Joining Washington’s one percenters takes more than the U.S. average

April 21, 2012

At the Collection at Chevy Chase, a $1,100 purple python pump gleams in the window of the Gucci store. Across Wisconsin Avenue at TTR Sotheby’s, sales agents prepare to sell a $32 million riverview home near Annapolis — one of the most expensive properties ever listed in the D.C. area. And at a nearby Whole Foods, BMWs idle in the circular drive as shoppers dash in for $19.99-a-pound Dijon-crusted rack of lamb.

Long before “the 1 percent” became part of the political lexicon, a growing number of highly educated, dual-income families were driving the region’s top income levels into the stratosphere.

To be considered part of the 1 percent in this area, it takes a household income far above the national average of $387,000. The gateway for the region is $527,000. In the District, the top 1 percent of households bring in at least $617,000; in Montgomery County, more than $606,000; and in Fairfax County, $532,000, according to an analysis of census statistics by The Washington Post and Sentier Research, a firm that specializes in income data.

Most of those people making the big bucks are exactly who you would expect: doctors, lawyers, chief executives, managers and management analysts. Eight in 10 households in the 1 percent are white. Just 6 percent are black. Many of the one-percenters are clustered in affluent enclaves in Northwest Washington, Bethesda and Chevy Chase.

The percentage of area households with impressive, if not eyepopping, salaries has grown as well. In 1980, just 3 percent of households in the region had incomes that were the equivalent of $200,000 or more in today’s dollars. Now 13 percent do.

Meanwhile, middle incomes across the region have inched up over the past three decades, after being adjusted for inflation, and the incomes of the bottom fifth have stayed essentially flat.

With such economic disparities fueling voter resentment, President Obama has made addressing income inequality and raising taxes on the rich hallmarks of his reelection campaign.

Last week, he and Mitt Romney traded jabs over Romney’s wealth, with the president remarking, “I wasn’t born with a silver spoon in my mouth,” and his Republican opponent retorting that Obama ought to focus on “attacking problems” instead of “attacking people.”

State and local officials are also debating just how much of their budget shortfalls should be borne by the rich. Maryland lawmakers are split over whether to raise taxes on high-earners.

Shortly before Occupy protesters took up residence in two downtown parks, waving signs that said “Eat the Rich,” the D.C. Council voted 7 to 6 to impose a higher tax rate on the city’s wealthiest residents. The measure is expected to bring in more than $106 million over four years.

Some local millionaires say the political rhetoric has made them feel unfairly targeted.

Raul Fernandez, a tech entrepreneur and vice chairman of the company that owns the Washington Wizards and Capitals, said he had a surreal moment this year when he was accosted by Occupy protesters on his way into a black-tie dinner at the Capital Hilton. He grew angry as they called him names and doused him with glitter.

“It’s all about the vilification of the so-called 1 percent,” said Fernandez, who is the son of Cuban and Ecuadoran immigrants and grew up in modest circumstances in Silver Spring. “They paint it with one big brush. They are truly trying to make it evil.”

Fernandez said he is so turned off by the debate that he plans to vote for anybody but Obama this year, even though he contributed $30,000 to Obama’s election effort in 2008.

“It’s one class of people driving another class of people against them,” he said. “That’s the most anti-American thing you can do.”

Spreading affluence

When Patricia Baptiste was growing up in Chevy Chase in the 1950s and ’60s, the neighborhood was far less affluent than it is now.

“Everybody lived in three-bedroom colonial houses with nice yards,” said Baptiste, now chair of the Board of Managers for Chevy Chase Village.

The fathers worked for the federal government, and the mothers stayed home to raise the children. “That was the core of Bethesda and Chevy Chase. There was a lot less ostentatious living.”

Today, BMW and Mercedes-Benz cars are common in her neighborhood. Baptiste is one of a handful of people on the block who cut their own grass. And she and her husband drive past the Collection at Chevy Chase, which opened six years ago, and wonder who shops there.

The wave of wealth has made it increasingly harder to crack the Washington area’s 1 percent. Two decades ago, a household income equivalent to $368,000 in today’s dollars was enough to make it. Now it takes 43 percent more.

The District has the region’s most extreme income gap between rich and poor, but the regional imbalance is less than in some other places in the nation.

One-percenters account for 6 percent of all personal income in the Washington area, according to a Post analysis. That’s less than the national average as calculated several ways. And the region lags far behind the metropolitan area with the highest minimum household income for one-percenters: $906,000 in Stamford, Conn., home to many corporate headquarters and financial institutions.

