Coruscation

A new study from the Brookings Institution quantifies that price gap, and the differences between the cost of living near a high-scoring public school and a low-performing one are striking.

The study, by Jonathan Rothwell, a senior research analyst in the Metropolitan Policy Program at Brookings, found that housing costs in the nation's 100 largest metropolitan areas were an average of 2.4 times as high - a difference of $11,000 a year - for homes near schools whose average test scores put them in the top fifth of schools in the area, compared with schools in the bottom fifth.

That means that a family would have to pay more per year to move into a good public school zone than for their children to attend some private schools. Translated into an average home price, the gap works out to an average of $205,000 more for a home near a high-performing school.

"We think of public education as being free, and we think of the main divide in education between public and private schools," Mr. Rothwell said in an interview. "But it turns out that it's actually very expensive to enroll your children in a high- scoring public school." Mr. Rothwell said that in the New York metropolitan area, for example, annual housing costs are $16,000 higher on average in neighborhoods near high-performing schools than in neighborhoods near low-performing schools,

Continue reading "Housing in better school district costs a $11,000 a year " »

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California Democrats want to raise taxes even more. Mind you, the November ballot initiative that Mr. Brown is spearheading would primarily hit those whom Democrats call "millionaires" (i.e., people who make more than $250,000 a year). Some Republicans have warned that it will cause a millionaire march out of the state, but Mr. Kotkin says that "people who are at the very high end of the food chain, they're still going to be in Napa. They're still going to be in Silicon Valley. They're still going to be in West L.A."

That said, "It's really going to hit the small business owners and the young family that's trying to accumulate enough to raise a family, maybe send their kids to private school. It'll kick them in the teeth."

A worker in Wichita might not consider those earning $250,000 a year middle class, but "if you're a guy working for a Silicon Valley company and you're married and you're thinking about having your first kid, and your family makes 250-k a year, you can't buy a closet in the Bay Area," Mr. Kotkin says. "But for 250-k a year, you can live pretty damn well in Salt Lake City. And you might be able to send your kids to public schools and own a three-bedroom, four-bath house."

According to Mr. Kotkin, these upwardly mobile families are fleeing in droves. As a result, California is turning into a two-and-a-half-class society. On top are the "entrenched incumbents" who inherited their wealth or came to California early and made their money. Then there's a shrunken middle class of public employees and, miles below, a permanent welfare class. As it stands today, about 40% of Californians don't pay any income tax and a quarter are on Medicaid.

It's "a very scary political dynamic," he says. "One day somebody's going to put on the ballot, let's take every penny over $100,000 a year, and you'll get it through because there's no real restraint. What you've done by exempting people from paying taxes is that they feel no responsibility. That's certainly a big part of it.

And the welfare recipients, he emphasizes, "aren't leaving. Why would they? They get much better benefits in California or New York than if they go to Texas. In Texas the expectation is that people work."

THE WEEKEND INTERVIEW
April 20, 2012, 7:19 p.m. ET

Joel Kotkin: The Great California Exodus
A leading U.S. demographer and 'Truman Democrat' talks about what is driving the middle class out of the Golden State.

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"Rich" is a term that gets thrown around a lot in discussions about tax policy and income data, but judging from polling data there's a wide variation in how Americans define the word.

Gallup recently released numbers showing $150,000 was the median annual income Americans would have to earn to consider themselves rich. But a closer look at the results reveals how difficult it is to define rich or middle class.

The Gallup data support the notion that the more money you make the higher the threshold considered rich. "According to the U.S. Census Bureau, the median annual household income in the United States is roughly $50,000 per year. The Gallup poll finds those below that level typically saying they would need to earn $100,000 or more in annual income to be rich. Those at or above that level typically report they would need to earn $200,000 a year to be rich, which expands to $250,000 among those well above the U.S. median income ($75,000 or more in annual household income)," writes Gallup's Jeffrey M. Jones.

-- Phil Izzo, Difficulties in Defining 'Rich': Is It $150,000 a Year ?
December 9, 2011 WSJ Real Time Economics

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Within President Barack Obama's budget released Monday are proposals to end the 2001 and 2003 tax cuts and limit itemized deductions for households making more than $250,000 a year and individuals making more than $200,000 a year.

Obama has spoken about having the rich pay their fair share, and $250,000 is a lot of money. But to characterize those households that earn that sum as "rich" or middle class depends very much on where they live. Thanks to regional differences on costs, $250,000 does not go so far in places like New York City and Honolulu, compared with cities in Texas or Tennessee.New York

The Council for Community and Economic Research calculates cost of living indexes for U.S. cities based on goods and services bought by households in the top-income quintile, which nationally covers incomes of about $100,000 and above according to U.S. Census data.

What the data show is that the cost of living in Manhattan is 118% higher than the national average. On the other hand, a household in towns like Harlingen, Texas, or Memphis, Tenn., has a cost of living 15% less than the U.S. average.

