Friday, July 29, 2011

Confusing Signals from the US

Some columnists complain that an income of $500,000 a year is not "wealthy" and are up in arms that somebody would think these people should be taxed more than they are.

Other columnists (and sometimes the very same one!) think that a senior with an income of $30,000 is "wealthy" and can afford to have their government benefits trimmed "for the greater good of the country" to fight the "debt problem".

Here is an example provided by Dean Baker in his Beat the Press blog:
Robert Sanuelson Redefines "Wealthy"

The Washington Post once ran a front page piece questioning whether people who earned $250,000 a year, President Obama's cutoff for his no tax hike pledge, were really rich. However, it also features Robert Samuelson on its opinion page telling readers that seniors with income of $30,000 a year are wealthy. I'm not kidding.

In a piece titled "Why Are We In This Debt Fix? It's the elderly stupid," Samuelson tells readers:
"some elderly live hand-to-mouth; many more are comfortable, and some are wealthy. The Kaiser Family Foundation reports the following for Medicare beneficiaries in 2010: 25 percent had savings and retirement accounts averaging $207,000 or more."
Let's see, we have retirees who have their Social Security checks, plus a stash of $207,000. If someone at age 62 were to take that $207,000 and buy an annuity this money would get them about $15,000 a year. Add in $14,000 from Social Security and they are living the good life on $29,000 a year. And remember, 75 percent of the elderly have less than this.

To be fair, many of the people with $207,000 in savings will be older than 62 so their money will go further, but it is hard to believe that anyone can think of this as a cutoff for being wealthy, or at least anyone other than Robert Samuelson and his colleagues at the Washington Post.
I think the confusion can be explained. You are wealthy and "part of the problem" if you are in the bottom 90% of the population. You are not wealthy and need ever more "tax cuts" if you are in the top 1% of the population.

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