Earlier this morning, TeacherKen posted a diary with a take on last night's dueling TV statements by Pres. Obama and John Boehner. In the comments, TooFolkGR posted a link to a different take by Megan McArdle over at the Atlantic.
In her response, McArdle stated that Obama's speech included:
The puzzling assertion was repeated that we need "millionaires and billionaires" to do their part; apparently, the "millionaire" category now begins at a household income of $250,000 a year for a married couple filing jointly.
STOP. Hold on a minute; there's a big part of the problem right there.
mil·lion·aire/ˌmilyəˈne(ə)r/
Noun: A person whose assets are worth one million dollars or more.
A millionaire isn't necessarily someone who earns a million bucks a year; it's someone whose assets are worth more than a million dollars.
Which, I'm guessing, would include most people who gross over a quarter-million dollars a year, married or not.
Whether that's the place to make the tax rate cut-off or not is a different argument, but yes, $250K+ income seems about right to define as "millionaire".
The thing is, this is not only a very common misconception among the general public, but it's also indicative of an even larger problem when it comes to getting Joe Sixpack to understand basic economics.
A better example: Obama tried to get it through people's skulls last night that raising the debt ceiling allows us to pay bills WE'VE ALREADY INCURRED, not FUTURE spending, which is a pretty Goddamned important distinction.
An even better example when it comes to understanding tax rates: Believe it or not, a huge number of people don't understand how tax brackets work, and it's this basic, and seemingly absurd misunderstanding that fuels a lot of fear/anger about raising taxes.
Let's suppose that the tax rates were set to the following:
$0 - $25,000: 0%
$25K - $100K: 10%
$100K - $1,000,000: 20%
Over $1,000,000: $40%
There's a lot of people--yes, even supposedly Smart People® like doctors, lawyers and EVEN ACCOUNTANTS (I once had a friend going for his CPA who believed this; needless to say, I don't have him do my taxes) about how much their taxes would be under this seemingly simple formula:
They think that if their income goes over the tax bracket threshhold, that they have to pay the higher rate on ALL of their income.
So, the guy making $24,999/year (no taxes due) honestly thinks that if he earns $2 more ($25,001), that he suddenly owes $2,500 in taxes, instead of what he'd actually owe: $0.10.
The guy making $99,999/year ($9,999.90 in taxes) honestly thinks that if he earns $2 more ($100,001), that his taxes have suddenly doubled to $20,000, instead of only being $0.30 more ($10,000.20).
The guy making $999,999/year ($189,999.80 in taxes) honestly thinks that if he earns $2 more per year ($1 million & $1 dollar), that he suddenly owes $400,000 instead of only owing $0.60 more.
How the hell do you have a rational discussion of tax rates when you have to deal with this sort of ignorance?