Wonkblog | Analysis
October 25, 2017 at 11:20 AM
There’s a prolonged pause when I ask Lyft driver Gaby Osegueda if her family is middle class. Her smile fades as she thinks about it for a while.
“Yeah, I think so. I don’t even know what the middle class is anymore,” says Osegueda, who with her husband earns nearly $100,000 a year in the San Francisco area.
The majority of Americans — 62 percent — identify as “middle class,” according to a Gallup poll conducted in June. It’s the highest percentage of people feeling that way since 2003. But a lot of Americans are like Osegueda: They feel middle class, but they aren’t sure what it means.
Just who exactly is middle class is in the national spotlight again as President Trump and Republicans in Congress craft tax cuts for individuals and corporations that they say will primarily benefit the middle. Vice President Pence called the plan, which is still being fleshed out, a “middle class miracle” this week. But amid this discussion, the middle class has been defined in different ways. Gary Cohn, Trump’s top economic adviser, recently discussed how a “typical family” making $100,000 a year would benefit. Trump has espoused the value of the plan to truckers, who make around $41,000 a year.
So what is the middle class? In America, an income of $59,000 a year (before tax) is smack dab in the middle, according to the U.S. Census. But it's not that simple.
There is no exact definition of middle class, and a deep look at the data shows a wide variety of individuals could be part of it, depending on where they live and how big their family is. The middle class in San Francisco, where Osegueda lives, is not the same as it is in Peoria, Ill. You can explore whether your household is middle class in this calculator (more details on our definition below):
Osegueda and her husband are in their early 30s. Both have college degrees — she also has a master’s — and launched careers in San Francisco’s booming tech industry. She worked in human resources, and he’s an engineer. They love San Francisco, but a year ago, they moved to Pacifica, a suburb, where rent is more affordable and their young son has space to play. Despite making nearly $100,000 a year, they aren’t sure they’ll ever own a home, at least not anywhere in the Bay Area.
It's not just San Francisco. A quick glance at the median income in these six American cities highlights how much it varies:
Newton, Mass.: $122,100
Washington, D.C.: $70,800
Birmingham, Ala.: $31,200
Flint, Mich.: $24,900
Now take a look at how median income varies by family size. The median income for single people in America is just $30,400. For a household of two, it jumps to $65,600. For three, it’s nearly $77,000. For four, it’s $91,000 (not far from Cohn’s definition of $100,000 for a family of four). You get the idea. The more people in a family, the more money they typically need to live a comfortable middle-class lifestyle.
When Americans talk about the “middle class,” they are usually thinking about a range, not just the specific income dead in the middle. Pew Research says the middle class runs from $42,000 to $125,000 (before tax). They define middle as a household of three with an income that falls between two-thirds and double the median income. By Pew’s calculation, just over half of American households are truly middle class, less than the 62 percent who self-identify that way.
To dig further into the data, The Washington Post opted to define middle class as American households with incomes that fall between the 30th percentile mark and the 80th percentile mark. It captures half of U.S. households, but the range is skewed high enough so that someone would have to be well above the poverty line and earn at least $16 an hour in a full-time job to qualify.
America’s middle-class ranges from $35,000 to $122,500 in annual income, according to The Post’s calculation. (The data is in 2016 dollars before taxes. You can see in the chart below how much the range varies by household size). Rakesh Kochhar, associate director of research at Pew, calls it a “fair” estimate. He helped craft Pew's definition.
The bottom line is: $100,000 is on the middle-class spectrum, but barely: 75 percent of U.S. households make less than that.
Others prefer to define middle class by the lifestyle you can afford. They think of middle class status symbols, such as being able to own a home and car and go on a family vacation now and then to places like Disney World or the beach.
Former vice president Joe Biden headed up a Middle Class Task Force, which put out a report in 2010 classifying middle class like this: “Middle-class families are defined by their aspirations more than their income . . .[they] aspire to homeownership, a car, college education for their children, health and retirement security and occasional family vacations.”
In Beattyville, Ky., a place dubbed “America's poorest white town,” median income is only $16,000 and a typical home costs only $53,000. Deep poverty also exists on many Indian reservations, such as the one in Blackwater, Ariz., where the median income is just $18,000.
On the other end of the spectrum are rapidly developing cities such as the San Francisco area, where Osegueda lives. The median income is a whopping $136,000 in Palo Alto, the hub of Silicon Valley. Even engineers at Facebook have been struggling to pay their rent. Being able to save for a home seems even more of an implausible scenario.
“My husband and I sometimes look at each other and say, what are we doing here? A house here costs a million dollars,” says Osegueda. “It's kind of insane when you think about it.”
Osegueda and her husband once lived in the trendy Mission District of San Francisco, but they moved out of the city when apartments on their block started renting for $4,000 a month for a one-bedroom. Osegueda has been staying home to take care of her 1-year-old son, but she drives a few days a week for ride-share service Lyft to help the family budget and mingle with people in the city she loves.
America's vast differences in pay and costs make creating a one-size-fits-all tax policy tricky. One of the biggest dilemmas Republicans face as they work on the tax bill is where to draw the tax bracket lines for people of different incomes. GOP leaders are still working out where to set the rates, and at what income level those rates will kick in.
It's even more complicated when you consider race and educational attainment. Eighty-five percent of African Americans and 82 percent of Hispanics make less than $100,000, according to U.S. census data. And 85 percent of people with only a high school education, a group Trump won handily in the election, make under that threshold.
Another big debate right now is whether to get rid of the state and local tax deduction (known as SALT). This allows people to deduct their state and local taxes from their federal income taxes, a benefit that's particularly lucrative for people in high-tax cities and states such as San Francisco. It could make a substantial difference to some middle-class families.
Republicans aren't the only ones who have had a dicey time defining middle class. In the 2008 Democratic primary, Hillary Clinton and Barack Obama famously sparred over this question. They ended up settling on $250,000 as the maximum threshold. Once Obama won the nomination, he campaigned on a promise not to raise “any form” of taxes on individuals making less than $200,000 and couples making $250,000 or less. Clinton resurrected that pledge in the 2016 campaign, taking heat from progressives for pandering to the well off.
Politicians almost always say their top concern is the well-being of the “middle class,” taking advantage of the vague definitions of the term to appeal to voters at a broad range of income levels.
But as Republicans look to rewrite the tax code, their proposal to sharply cut tax rates while also eliminating many tax deductions will have winners and losers — including among people who consider themselves middle class.