Don't Mess With Taxes

Rich. Well-to-do. Millionaires. Billionaires. Affluent. 1 percent. Wealthy.

All those terms are being tossed about as Congress debates, yet again, how much tax the country's top earners should pay.

But the underlying discussion is just who are these people?

Most of us have an idea of who's rich. We think Bill Gates, Warren Buffett, Larry Ellison and beau coup entertainment and sports stars.

If we look beyond the U.S. borders, there's Carlos Slim Helú of Mexico and Bernard Arnault of France, which is having its own taxation controversy.

Now some U.S. taxpayers who definitely aren't in the same league as those folks are worried about being lumped in the wealthy category when Congress and Obama finally finish their tax rate deal.

Rich at $200,000: At issue is the income level that Obama wants as the threshold at which higher rates kick in.

Since the president's first campaign for the White House back in 2008 and repeated this election year, Obama has sought to increase the tax rates for individuals earning more than $200,000 a year and families with adjusted gross incomes of more than $250,000 a year.

The argument is that higher tax rates starting at those income levels will do more to raise the $1.6 trillion in additional revenue that the Administration seeks than would simply reducing tax breaks for higher earners.

What amount qualifies as rich? And those earning levels have become the definition of rich, at least when folks are talking taxes.

But many -- OK, most -- of the taxpayers on the low end of the income threshold feel far from rich.

I understand their worries.

No, the hubby and I aren't stepping over the $250,000 line or even nudging it.

And I grew up in a small West Texas town at a time when $1 million, not the billions now pocketed by the super wealthy, was the definition of rich, even though it didn't take nearly that much for someone in my hometown to be perceived as wealthy.

Then I moved. And I moved to some really high cost of living areas: Washington, D.C., and Palm Beach County, Fla.

That's when I learned there's rich and there's rich. I met people who were making money that definitely would qualify them as rich back in West Texas and similar locales across the United States.

The funny thing, though, was that while these folks certainly were doing fine, they weren't rich by any stretch of the imagination, especially in those areas.

And they are the people who would see tax increases that the president and others say are aimed at the wealthy.

Who would pay how much? An analysis by the Tax Policy Center (TPC) found that taxpayers with adjusted gross incomes in the $200,000 to $500,000 range would face an average tax increase of around $3,300.

Those nearer $200,000 would, of course, see less of an increase while those at the half million earnings mark would pay more.

Taxpayers with adjusted gross incomes of more than $1 million would see average increases of almost $185,000, according to the TPC study. That average is affected by the higher taxes on the ultra-wealthy, such as Gates, Buffett and Ellison.

Right now, folks earning at the low end of that range are in the 33 percent tax bracket. They don't make it to top earner status in 2012 until they take in $388,351 or more.

Time for more rates? In previous tax and budget discussions, both in December 2010 and the summer of 2011, some members of Congress, including Democrats from states that have a lot of higher income earners, wanted to add another tax level for true millionaires and richer.

Several states have opted to add a special top rate for millionaires. A federal millionaire surtax hasn't been mentioned during the fiscal cliff battle ... yet.

But as the tax and spending discussions continue, don't be surprised to see it thrown into the mix. Even some Republicans are saying they would back a millionaires' tax in return for some other concessions from the Democrats.

Yes, it would complicate any deal, forcing lawmakers to come up with even more ways to raise revenue and/or cut spending.

And it brings up another campaign issue: fair share of taxes. You can bet folks who just cross the $200,000 and $250,000 income lines are going to be making that argument to their Representatives and Senators.

You also might find these items of interest:

• Tax the rich, whoever they are
• Representing the rich ... or not
• 'Tax us more,' say some rich Americans