Soak The Very, Very Rich

James Surowiecki
August 16, 2010

The fight on Capitol Hill over whether to extend the Bush tax cuts is about many things: deficit reduction, economic stimulus, supply-side ideology. But at its core is a simple question: who counts as rich? The Obama Administration’s answer is that you’re rich if you make more than two hundred thousand dollars a year as an individual or two hundred and fifty thousand dollars a year as a household, and therefore you should have your taxes raised. Conservatives suggest that this threshold is far too low, and argue that Obama would be taxing mostly small-business owners, or the people a Fox News host has referred to as “the so-called rich,” rather than fat plutocrats. You might think this isn’t really much of a debate. An annual income of two hundred and fifty thousand dollars puts you in the top three per cent of American households, and is more than four times the national median. You’re rich, and a small tax increase isn’t going to rock your world.

Good luck convincing people of this, though. Judging from surveys of how Americans describe themselves, most of the privileged don’t feel all that privileged. Why is that? One reason is the American mythology of middle-classness. Another is geography: in a place like Manhattan, where the average apartment sells for nine hundred thousand dollars, your money doesn’t go as far. And then there’s a larger truth about how wealth is getting concentrated in this country. As the economists Thomas Piketty and Emmanuel Saez have documented, people who earn a few hundred thousand dollars a year have done much worse than people at the very top of the ladder.