Putting It Into Perspective

Today's Yahoo Finance has a column up that finally discusses some things that my radio partner Jazz Shaw and I have discussed multiple times....

Ellen Parnell and her husband, Donald Parnell Jr., seem like the kind of well-off couple President Barack Obama has in mind when he suggests raising taxes on families earning more than $250,000 a year. A surgeon at Fort Sanders Sevier Medical Center in Sevierville, Tenn., he drives an Infiniti. They vacation at a beach resort every year.
Yet, right now he is working seven days a week. The car is more than a decade old, the vacation home in Sandestin, Fla., comes at a moderate weekly rate because members of Ms. Parnell's extended family own it. Her family of five would like more room than they have in their 2,500-square-foot home, yet they can't afford anything larger. The downturn has them skittish about paying for renovations.

Now many folks would say "Oh I would LOVE to have their problems instead of mine" and I can sympathize. Heaven knows I would not mind having a slightly larger home but then again, I certainly would not want to have many of the minuses that come with being a surgeon. For example, there is malpractice insurance, there are lingering medical school loans to pay back and THEN there is the mortgage, car payment, monthly utilities, college, taxes etc to think of.

However, the point that Jazz and I have made when we have had this discussion boils down to a simple real estate marketing phrase....location, location, location. A person making $250,000 would be able to live quite well here in Utah, but in New York City or California....

Changes to the tax code don't generally make adjustments for high costs of living in particular areas of the country.

San Jose, Calif., Mayor Chuck Reed calls a family living in Silicon Valley earning $250,000 "upper working class." That is about what two engineers working at a technology firm can expect to make, but "a family earning $250,000 a year can't buy a home in Silicon Valley," he said.

That is something that a simple statistical figure can not take into account! As the column points out, $250,000 IS in that top bracket of income earners. But those statistics don't take into account that most folks making that kind of money live in cities where the cost of living is much higher which eats up a larger portion of that income than it does elsewhere.

The reasons for the insecurity are that net worth is declining at the same time that expenses like education and health care, two of the biggest concerns cited by members of that income group, are going up faster than wages and income, says Heidi Shierholz, an economist at the Economic Policy Institute in Washington. "Those are the biggies. They are huge parts of the set of middle-class aspirations, and the prices of those have increased way faster than income." The bursting of the housing bubble makes that more stark.

These concerns, tied to a falling economy, are having a political impact for many people.

James Duran owns a human-resources company in Silicon Valley and is president of the Hispanic Chamber of Commerce in California. He supported Mr. Obama, but is worried about the tax proposals. He has laid off some employees in recent months and has been wondering how he can fund an extension of those workers' health-care benefits.

Mr. Duran said he and his wife earn about $400,000 annually, but "I'm barely getting by." They have high property and state taxes, as well as college tuition and savings to cover. "I'm an Obama man, but this side of him is a difficult pill for me," he said.

Congress is already backpedaling because of it...

Already, many members of Congress are seeking to scale back some of the proposed tax increases, which call for raising the top federal tax rates to 36% from 33% on households earning $250,000 or above.

...because they know that they have to face the voters long before President Obama does!

Meanwhile, many small business owners are cutting back their business in order to cut back their income in order to get in just under the cap.

Now to be fair, the Parnell's don't want pity....

"I'm not after sympathy. We are blessed. What I want is a reality check on what rich means," Ms. Parnell says. "I can pay my mortgage and I can buy some clothes. I'm not going without, but I'm not living a life of luxury."

While I happen to agree with Mrs. Parnell, I know that the Obama's and the rest of the class envy crowd don't. The Parnell's are the epitome of the "evil rich" that need to be punished. They won the "lottery" of life and therefore they have all the means to pay more. Isn't that the way the progressive theory goes?