Feeling sorry for the ‘working wealthy’?

The Atlantic found this gem from an opinion piece by CNN contributor John Avalon. I’ll reproduce the relevant section here:

It is the gap between the "super rich" -- who really do have more money than they know what to do with -- and what might be called the "working wealthy," who are taxed as though they're rich enough to able to give away half their money.

These are individuals whose household income might bring them into the top tax bracket of $250,000 a year but who, with two parents working, might still find themselves struggling to stay in the stability of the upper-middle class in the expensive urban areas where they often work.

Much of the anger about the scheduled sunset of the Bush tax cuts for the increase in top-bracket taxes comes from this productive group of Americans.

First off, is he correct in saying that there is a class of working wealthy who spend most of their >250K a year? Well, it is expensive to put kids through private school while living in a nice neighborhood. The choice of neighborhood may well be determined by proximity to work and co-workers. So let’s allow Mr. Avalon the argument that such people exist and that they need their income. However, I find it hard to believe that they live hand-to-mouth and buy only the bare essentials. These people have extra cash, just not as much as you might think.

Which leads me to wonder, exactly how big are the Bush tax cuts and what would the effect be on these working wealthy. I know the US tax code is a complex beast and I’m Canadian so I’m probably missing some bits and pieces, but from what I’ve seen the parts of the Bush tax cuts that apply specifically to the wealthy are income tax cuts. In 2000, the year before the Bush tax cuts came into effect, the top two tax brackets for a married couple filing jointly were:

Tax Rate (2000)	Lower Bracket	Upper Bracket
36%	$161,450	$288,350
39.6%	$288,350	∞

And in 2010, they are:

Tax Rate (2010)	Lower Bracket	Upper Bracket
33%	$209,250	$373,650
35%	$373,650	∞

So, if we assume that repealing the tax cuts means restoring the old rates and not the old brackets, then someone making 250K will have to pay a whopping $1222.50 in extra income tax, that’s $101.88/month. These families are making $15810/month, after tax, on 250K of income, so I don’t think $100 is going to make a big difference. I’m sure other taxes take a toll, but it should be obvious that the increase in tax on the ‘working wealthy’ by repealing the Bush tax cuts should not be a significant issue.

I wonder if Mr. Avalon’s paragraph sounds like the same reasonable argument if you add in the results of the above analysis:

These are individuals whose household income might bring them into the top tax bracket of $250,000 a year but who, with two parents working, might still find themselves struggling to stay in the stability of the upper-middle class in the expensive urban areas where they often work. For these families, that extra $1222.50 goes a long way to making ends meet.

I didn’t think so either.