Obama's 'Buffett tax' plan hurts hardworking average families, too
Obama’s new tax initiative supposedly targets millionaires, but he is also proposing limits to deductions and exclusions for families making $250,000 or more. That would hurt average, hardworking families living in high-cost regions.
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While the “superrich” may make heavy use of loopholes and deductions, these normal families are certainly paying their fair share. Limiting the deductions they can claim only increases their effective tax burden. In fact, because our graduated tax code is not adjusted to reflect actual wage to expense ratios, families of all income levels in high-costs areas already effectively carry a heavier tax burden than those with equivalent standards of living in other areas of the country.Skip to next paragraph
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A study conducted by the Center for an Urban Future showed that a Manhattan family of four must earn $60,000 a year to have the equivalent standard of living to a family surviving just above the poverty line in Atlanta. Higher incomes in pricey areas bump families of all income levels up to the next federal tax bracket, and state and local taxes in these communities exact a heavy toll. Though these families may be just getting by at a standard of living far below those at a $250,000 income bracket in lower-cost areas, they pay taxes at the same level.
While families can and do make the choice to leave their current jobs and social environments to move to low-cost areas, urban flight does not solve the overall problem – nor it is possible for every family. It is simply more costly to live in certain areas in the United States, and salaries in those areas reflect that fact. There are more than 1.5 million people living in Manhattan alone; they can’t all move to Atlanta.
[Editor's note: The original version of this piece overstated the population of Manhattan.]
In this tough economic environment, families spending every penny to make ends meet deserve to be treated with respect, whether those families are struggling in Indianapolis, Atlanta, or New York. Families with an income of $250,000 in high-cost areas are already shouldering more of a tax burden than their fellow citizens. Obama is asking them to carry even more.
Instead of disproportionately penalizing high-earners in expensive regions, the president should be proposing tax initiatives to help these families. Rather than limiting the deductions these families can claim, Obama should propose adjusting tax rates according to an average family’s geographic cost of living. This would help – not harm – the hardworking families the president says he wants to protect.