Does $200,000 make you rich? Not in New York
I remember, many decades ago, hearing Ted Kennedy propose a ban on mergers between large companies. I thought it was a great idea — until I heard his definition of large. It was something like $100 million in revenue. Okay, in today’s dollars, make that, say, $700 million (my guess is, inflation hasn’t been that bad). So much for exit strategies for successful small companies, for economies of scale by combining two medium sized companies, for all those good business moves that help US companies be more competitive without violating the letter or the spirit of antitrust legislation. Kennedy had a great idea (“too big to fail” would not have entered our vocabulary) but the wrong cutoff point. Fortunately, it never passed.
I feel the same way about Obama’s proposal to impose a hefty tax on individuals earning more than $200,000 a year. Maybe in Iowa that’s a lot of money. In New York City it’s barely middle class. Once you’ve paid the rent (or maintenance), you probably couldn’t afford college tuition for your kids.
I’m all for the graduated income tax, for the idea that rich people should bear more of the burden. But look at what happened with the alternate minimum tax — it started out as a good idea, they forgot to index it for inflation, and now it is hitting a huge swath of people who are not rich by anyone’s standards.
So we have to have a better definition of rich. For one thing, we have to change that definition when inflation eats away at disposable income. And here’s a radical thought: How about an income tax that reflects the regional cost of living?
It is nonsensical to talk about CPI or other national gages. If you live in Manhattan, $200,000 will buy what $100,000 buys in rural America. So sure, tax multi-million-dollar bonuses, but don’t pretend that $200,000 is an obscene amount in a high-cost region.
And an alternate plan: If for some reason it is not feasible to let taxes reflect regional costs, how about letting everyone deduct housing costs? Not just mortgage interest, but rents, common charges, etc. That would go a long way toward equalizing the tax burden, no?