Tax Policy and the Upper Middle Class

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The upper middle class is essentially defined by high earned income.  These people use education, skills, connections or whatever to earn a good living at a job they enjoy.  The American Dream is to be Upper Middle Class.

The upper class is defined by unearned income.  Essentially the upper class gets all it's income from owning rather than working.  Bush tax cuts on interest, dividends, capital gains, etc. are all targetted at lowering the taxes on unearned income.

We need to alter the debate on tax policy to better point out this distinction.

The GOP and their upper class backers have been able to alter the debate to deceive the American public.  The upper middle class thinks that tax breaks on dividends and stock appreciation helps them due to their 401k and small side portfolios.  And the middle class supports this also because they are "only a couple promotions away" from being upper middle class.

But the truth is that the highest tax bills fall on the upper middle class because their income is all W2 income (earned).  35% of every additional dollar from working harder goes to taxes.

The upper class doesn't do anything, they just own stuff.  And their unearned income is taxed at a much lower rate.  Each additional dollar of dividends from owning more is taxed at 15%.  Same with capital gains on stock sales.  Some types of ownership (such as energy/mining rights) are taxed at much lower rates.

The debate on taxes does us (the progressives) a disservice.  The media (and us) constantly report "benefits mostly to households earning more than 200k/yr" when discussing the Bush tax cuts.

This is simply wrong.  It's conflating two statistics: annual income and earned/unearned income.  It is true that high annual income is associated with people who have high unearned income, but it is not true that simply getting a raise or working harder will increase your unearned income.

We need to point out that it is fundamentally wrong for anyone to be taxed on their earned income from work at a higher rate than someone else is taxed on their unearned income from simply owning.  They can do nothing but sit on the couch, or shop, or party, or pose for the tabloids and still the income rolls in.

That isn't true for upper middle class professionals, even if they earn over $200k/yr.  Every day they have to work and perform or they will find themselves no longer living the American dream.  And that's how it should be.

Working (regardless of pay) contributes to our Gross Domestic Product.  Owning doesn't.  Don't believe the bull about low unearned tax rates being good for jobs, economy, or whatever.  If you work, it's good for the economy.  If you don't, it isn't.

So when you get jealous of that cousin with the fancy car, or the manager with the big house, or whatever.  Keep in mind: they have to earn that money.

And in a fair system, they would pay less taxes on dollar $250,001 than anyone pays on their first dollar of unearned income.  Because in America, we all dream that someday we or our children will work hard and live the American dream.

Nobody dreams that their daughter will grow up to be Paris Hilton.  It's just not American.  Don't let the GOP fool you into supporting their bogus tax policy.