What the differences do mean is a household earning $250,000 is not nearly as "rich" or has nearly the buying power as a Memphis household bringing home, say, $150,000 a year.

(The C2ER survey doesn't include private school tuition, which recently made headlines in New York by breaking the $40,000 a year ceiling. It also doesn't take into account local taxes, which can be an extremely heavy burden.)

More on middle class.

-- WSJ / Kathleen Madigan

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The modern populists in the Democratic Party have long argued that government has abandoned what their most ardent spokeswoman, Elizabeth Warren, has called the "vanishing middle class." They insist that a government owned by corporations is now skewed toward subsidizing the rich, while the middle class, a squishy term that in this case generally denotes families making something like $50,000 or less.

the mirror image of the Tea Party case. According to both ideological briefs, the middle class is being underserved. But in the Tea Party gospel, it's the poor who are absconding with a disproportionate share of the tax dollar, while in the left's, it's the wealthy. It just can't be that government is being generous with the guy earning $40,000 when that guy is a Tea Party sympathizer, but somehow it's behaving with negligent indifference when that same $40,000 earner is a union member.

-- Matt Bai

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The area has long been populated by members of the working and creative classes, joined recently by professionals.

Doug Bowen, a resident and senior vice president of CORE real estate, said the average house price last year was $975,000 or $395 per square foot, virtually unchanged from 2010. Andrea Yarrington, a vice president of the Corcoran Group, said houses took an average of 136 days to sell, versus 347 in 2010.

Ms. Yarrington added that 15 condos sold in 2011, for an average of $452 per square foot. A search on Streeteasy.com showed four co-ops, three condos and three town houses on the market.

Continue reading "Wallabout, Brooklyn" »

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Financial benchmarks in this area can differ radically from those in places where more people are struggling to put food on the table. Many of Nassau's affluent families think of themselves as practically middle class, saying that property values and taxes are so high that $380,000 does not go very far.

"On Long Island, it's barely a living," said Steven R. Schlesinger, a lawyer and professional poker player. "In Plano, it's a living."

The cutoff for the 1 percent varies depending on how income is calculated. On the low end, an analysis of census data puts the cutoff at $380,000 for a household and provides a wealth of demographic characteristics that were used in this article. On the high end, the Federal Reserve's Survey of Consumer Finances, which uses a broader measure of income that includes capital gains, yielded a cutoff of $690,000 in 2007, the most recent year of data available. The Tax Policy Center, a nonpartisan group, makes projections based on Internal Revenue Service data and adjusts for people who do not file taxes. It puts the cutoff at $530,000 per tax return in 2011. Even by that gauge, though, $380,000 would still put a family well above the 95th percentile. There is little current data that would allow a measurement of the 1 percent by wealth.

Continue reading "$380,000 is middle class on Long Island, NY" »

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The first challenge was figuring out who exactly is "rich." The Occupy Wall Street movement claimed to represent the bottom 99 percent of the population. The remaining 1 percent, according to the Internal Revenue Service, earn $506,000 or more. President Obama, meanwhile, has set the dividing line at $250,000. Under $250,000, you're middle class; anything over $250,000 and you're wealthy so you should pay higher taxes. Only 2 percent of households in the nation make more than $250,000, according to the IRS, so that seemed like a decent cutoff.

I then asked researchers at Experian Automotive, a unit of the well-known credit information service, to dig into their database of more than 600 million vehicles in the United States and Canada for insights.

Experian looked to see which brands were favored by people in three different income groups: $250,000 or above; $100,000 to $249,000, and less than $100,000. Not surprisingly, the richest people were the most likely to buy luxury brands (39 percent for people with household income above $250,000 vs. 8 percent for people who earn less than $100,000 a year).

But what that analysis also told me was that 61 percent of people who earn $250,000 or more aren't buying luxury brands at all. They're buying the same Toyotas, Hondas and Fords as the rest of us. So what cars are preferred by the rich?

Luxury models led the list of the 10 most popular cars for people earning over $250,000: The Mercedes E-class, Lexus RX 350, BMW 5 Series and 3 Series had the top four spots. But most surprising is the cars that rounded out the top 10: Three Hondas, a Toyota, an Acura and a Volkswagen. Not a single domestic vehicle in the bunch, though Cadillac has at least grown in popularity among the rich for the past two years.

Continue reading "Forbes: middle class ! Rich starts at 500k" »

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An agenda for the middle class ?

RAISING TAXES, REDUCING THE DEFICIT Tax reform is essential. But there is no way to build public consensus for broad reform without first reversing the lavish tax breaks for the rich. In addition to letting the high-end Bush-era tax cuts expire at the end of 2012, Mr. Obama could call for all forms of income to be taxed at the same rates, rather than allowing lower rates for investment income, which flows mostly to wealthy Americans. Income tax rates also need to be adjusted at the top of the scale, so that the affluent, say, couples with taxable income of $400,000 a year, are not paying the same top rate as multimillionaires.

Continue reading "Middle class up to $400,000" »

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Is the judiciary a middle class vocation ?

