You don’t get a stimulus check if you make over $150,000. But is that really ‘rich’?

Take a look at the economic reality of most American families and it’s a very different story to what some are saying in Washington DC

(AP)

I live near a middle school, and one of the easier ways to get a laugh from politics these days is to walk the dog down there and count the limousines where the teachers park. I also like to bathe in showers of diamonds by the police station across town. You see, as Joe Biden prepares to sign the $1.9 trillion coronavirus rescue bill, the left — and the right, each in its own way — is trying to sell the idea that teachers and police officers are “rich.” 

Democrats are suddenly seized — or the online part of the party is — by the notion that $150,000 a year in combined family income makes one rich. Hilarious, if you’ve run such a household. At the same time, Republicans are galvanized by fury that public employee unions are calling such folks elitists. 

It’s not smart, for either side. But this argument is what undergirds the stimulus fight, and fights to come over student loans, green cars, childcare support, health insurance and taxes. 

It’s important to consider what words mean. Because, obviously, we’d all like “the rich” to get less from the government dole. And at least one party would like “the rich” to pay more in taxes. 

So what is rich? Specifically, does earning a family income of $150,000 make you rich? (Quick answer: No, unless you’re a kid. But read on). The dictionary gives several definitions, of course. I lean toward “rolling in it” and “opulent,” which come closer to the idea that one must separate themselves from the pack before we call you wealthy, or ask you to pay an especially large share for society’s public goods. Or, readers should think about ordinary obligations of middle-class life, and how manageable they are on $150,000 a year. 

Let’s begin with college, health insurance, childcare and a house. Most people agree they’re not the exclusive province of Scott Fitzgerald characters who built homes atop hidden diamonds as big as the Ritz-Carlton hotel. The average private college has a list price of $51,000, says the College Board, with top schools commanding $80,000. A flagship state school runs about $25,290. Even Notre Dame, beau ideal of ethnic-Catholic subway alumni, is $78,000. Somewhere, Rudy’s having panic attacks. 

The average corporate-provided health insurance policy for a family of four costs $21,342 on average and can top $30,000, with workers themselves picking up about $7,000 in premiums and deductibles, according to the Kaiser Family Foundation. This is only manageable because the federal subsidy for health insurance is the largest loophole in the tax code. 

Then think about houses. The average house in California — only the middle tier of homes, says Zillow — costs $625,000. In northern New Jersey, it’s basically half a million, depending on the county. In Seattle, it’s more than $800,000. These few accoutrements of middle-class life can consume all the after-tax income of a $150,000 family. 

The erosion begins with 10 percent retirement savings, and the $20,000 a Motley Fool analysis says a family in this bracket pays in taxes. Add $50,000 for college — at that level, you don’t get federal aid — and $25,000 to $30,000 for house payments or rent, as well as the $7,000 for a workers’ share of health insurance. You’re under $40,000 before childcare, which Moody’s Analytics says consumes about 10 percent of affected families’ pay, and before putting a crumb of food in anyone’s mouth. You have less in California, or states with higher-than-average local taxes. 

Now consider what household makes $150,000. Where I live, a state trooper makes $111,000 after a few years. Nationally, teachers made about $62,000 as of 2018, according to the federal Education Department. Is “elite” a two-parent household, headed by a teacher and a cop? Really? 

Further confirmation that $150,000 isn’t rich comes from the Census Bureau, which points out that people’s incomes rise with age. The median household in a US metro area headed by a 45- to 55-year-old couple with two kids is $149,000. Awfully close to $150,000, that median. 

Why does this matter? First, because we’ll decide this year how to income-test a lot of benefits, from tax credits for buying electric vehicles to federal support for childcare to working families. Down the road, we’ll look at which folks should pay higher income-tax rates. Around $150,000, it’s fair that a lot of federal benefits should phase out. That’s enough income for people to stand on their own, even if it’s not enough for beach houses. 

That’s why most proposals to make state college education tuition-free assume the full benefit applies to families earning $125,000 or less, for example. And at some point — maybe 2023 — look for a tax hike. But it should kick in at incomes way above $150,000. 

When Barack Obama raised taxes, the top rate rose at $400,000 in income. Politically, this is the difference between raising taxes on 10 percent of all households — which includes nearly half of middle-aged families with kids — and a little more than 1 percent. And Obama’s top rate was 39.6 percent, not the 70 percent liberals have convinced themselves is necessary. 

Fortunately, sane third-way redistribution is plenty enough to narrow inequality. Gaps between rich and poor narrowed notably under Obama, thanks to tax hikes and gains in health insurance coverage under Obamacare. For Democrats, the point of smiting the rich — in the finest Rooseveltian tradition — is to win elections to help poor and working people. That’s not helped by selling an out-of-touch fantasy version of what being rich is.