Economic Snapshot | Budget, Taxes, and Public Investment

Households making between $250K and $1M a year are not ‘middle class’

President Obama’s long-held position on the Bush-era tax cuts has been that taxpayers making less than $250,000 ($200,000 for single filers) should not pay more in taxes. Until a few weeks ago, most of the Democratic leadership in Congress agreed. Minority Leader Nancy Pelosi, however, recently indicated that she would support raising the threshold to $1 million. In expressing their positions, both the president and Pelosi refer to taxpayers below their preferred threshold as “middle-class families.”

The figure below shows the distribution of tax filers by adjusted gross income. First, it illustrates where most taxpayers—i.e. the middle class—lie on the income distribution; according to IRS data, over 87 percent of taxpayers make less than $100,000 in adjusted gross income. Second, it shows just how far removed individuals making just under $1 million—which is more income than roughly 99.5 percent of Americans and nearly 20 times the average household—are from the middle class.

Where exactly the “middle class” begins and ends in the income distribution is a question that probably has no firm answer that will satisfy everybody. But the data in this figure strongly suggest that any reasonable definition of it ends well before even the $250,000 threshold.

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