Who is middle class in America, and why does it matter?
Middle Class Politics
One favorite political maneuver is to come out in favor of the middle class. There are a lot of reasons for this. First, and foremost is that numerous studies have shown that no matter how much money they actually make, most Americans think that they are middle class. Thus, when a politician says they care about the middle class, most people make the assumption that the politician is talking about them.
On a secondary level, the value in favoring the middle class, is that there is a deeply American assumption that the middle class is where you will find the normal, hard-working American people. Those who are wealthy, can be assumed to be either exceptionally lucky, exceptionally hard working, or exceptionally smart, depending on who you ask. Realistically, it is all three. One need only look at the number of seemingly less than intelligent, or motivated, celebutaunt children who just luckily have wealthy parents, compared to the rags to riches stories of various immigrants or sons and daughters who were born into poverty. Whereas, the poor are the exceptionally unlucky, unhard working, or unintelligent. The fact that these assumptions are frequently proven untrue does not dissuade the concept that the middle class are regular, and those above and below are not.
As a politician, it is unseemly to be visibly in favor of the rich (no matter how much you and your policies actually do favor them). Politicians also tread a line of not being too in favor of the poor, lest it seem that they are favoring them over those in the middle who work so hard.
But, who, exactly, are the middle class?
The median household income (that is the amount which half of American households earn more than, and half earn less than) is $53,657. One can argue then, that those making $53,657 are definitely middle class. Logically, some amount on either side of the number should be considered middle class, but how close one needs to be is where it gets tricky.
Middle Class Taxes
For the most part, all the posturing about the middle class tends to come down most concretely to taxes. While numerous social policies, executive orders, or trade decisions can be said to be made in the interest of the middle class, the hard tangible location of most middle class favors occurs on American tax forms.
The most common middle class functions come in the form of phased out tax deductions. The idea is that these tax advantages are there to help and support hard working, middle class Americans, not to be abused by the rich.
Some of the most common tax deduction phase outs occur regarding retirement plans such as IRA contribution limitations, and a ceiling on deductible IRA contributions. The idea is that the tax code should encourage middle class people to take part in their own retirement planning, not for rich people to avoid taxes.
But, here is where the catch of the whole middle class thing comes in. In order to set these limits to make tax deductions work only for the middle class, one has to pick a number. For example, the maximum adjusted gross income allowed for a fully deductible IRA contribution for a married couples is $98,000. Does that make everyone earning over $98,000 not middle class?
Before you answer, consider that the maximum income for the student loan interest deduction for a married couple is $160,000. Does that make those earning up to $160,000 middle class?
The reality is that the concept of a middle class is fluid. For starters, the cost of living varies greatly depending upon where you live, as does the average salary. Furthermore, the size of the household has a very big impact on how far any specific amount of money goes. A family of four has higher expenses than a childless couple, for example.
Statistically speaking there is an interesting argument to be made about where the “real middle class” is. Let’s do some math.
The U.S. government sets an income level that is considered to be living in poverty. We can all agree that poverty does not equal middle class. Then, making the assumption that a true middle class must center around the median income of approximately $54,000, then we can calculate what the biggest possible, mathematically, sound band of middle class is.
The poverty level is calculated based on family size, while the median income is not. Thus, this is an inexact calculation, but considering we are just looking for a general band that we can call middle class, we can just pick something. In this case, we’ll use the prototypical family size of two adults and two children. For this family of four, the poverty level is $24,250.
So, one middle class calculation can be made solely on dollars. In this case, if we assume the bottom boundary between poor and middle class is $24,250, and the median income is $54,000, then middle class would be $24,251 to $78,250. That gives us an equal distribution of “middle” around the median income.
However, if one were to try and find an even number of people on each side of $54,000, then that is different math. In this case, according to the 2010 US Census, approximately 29.16 percent of Americans earns between $24,250 and $54,000. To get an even number of Americans on the “above” side we need to go to around $110,000 for middle class. That would give us the same number of people on either side of the middle.
Of course, these calculations all depend on a three tier strata in which there is only poor, middle, and rich. There is obviously more room for nuance in the form of things like upper-middle class, lower-upper class, and so on.
In the end, whether you are, or are not, middle class has no bearing on much of anything other than qualifying for government benefits and grants or qualifying for tax breaks. So, next time a politician talks about the middle class, they probably mean you… unless they’re talking about taxes, in which case, you can look up whether they mean you.