FacebookTwitterGoogle+RedditEmail

Obama’s War on the (Upper) Middle Class

by PAUL CRAIG ROBERTS

Obama and his public relations team have made it appear that his trillion dollars in higher taxes will fall only on “the rich.”  Obama stresses that his tax increase is only for the richest 5 per cent of Americans while the other 95 per cent receive a tax cut.

The fact of the matter is that the income differences within the top 5 per cent are far wider than the differences between the lower tax brackets and the “rich” American in the 96th percentile.

For Obama, being “rich” begins with $250,000 in annual income, the bottom rung of the top 5 percent.  Compare this “rich” income to that of, for example, Hank Paulson, President George W. Bush’s Treasury Secretary when he was the head of Goldman Sachs.

In 2005 Paulson was paid $38.3 million in salary, stock and options. That is 153 times the annual income of the “rich” $250,000 person.

Despite his vast income, Paulson himself was not among the super rich of that year, when a dozen hedge fund operators made $1,000 million.  The hedge fund honchos incomes were 26 times greater than Paulson’s and  4,000 times greater than the “rich” man’s or family’s $250,000.

For most Americans, a $250,000 income would be a godsend, but envy can make us blind. A $250,000 income is not one that will support a rich lifestyle. In truth, those with $250,000 gross incomes have more in common with those at the lower end of the income distribution than with the rich.  A $250,000 income is ten times greater than a $25,000 income, not hundreds or thousands of times greater.  On an after-tax basis, the difference shrinks to about 6 times.

The American tax code taxes the $250,000 income at the same rate as it taxes a $100,000,000 or higher income.  On an after tax basis, after the federal government grabs 30 per cent in income taxes and state government grabs 6 per cent, the “rich” man or woman or family earning $250,000 has $160,000.  In New York City, where there is a city income tax in addition to state and federal, this sum diminishes further.  State sales taxes take another 6 or more percent of most consumption expenditures.

When all is said and done, the after-tax value of a $250,000 income in New York City is about $140,000.

Is this rich? Not in New York City.  The “rich” person or family won’t be purchasing a Manhattan apartment, much less a brownstone.  They won’t be driving a luxury car.  Indeed, they won’t be able to afford a parking garage for an economy car.  If they fly anywhere, it won’t be in a first class seat.

For the most part, $250,000 incomes are located in large cities where the cost of living is high.  For example, a husband and wife who are associates at major law firms, each of whom works 60 hour weeks and has no job  security, earn $125,000 each. They might both have student loans to pay down. For the Obama administration to lump these people in with Hank Paulson or billionaire hedge fund operators is propagandistic.

What is the difference between the $250,000 “rich” income and the $245,000 “non-rich” income?  After Obama’s tax scheme goes into effect, the $245,000 income will benefit from a tax cut, and the $250,000 will have a tax increase.  Will people in the 96th percentile ask for pay cuts that will drop them into the 95th percentile?

In America, the truly rich are those in the top 0.5 per cent of the income distribution.  These are the people with yachts, private airplanes, and who are still rich after they lose half their wealth in a stock market collapse caused by government policy that accommodated financial gangsters.

“Oh well, I was worth $600,000,000 last year and only $300,000,000 this year.  Perhaps we should stop drinking $1,000 bottles of rare vintages and move down to $100 a bottle wines.  Probably shouldn’t buy that new yacht or that villa in the south of France.”

The upper middle class with  $250,000 gross incomes are major losers of the financial collapse.  Many of the people in this income class are leveraged to the hilt in order to maintain appearances and can be swept away as easily as the very poor.  But those who were frugal and invested for their future have lost 50 per cent of their savings.  These wiped out people are the ones who will bear the brunt of Obama’s tax increase.

If the tax rate on a multi-million dollar annual income goes up by 5 percentage points, the cutbacks won’t really affect the lifestyle.  But for the $250,000 gross income group, it means no prospect of private schools and Ivy League education for the children, who will be attending state colleges with the rest of the non-rich.

Obama is attacking the only income class that has any independence–the upper middle class professionals.  The real rich are few in number and seldom present any opposition to government.  Recently, the New York Times reported (March 23, 2009) that the 400 richest Americans’ “share of the nation’s total wealth has nearly doubled to more than 22 percent.”  The average income of the 400 richest Americans is $263 million annually.  That is 1,052 times the income of the “rich” $250,000 income.

What the Obama administration is really doing is taxing ordinary people in order to bail out the super rich. The 95 per cent of Americans who get the tax cut will find that it is offset many times by the depreciation in the dollar and the raging inflation that will result from monetizing the multi-trillion dollar budget deficits made necessary by the bailouts of the banksters.

