Clarification on the $250,000 Line in the Sand

Here is a bit from a NY Times blog post by David Leonhardt that helps show just how crazy the fight was the $250,000 and up tax cuts:

We’ve heard from several readers who wanted to know how much money households with $250,000 a year in adjusted gross income — that is, those who would have been affected by the Democrats’ original proposal on the Bush tax cuts — actually make. The answer seems to be about $315,000 a year.

Some background: President Obama and other Democrats originally proposed the expiration of the Bush tax cuts on income above $250,000 a year. With the Republicans taking over the House, the Democrats retreated from that proposal and agreed to extend all the Bush tax cuts for two years. But Democrats say they still want to see these high-end cuts expire in 2012.

There are two aspects of the high-end cuts that often get lost in the public discussion. The first is households with more than $250,000 a year in adjusted gross income would still get a tax cut — on their first $250,000 of such income. On average, this tax cut would equal about $6,500 a year, regardless of whether a household had $250,000 in adjusted gross income or $1 million (or much more) in adjusted gross income. If all the Bush tax cuts are extended, by contrast, households making at least $1 million a year would receive an average annual tax cut of $104,000.

The second issue is that earning $250,000 in adjustable gross income is different from earning $250,000 in total income. High-income households tend to take a significant number of deductions. At our request, Roberton Williams at the Tax Policy Center analyzed the total income of households with $240,000 to $260,000 a year in adjusted gross income. On average, they made $315,000 in adjusted gross income, including $32,000 in capital gains and dividends.

So when you hear talk about taxes on people makes at least $250,000 a year, it really tends to means taxes on income above $315,000 a year.

So all that grandstanding by Republicans over "everybody" should get a tax cut, was a fight to make sure that people making six times the average American household's income.

Funny, when you make six times as much, what do you buy six times as many of? You don't eat 18 meals a day. Even buying a house 6 times the size of an average house isn't something most people do. You don't drive 6 cars. I guess you could take 6 times as much vacation, and you can buy clothes that cost 6 times as much. But it is hard for me to understand the tenacious fight to make sure that very, very wealthy people get such big tax cuts.

At the same time, Republicans have the audacity to say that unemployment insurance should be stopped because it encourages people to be "lazy". This is the Marie Antoinette syndrome. These Republicans spend too much time with their rich friends. They simply don't know how ordinary people live (and they obviously don't care). That's the real crime for which Marie Antoinette lost her head: when the mobs from Paris stormed the gate, Marie Antoinette was so disengaged from reality that when she was told they were rioting because of "bread" her response what "well, let them eat cake!"

If you want the details on what a $250,000 income will buy, read this.