what's middle class to you?

[walkitout]

http://www.usnews.com/blogs/the-home-front/2009/02/26/mortgage-interest-deduction-on-the-chopping-block.html

The budget proposal phases out (may not be the right terminology) the mortgage interest deduction. As far as I'm concerned, there should not _be_ a mortgage interest deduction. There should be a _rent_ deduction. The current set up is heinously regressive. The commentary in the above URL is truly appalling, in that it quotes a guy from NAR saying:

"this proposal will increase the cost of housing for many middle-class families" in places with expensive housing.

There is also a quote from this article:

http://online.wsj.com/article/SB123559630127675581.html

The WSJ is careful to note that this proposal affects "Upper-Income Americans" -- after all, the brackets affected in TY2009 _start_ with an AGI of $208K+.

What do you think -- does the "middle" class include couples making $208,000 AGI?

Comments

[ethelmay.livejournal.com]

"Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments."

Either Laura Meckler or the WSJ copy editor was asleep on the job over those sentences. They don't mean what she meant to say at all.

The median household income in 2007 was about $51K. It takes a pretty broad definition of "middle class" to include couples making over four times as much (especially since the $51K isn't AGI as far as I know). But people want to believe that the middle class is more economically diverse than the upper class. It makes sense that it should be so, but it just ain't so. Even confining the range of the rich to those who make six-figure incomes, leaving out all above, there is obviously a much bigger range between 100,000 and 999,999 than there is between, say, 40,000 and 99,999.

Meckler/WSJ didn't use the term "middle class"

[walkitout]

Other than to note that Obama is extended tax _cuts_ to them; they are quite clear that the change to the mortgage interest deduction affects "upper income" Americans.

It's the idiots at NAR and/or The Home Front blog at US News that I'm aiming at.

Re: Meckler/WSJ didn't use the term "middle class"

[ethelmay.livejournal.com]

Oh, I know, I didn't mean to imply that they did. It's just that Meckler got the terminology all catawampus. If you're in the 33% bracket, you don't get to deduct 33% of mortgage interest. You deduct 100% of your mortgage interest, and therefore don't have to pay income tax on any of it, saving you 33%. So I was going, wow, in the WSJ she got away with being that sloppy? But it really wasn't related to the points you were making at all.

[jinasphinx.livejournal.com]

My gut reaction is heck no, $208k AGI is not middle-class. Even Mitt Romney agrees. :) http://www.factcheck.org/askfactcheck/is_there_a_standard_accepted_definition_of.html

Although then I wonder, is my little family middle-class? Our AGI is I think about twice the median household income ethelmay cites. But it feels to me like we're middle class: we have a comfortable suburban lifestyle and we don't sweat eating out or book/DVD spending sprees. But we do sweat about useful health insurance, how to afford daycare for a hypothetical second kid, or what if one of our 14-year-old cars needs major repair.

I agree there should not be a mortgage interest deduction. Besides being regressive, it's there to encourage people to borrow money. We're now seeing how that approach built a house of cards on sand. I'd like to see an end to people budgeting by interest rates and monthly payments, and getting back to "What is the lump sum?"/"Do I have that much in my piggybank?"

Re: Meckler/WSJ didn't use the term "middle class"

[walkitout]

Yeah -- I still haven't been able to figure out what Obama's change is in the mind of Meckler/WSJ. It is horrendously sloppily worded.

being middle class sucks

[walkitout]

I think if we warp the income-based definition of middle-class to make it feel as prosperous as it felt in the past, it detracts from consciousness raising on the subject of how precarious being middle-class these days is.

The budgeting-by-payment has been going on for a lot longer than I realized a couple years ago. Before the installment-loan mortgage invention under the New Deal, home mortgages were really weird lump sum loans that were repaid as lump sums (think a balloon payment with no prospect of refi). They were used in conjunction with a co-op scheme and a _lot_ of savings to buy land, build a house on it, etc. That whole house of cards fell apart in the Great Depression (back in the days when calling it a Depression was a nice euphemism for Panic).

I don't know that we'll ever live in a world where most people buy their homes with cash (or, presumbly, rent). I'm not sure I want to. I just want to go back to the Good Old Days of 6% interest on a 30 year fixed. ;-)

It'll never happen? Ha! We're here right now.