In the United States, government has become expert at manipulating both left-wing and right-wing ideologies.  It keeps those on both ends of the spectrum set at each other’s throats in order to ensure the government’s continuing independence from accountability.

Historically, the definition of a free person is a person who owns his own labor.  Serfs were not free, because they owed their feudal lords, the government of that time, a maximum of one-third of their labor.  Nineteenth century slaves were not free, because their owners could expropriate 50 per cent of their labor.

Today, no American is a free person. The lowest tax rate, not counting state income, property tax and sales tax, is 15 per cent Social Security tax and 15 per cent federal income tax.  The “free American” starts off with a 30 per cent tax rate, the position of a medieval serf.

In medieval Europe, when tax rates reached beyond 30 per cent, serfs rebelled and killed their masters.

PAUL CRAIG ROBERTS was Assistant Secretary of the Treasury in the Reagan administration. He is coauthor of The Tyranny of Good Intentions.He can be reached at: PaulCraigRoberts@yahoo.com

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format. His latest book is The Neoconservative Threat to World Order.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

January 23, 2017
John Wight
Trump’s Inauguration: Hail Caesar!
Patrick Cockburn
The Rise of Trump and Isis Have More in Common Than You Might Think
Binoy Kampmark
Ignored Ironies: Women, Protest and Donald Trump
Gregory Barrett
Flag, Cap and Screen: Hollywood’s Propaganda Machine
Gareth Porter
US Intervention in Syria? Not Under Trump
L. Ali Khan
Trump’s Holy War against Islam
Gary Leupp
An Al-Qaeda Attack in Mali:  Just Another Ripple of the Endless, Bogus “War on Terror”
Norman Pollack
America: Banana Republic? Far Worse
Bob Fitrakis - Harvey Wasserman
We Mourn, But We March!
Kim Nicolini
Trump Dump: One Woman March and Personal Shit as Political
William Hawes
We Are on Our Own Now
Martin Billheimer
Last Tango in Moscow
Colin Todhunter
Development and India: Why GM Mustard Really Matters
Mel Gurtov
Trump’s America—and Ours
David Mattson
Fog of Science II: Apples, Oranges and Grizzly Bear Numbers
Clancy Sigal
Who’s Up for This Long War?
Weekend Edition
January 20, 2017
Friday - Sunday
Paul Street
Divide and Rule: Class, Hate, and the 2016 Election
Andrew Levine
When Was America Great?
Jeffrey St. Clair
Roaming Charges: This Ain’t a Dream No More, It’s the Real Thing
Yoav Litvin
Making Israel Greater Again: Justice for Palestinians in the Age of Trump
Linda Pentz Gunter
Nuclear Fiddling While the Planet Burns
Ruth Fowler
Standing With Standing Rock: Of Pipelines and Protests
David Green
Why Trump Won: the 50 Percenters Have Spoken
Dave Lindorff
Imagining a Sanders Presidency Beginning on Jan. 20
Pete Dolack
Eight People Own as Much as Half the World
Roger Harris
Too Many People in the World: Names Named
Steve Horn
Under Tillerson, Exxon Maintained Ties with Saudi Arabia, Despite Dismal Human Rights Record
John Berger
The Nature of Mass Demonstrations
Stephen Zielinski
It’s the End of the World as We Know It
David Swanson
Six Things We Should Do Better As Everything Gets Worse
Alci Rengifo
Trump Rex: Ancient Rome’s Shadow Over the Oval Office
Brian Cloughley
What Money Can Buy: the Quiet British-Israeli Scandal
Mel Gurtov
Donald Trump’s Lies And Team Trump’s Headaches
Kent Paterson
Mexico’s Great Winter of Discontent
Norman Solomon
Trump, the Democrats and the Logan Act
David Macaray
Attention, Feminists
Yves Engler
Demanding More From Our Media
James A Haught
Religious Madness in Ulster
Dean Baker
The Economics of the Affordable Care Act
Patrick Bond
Tripping Up Trumpism Through Global Boycott Divestment Sanctions
Robert Fisk
How a Trump Presidency Could Have Been Avoided
Robert Fantina
Trump: What Changes and What Remains the Same
David Rosen
Globalization vs. Empire: Can Trump Contain the Growing Split?
Elliot Sperber
Dystopia
Dan Bacher
New CA Carbon Trading Legislation Answers Big Oil’s Call to Continue Business As Usual
FacebookTwitterGoogle+RedditEmail