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Your Take: $250,000 vs. $500,000 vs. What Is Rich?

Here’s an interesting question that popped up in my head as a result of Warren Buffett’s op-ed last week – should the bar for “high income” be at $250,000, $500,000, or some higher value? Should the bar be at a dollar amount relative to median income or should it be a calculated based on how many taxpayers it would capture?

In 2008, 4.3 million tax returns had an AGI above $200,000 [3]. That represents 3% of the total returns that year. Median income for 2008 was $52,029 [4], or approximately one fourth of that figure.

My feeling is that we should probably tie our tax returns more to the median income, rather than calculating approximately how many people it will affect. I think $250,000 and $500,000 are simply nice round numbers people like to use but the reality is that very few people make over $200,000. 3%. Three people out of a hundred earned more than $200,000 in 2008 (granted, I know things can be deferred and there are other games to play but let’s keep it simple).

This makes me wonder… does it matter? There will be so few people, percentage-wise, that are affected if the bar were set at $250,000 compared to $500,000 that I hope this isn’t a sticking point!

What do you think? Where do you think the bar should be?