Nevertheless, income inequality in the region, according to the Post analysis, is comparable to what is found in New York, Miami, Los Angeles and New Orleans, metropolitan areas known for big income gaps.

The regional income statistics reflect a profound shift in the region’s economy and lifestyles.

The percentage of adults with college degrees is higher in the Washington area than anywhere else in the nation, and there has been a sharp rise here in households with two salaries from professional jobs.

Many area residents now work for government contractors in the technology, biotech and security fields rather than for the federal government itself.

The top 10 percent of Washington area households account for almost a third of the total income, and only the San Jose area, the heart of Silicon Valley, requires a bigger paycheck to break into the top 20 percent.

The spreading affluence has transformed local neighborhoods. Montgomery, for example, was once known as a bedroom community for higher-ranking civil servants. In the past 30 years, however, as the local economy has diversified, the percentage of households with incomes above $200,000 in inflation-adjusted dollars has tripled.

In the region, only Northwest Washington has a higher concentration of one-percenter households than the area that includes Bethesda and Chevy Chase.

Although Washington’s one-percenters can afford to shop at the Collection at Chevy Chase or Tysons Galleria, experts say, they are more likely to spend their money on travel, private school tuition for their children and charitable giving.

Ten years ago, for example, the Community Foundation for the National Capital Region — which helps individuals and business leaders decide where to donate their money — had 350 funds with assets of $240 million. Now it has nearly 900 funds with assets of $354 million.

“What they’re doing with their money is not necessarily buying a $40,000 Vuitton bag,” said Aba Bonney Kwawu, president of the Aba Agency, a public relations firm that specializes in high-end retailers. “They’re spending their money on private school tuition and taking the whole family to Greece.’’

To a degree, the recession did puncture the bubble of such one-percenter enclaves as Chevy Chase, Baptiste said. She noticed more stores closing and storefronts taking longer to rent, which suggests that “people can do without what they’re selling.” People who can afford higher gas prices drive to Kensington to save on gas. And some retirees are downsizing their housing to stretch fixed incomes.

But she said the sacrifices are largely symbolic.

“We don’t worry about the things that people who really are affected by this economy worry about,” said Baptiste, who is not in the top 1 percent herself. “People with lots of money looking to save 15 cents on a gallon of gas are fooling themselves into thinking they’re affected.”

Maintaining a lifestyle

In interviews across the region, some one-percenters expressed surprise that their salaries elevated them into this elite category of earners, and they were quick to point out that, in an area with the country’s eighth-highest cost of living, they didn’t have as much left over for luxuries as those in the 99 percent might imagine.

But some disconnect was apparent. A one-percenter who lives in a million-dollar home in Potomac called it a “typical, stereotypical . . . very normal, upper-middle-class neighborhood.” But he said that he had just returned from a business retreat on billionaire Richard Branson’s private island and that his neighbor owns a stake in a private jet.

Even in Prince George’s, the county with the lowest threshold for the top 1 percent — $292,000 — one-percenters bring in nearly six times the U.S. median household income.

Staying grounded

Stacey-Ann Baugh, an assistant professor of psychology at Trinity Washington University, lives with her husband and two children in a gated community in Upper Marlboro. She said she works to keep her family grounded and avoids indulging the children — ages 7 and 9 — with big allowances and pricey electronics. They don’t take marquee vacations, and they eat out at relatively modest restaurants in Annapolis and at National Harbor.

“I do think the D.C. crowd gets completely insulated from the rest of America,” Baugh said.

But given Washington’s high cost of living, said her husband, Stefan Baugh, the couple needs hefty incomes to maintain their lifestyle. “Once you pay for a house, a car and child care, it’s not that much money,” he said. “You feel like regular middle-class people.”

Stefan Baugh already drives a Jaguar, but he dreams of being able to afford any car he wants.

“It would be great if I could drive by the Ferrari store and say, ‘I want that red one,’ and just buy it,” he said.

Stefan Baugh recently left his job as a partner in a large law firm to start a private equity company with two colleagues. He was motivated, he said, by a desire to create something as a legacy for his family — and to boost his earnings.

“If this goes the way I want it to, I could literally be a billionaire someday,” he said. “If I continue practicing law, there is zero chance of becoming what I consider wealthy.”

Staff researcher Magda Jean-Louis contributed to this report.

Carol Morello writes about demographics and the census, as well as a lot of other stuff that comes down the pike. She has worked at the Washington Post since 2000.
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