Indeed, in a series of interviews, judges acknowledged that it could be difficult to make the case for a judicial pay raise in hard economic times. Justices of New York's highest-level trial court, the State Supreme Court, make $136,700. The chief judge of the state makes $156,000. Across the country, "there is a devaluing of the job that judges do," so there is little pressure to pay them well, said Seth S. Andersen, the executive director of the American Judicature Society in Des Moines, which studies and evaluates judicial systems.

Current and former judges described the pressures they felt in fending off offers and trying to pay for mortgages and tuition bills. Mr. Spolzino, 52, said he had expected that he would remain until retirement, as judges did in the past. "It's very heady when you walk into a room and everybody rises, people laugh at your jokes," he said.

Emily Jane Goodman, a State Supreme Court justice in Manhattan, said the practical effect of her stalled pay was that she had to sell a summer home in the Hamptons and was having trouble paying for increasing fees on her two-bedroom apartment in the city.

"Here I am," Appellate Division on Madison Avenue, Justice McGuire said, "in a position where I'm working to achieve justice for other people and I don't feel that I'm experiencing justice."

"I tormented myself for the longest period of time about whether I should go, because I love the work," he said. "And then I realized, 'I've got no choice. The only responsible thing for my family is to go.' " Justice McGuire, 57, has two children, ages 5 and 3.

Continue reading "Justice for professional class includes a home in the Hamptons" »

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Do middle class apartments cost up to $10,000 per year ?

On the Upper East and West Sides, he said, there is strong interest from families for apartments with several bedrooms. His downtown clients, who typically work in the creative industries, tend to value location and design over space and even amenities, he said, and expect Sub-Zero or Viking appliances and remote-controlled sound systems and window coverings.

Other five-figure rentals offer a number of amenities. At 15 Broad Street in the financial district, James Cox of Prudential Douglas Elliman is marketing an apartment he described as being at the "low end of the high-end rental." At $12,000 a month, the two-bedroom apartment has almost 1,900 square feet of interior space, but its real draw is the 1,200-square-foot terrace with sweeping views of Lower Manhattan, Midtown and beyond. That, and the building's extras, like a single-lane bowling alley, basketball court, gym and pool in the basement and a billiards room, party space and parklike common terrace on the seventh floor that offers a full-frontal view of the frieze over the New York Stock Exchange.

As prices rise, so do the expectations, said Dennis R. Hughes, a senior vice president at Corcoran Group Real Estate. For about $20,000, he said, he was able to find one client, a divorced businesswoman moving from a town house, a 2,300-square-foot, three-bedroom apartment in TriBeCa with outdoor space and views of the Hudson River. For $45,000, a renter could have a 4,500-square-foot, five-bedroom apartment in a prewar doorman building on Fifth Avenue with a spa in the basement.

And for $85,000, Prudential Douglas Elliman is marketing a full-floor loft at 25 Bond Street with 7,326 square feet inside, five bedrooms, six and a half baths, fireplaces and terraces. It even comes with a movie star, Will Smith, staying just below.

Continue reading "Upper class rent starts at $10,000 per month" »

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famous Prius owners just like driving a 50 m.p.g. hybrid even if they could commute via yacht and helipad. And even for many middle-class converts, the Prius's $26,000 median price is hardly a burden: Toyota figures the average Prius household pulls in nearly $83,000 a year, which is rather high for an economy car.

Those figures help to illuminate Toyota's logic behind the 2011 Lexus CT 200h. Is this deluxe hybrid hatchback a better car than the Prius? You bet. Is it really worth an extra $7,000 or $8,000? For a bargain hunter, no. But for a certain well-heeled, light-footed buyer, the Lexus should be a painless stretch.

The CT 200h won't quite match the Prius's mileage, but at a robust 44 miles per gallon in my own combined city and highway driving, it's close enough. And despite its pokey Prius-based hybrid system, the Lexus gives people good reasons to move up.

The CT is more luxurious, more quiet and feels more solidly put together. And its distinctive design, inside and out, may attract two types of customers: bored Prius owners who want something new, and people who crave high mileage but wouldn't be caught dead in a Prius, for either its econobox vibe or its granola image.

Continue reading "Middle class economy car: make less than $85k, drive an economy car" »

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A Georgetown University study of the class of 2010 at the country's 193 most selective colleges. As entering freshmen,

Only 15 percent of students came from the bottom half of the income distribution.
Sixty-seven percent came from the highest-earning fourth of the distribution.

These statistics mean that on many campuses affluent students outnumber middle-class students.

"We claim to be part of the American dream and of a system based on merit and opportunity and talent," Mr. Marx says. "Yet if at the top places, two-thirds of the students come from the top quartile and only 5 percent come from the bottom quartile, then we are actually part of the problem of the growing economic divide rather than part of the solution."

-- Anthony Marx, a 44-year-old political scientist, and outgoing president of Amherst College, in western Massachusetts,

Continue reading "Middle Class on Campus" »

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