That's Rich -- but Maybe Not for Someone Else

By Joel Achenbach
Washington Post Staff Writer
Monday, November 26, 2007

Who's rich? Who's middle class? How can you tell the difference? By the "upper class," do we mean the yacht-club set, the ascot-wearing folks with the Thurston Howell III lockjaw diction and the monogrammed jodhpurs? Or does the upper class include all those harried, two-income suburban families who somehow burn through 200 grand a year and fret about orthodontic bills?

Class, always an awkward topic in the United States, made a rare cameo appearance at a recent candidates debate in Las Vegas. The two front-running Democratic presidential contenders, Sen. Barack Obama (Ill.) and Sen. Hillary Rodham Clinton (N.Y.), sparred over tax policy and quickly got entangled in the question of whether someone making more than $97,000 a year is middle class or upper class. That's upper class, Obama said. Not necessarily, suggested Clinton.

The Democrat generally considered to be in third place, former senator John Edwards (N.C.), didn't join in this particular discussion, but from his initial announcement almost a year ago in New Orleans, he has been the bluntest of all the candidates in describing a country divided between the haves and the have-nots.

Discussions about taxes usually have a class subtext. For instance, Republicans generally want to preserve or expand President Bush's tax cuts, which lowered marginal rates across the board but gave the largest benefits in real dollars to the richest Americans.

Government statistics show that most households' income has declined, in inflation-adjusted dollars, since 2000. Many workers' jobs have been outsourced to other countries, even as a new class of tycoons, the managers of hedge funds, has found a way to pay only a 15 percent marginal tax rate.

Still, if there are political opportunities here for Democrats, there are also hazards. Candidates don't want to lose votes by advocating a tax hike on the not-really-that-rich. The basic question: Who, exactly, can afford to pay more? Who is rich?

The exchange between Obama and Clinton began when the senator from Illinois said he was open to adjusting the cap on wages subject to the payroll tax. That's the tax that the government prefers to call a "contribution" to Social Security. Under current law, a worker pays a flat percentage (and employers match it) of wages up to $97,500. Wages beyond that aren't taxed.

Clinton responded by saying that lifting the payroll tax would mean a trillion-dollar tax increase, adding that she did not want to "fix the problems of Social Security on the backs of middle-class families and seniors."

Obama replied: "Understand that only 6 percent of Americans make more than $97,000 a year. So 6 percent is not the middle class. It is the upper class."

Clinton: "It is absolutely the case that there are people who would find that burdensome. I represent firefighters. I represent school supervisors."

Obama doesn't want to lift the payroll cap entirely, according to one of his campaign's senior advisers. Rather, Obama has said he would consider a "doughnut hole" arrangement, in which people would not have to pay any additional payroll tax until they had made at least $250,000 or $300,000. The adviser said of Obama: "He has always said that the people he expects to pay their fair share are households with income above 250,000."

Clinton has cited that same figure, saying households with income above $250,000 can pay the marginal rates set in the 1990s when her husband was president. She would also give married couples with estates worth less than $7 million an exemption from the estate tax, known in conservative Republican circles as the "death tax."

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