Middle vs upper class

[disneysteve]

The "average" could also be defined as the median which means 50% have more and 50% have less than that number.

Actually that isn't quite right. Median means if you put all of a set of numbers in numerical order, median is the number in the middle of the list.

Example: 10, 12, 19, 25, 37, 42, 58, 96, 109
Median is 37 as it is in the middle of the list and your definition would hold true.

However:

Example: 2, 7, 8, 8, 8, 8, 8, 8, 8, 8, 12
Median is 8 as it is in the middle of the list and your definition wouldn't be accurate.

[dfeucht]

Actually that isn't quite right. Median means if you put all of a set of numbers in numerical order, median is the number in the middle of the list.

Example: 10, 12, 19, 25, 37, 42, 58, 96, 109
Median is 37 as it is in the middle of the list and your definition would hold true.

However:

Example: 2, 7, 8, 8, 8, 8, 8, 8, 8, 8, 12
Median is 8 as it is in the middle of the list and your definition wouldn't be accurate.

OK - DS thanks for calling me out - you are right. I have a stats degree and should have been clearer.

I use the median a bit at work and it is on a vast and wide varying degree of values so explaining it as approximately 50% with more and 50% with less is what we usually do.

My guess is that my definition of median for retirement accounts for millions is probably close to appropriate (especially if I add approximately).

[bjl584]

This has been my understanding. So, what is the significance of the tax cuts for those making above 250k but below a million? Let's say hypothetically that a couple makes 300k per year and does not own a business, but is just a regular employee. What difference would the temporary tax cuts make? Is there a simple summary out there? Thanks everyone!

Current tax rate for a couple using your example would be 33%. That would revert back to 39.6% if the tax cuts ended. The theoretical couple would pay $19800 more in taxes per year if the extention were not passed. That's an over simplification of things, but it serves as a good example.

[MonkeyMama]

Current tax rate for a couple using your example would be 33%. That would revert back to 39.6% if the tax cuts ended. The theoretical couple would pay $19800 more in taxes per year if the extention were not passed. That's an over simplification of things, but it serves as a good example.

Except it's not really that simple since a large chunk of individuals/couples making between $150k - $500k are being slammed by AMT. As such, I wouldn't expect to see much "real" tax increase on the upper middle class, if tax cuts were not extended. The Bush tax cuts just pushed more of these people into AMT (higher taxes).

For $500k+, the above answer will do for simplicity.

[jIM_Ohio]

Even "29k" as an "average" is misleading. To some people 29k is 10 years expenses, to others it's not even 1 years worth of expenses.

Focus should be how many years of expenses are in savings, not what the dollar amount (mean or median) is in the account.

[jIM_Ohio]

Originally Posted by EEinNJ
jIM nailed this. In all the political posturing and sound-bite reporting they ignore the reality of the tax code as it stands. That is, they already go after people making far less than 250K, not by raising the tax on the bracket, but by phasing out deductions.

Tax-wise, the worst place to be is a high salary W-2 employee. If you're a business owner, you can pay yourself less, itemize and expense, defer compensation, have a SEP IRA, etc.

This has been my understanding. So, what is the significance of the tax cuts for those making above 250k but below a million? Let's say hypothetically that a couple makes 300k per year and does not own a business, but is just a regular employee. What difference would the temporary tax cuts make? Is there a simple summary out there? Thanks everyone!

It would be a 33% tax vs 39.6% tax I think. I do not know what the highest tax rate was before Bush II.

Impact would be this

41,827.25 +33% (or 39.6%) of any amount above 171,850.
or
108,421.25+35% (or 39.6%) of any amount above 373,650

So for $250k the tax at 33% is 33%(250,000-171,850)=25790+41827=$67,617
if the tax is 39.6% that tax bill is $72,774

so an increase of about $5000 in taxes at 250k

if income was 900k, the math is
35% (900,000-373,650)=$292,644
vs
39.6 (900,000-373,650)=$316,856

which is about $24,000 more in taxes at 900k

This assumes all income was W-2...