happens, the real middle class—not to mention the poor—becomes invisible.