Last week, a number of House Democrats sent a letter to Speaker of the House Nancy Pelosi (D-CA) stating their objection to allowing the Bush tax cuts for the richest two percent of Americans to expire. Some of these Blue Dogs, who are breaking with President Obama in order to borrow and spend $830 billion on tax breaks for the richest Americans, are relying on discredited Republican arguments to bolster their position.
However, some of them are also claiming that a household earning $250,000 per year isn’t actually rich, once geographic differences are taken into account. “Where we come from, those people are living paycheck to paycheck,” said Rep. Michael McMahon (D-NY).
First, as Daniel Gross ably pointed out, “even if you look at the wealthiest metropolitan areas — Washington ($85,236), San Francisco ($76,068), Boston ($70,334), and New York ($63,957) — a quarter of a million dollars a year dwarfs the median income.” Not only that, but as a new report from Citizens for Tax Justice pointed out, two-thirds of the House Democrats who are looking to preserve the Bush tax cuts for the rich come from districts with a below average number of households making a quarter-million per year:
Of the 31 House Democrats who signed the letter in support of extending the Bush tax cuts for the rich, 22 represent districts where the share of taxpayers rich enough to pay higher taxes under Obama’s plan is less than the national average of 2.1 percent. Of those 31 House Democrats, 13 represent districts where less than 1 percent of taxpayers are rich enough to face higher taxes under Obama’s plan.
Even in McMahon’s district, just two percent of households earn that much. In total, there are only 30 districts (out of 436 in the country) where at least 5 percent of households would be affected by the expiring tax cuts. Just two of those districts are represented by House Democrats who signed the letter to Pelosi.
It’s also worth remembering that those making more than $250,000 would still receive a tax break on their income up to that amount, relative to where their tax rate was in the 1990′s. Under Obama’s plan, a millionaire will still pay roughly $6,300 less in taxes than they would if the entirety of the Bush tax cuts expire. So even the exceedingly few households represented by these lawmakers that would be affected if the Bush tax cuts expire would be keeping some of their tax breaks.
The House Democrats also asserted in their letter that the richest two percent of taxpayers are responsible for 25 percent of consumer spending. However, CTJ noted that these households account for 21 percent of total pretax cash income and “their share of total personal consumption is certainly not higher than their share of total income.” In all, this two percent of taxpayers is responsible for roughly 8 percent of consumer spending, CTJ estimated.