The Not-So-Compelling Plight of the Somewhat Rich

Gary Fields in The Wall Street Journal has one of these articles making the point that a family making slightly over $250,000 doesn’t necessarily feel all that “rich” when it comes to facing a tax hike from Barack Obama.

What the story doesn’t do is put this issue in the appropriate context of what an increase in the marginal rate really implies. If you raise taxes on “people making over $250,000” that means an increase only in the 250,001st dollar and onward. It’s not, in other words, as if a guy earning $249,999 and a guy earning $250,001 will be paying radically different amounts of taxes. In other words, though if you’re earning $5 million a year, Obama’s plan really will saddle you with a big tax increase, a person who’s earning $260,000 and feels that he’s facing a basically middle class economic situation is only going to be facing a very small tax increase. And however much our $260,000 a year guy may feel not so rich, surely he can agree that $260,000 is a lot more than $130,000 or $65,000 so it’s hardly absurd that he might pay a slightly higher rate.

Basically, even if you grant the premise of the story there’s no actual problem here. That said, I wouldn’t have a problem with launching a new, slightly higher rate, starting at $500,000 and a higher one starting at $1 million and another at $2 million another at $4 million another at $8 million and another at $16 million. I don’t see any reason to think that the progressivity of the scale should max out at $250,000 when obviously there’s a huge difference between someone earning that much money and someone earning ten times that amount.