Is $250,000 a Year Rich?

This year, the presidential election has many issues voters must focus on. One of the biggest differences between Senator Barack Obama and Senator John McCain is the issue of taxes.

To sum it up McCain will continue with the tax cuts given to all taxpayers by President Bush. He has said he doesn't want to raises income taxes on anyone at any income bracket. Senator Obama has said he will revoke the tax cuts given to families who make over $250,000 a year. He will keep the cuts enacted by Bush and actually cut more for working families. He has said this will effect 95% of the taxpayers. According to Obama's website, he "will ask the wealthiest 2% of families, those making over $250,000 a year, "to give back a portion of the tax cuts they have received over the past eight years to ensure we are restoring fairness". His argument against keeping the tax cuts permanent is that they only benefit the wealthy.

What Obama fails to mentions is that the top 5% of income earners, pay 57% of the taxes. The bottom 50% pay 3% of the taxes. The question of fairness comes into play here. If Obama is elected he will enact this tax hike and the IRS will not ask anyone, but will threaten and imprison people who say no to the 'request'.

Many people think the rich don't pay their fair share and Obama has exploited that sentiment. Regarding the tax cuts, Obama has said the rich 'don't need it, nor did they ask for it". While some of the richest Americans, such has Hollywood actors, lawyers and financiers like William Buffet may feel this way, it is a bit presumptuous to assume that rich people don't like to keep more of the money they earn. Rich and poor alike prefer to keep money they have worked for. This is basic human nature and while one must always remember that a society cannot exist with enriching the government to pay for roads, police, schools and a military, the question then becomes, who has to pay and how much?

For those of wealth who don't think they pay enough, it is possible to pay more to the government when you file your taxes. Anyone can calculate a percentage they think is fair and write a check to the IRS on top of what is required by law.

People might be surprised to learn that many top earners are not living the high life like the executives at Freddie Mac, Lehman Brothers and AIG. Not all earners are CEO's of major corporations or hedge fund managers. Consider the Paley family in Los Angeles. Los Angeles along with New York and San Francisco, has a high cost of living index. One of the highest in the country. Steve Paley works in the film industry as a behind the line camera operator. He makes about $275,000 a year. He is paid over time and time and half. He often works twelve hour days. He thinks he has great job, but it is Los Angeles centric, otherwise he would move his family of five to a cheaper city.

His wife Annie, works part time as a Realtor, but has not sold anything this year as a result of the housing slowdown. Two of Paleys' children are attending private universities. One in Los Angeles, one in New York City. Tuition alone is about $50,000 a year. The family bought their 1800 square foot house in 1999 in West Los Angeles for $525,000. They refinanced in 2005 to take some money out to pay for tuition. Their monthly payment is $4,500 a month, not including taxes, insurance, utilities and maintence.

Paley pays close to $125,000 per year in state, local and federal income tax, close to triple the average yearly income of most Americans. "We live paycheck to paycheck. If I could afford a gardener or housekeeper, they would be the first to go if the tax hike happens." said Annie Paley. "As it is we drive seven and eight year old cars, do coupons and really watch our pennies." If their taxes go up, they have decided to donate less money to charity. "I figure the government will distribute the money." said Steve.

The Paley's find it ironic that when Obama describes the struggles middle class families are going through, he is in fact also describing the struggles of a "rich family".

"I wish we were rich." said Steve. "We're comfortable and I don't want to sound like a complainer, but we work as hard as people making a lot less. I sacrificed a lot to be able to earn this kind of an income, but here in LA, it ain't rich."

Along with housing costs and tuition bills, the family has had to pay for medical expenses and insurance premiums. One of their children suffers from seizures and is on medication daily. "We have pretty good insurance, but it doesn't cover everything." Said Annie. "It seems like I'm always writing a check for something."

Paley is also concerned with the actors strike and says many of the production people in the entertainment industry are still feeling the effects of the writers strike. "It's not a good time to be raising taxes on anyone. It seems sort of obvious to us." said Annie. In a city like Los Angeles, the Paley's are far from unusual. Most of their friends and neighbors are professionals and industry workers who earn a good income, but live a relatively middle class life.

What about those people that are not near the break point of $250,000? The million dollar a year types? Will they feel the effects or will they even notice the difference of a tax increase. The rich and very rich will always have loopholes created in order to keep more of their money. The system has been set up to encourage people to cheat the government. One can be assured if these high earners do feel the effects, they will adjust their budget accordingly. There will still be housekeepers, assistants, gardeners and masseuses, there will just be less hiring. Instead of a daily floral arrangement from the local Beverly Hills or Upper East Side florist, there will be weekly. The effect won't be difficult on the rich, but on the florist and her employees.

In times of financial instability and worry, people often look for a scapegoat. Someone they feel must pay for their fears, however raising taxes on the 'wealthy' as a campaign strategy looks to some like nothing more than class envy and verges on socialism. When Senator Joe Biden said paying taxes is patriotic, he veers into a mentality that isn't healthy for any society.

One has to wonder, why people with money are viewed as a pariahs. Why aren't more people looking to emulate hard working people of means instead of vilifying them. While it is considered immoral, (and rightly so) to blame the poor for their circumstances, it makes no sense to turn it on its head and blame the rich for theirs.

People like the Paleys have sacrificed and worked hard to be in the position they are in. There is no trust fund or inheritance for the Paley's. We as a society need to ask the bigger question of when it become a bad thing to be financially successful and how can we expect people to grow and expend their incomes and business, if they know they will be penalized at some point if they become too successful?