Why is $250,000 the magic number?

There has been much debate with regards to how to close the budget deficit. With President Obama's fix saying that federal income taxes should be increased for households making more than $250,000.

The questions is, how did this become the threshold between being considered wealthy or middle class? Many people are questioning whether or not a household making more than that are truly wealthy enough to be taxed at the same bracket as millionaires.

This number seems to have a political basis. The dividing line originally appeared in 1993 when Clinton started a new tax bracket at 250,000 with a rate of 39.6%.

Meanwhile, President Obama first started using the $250,000 household income level to define who is wealthy in 2008. The proposed top household income tax bracket starts at $250,000 and would pay 39.6 percent on federal income. Single filers who make $200,00 or more would also be in the highest bracket. Currently, the highest tax bracket starts at $379,150, and they pay 35 percent so this would be a significant increase.

Aides that have worked with President Obama said he liked the $250,000 threshold because it helped bring back the feelings of President Clinton?s era of economic prosperity in the 1990s.

But the question remains as to whether or not this is the best dividing line between the wealthy and middle class. As most making this amount of income do not necessarily feel rich in comparison to the millionaires they are being lumped in with.

Author's Bio: 

Stephanie Horne is the founder of Bookkeeping-Basics.net. Her web site, located at Bookkeeping-Basics.net is quickly becoming one of the premier online resources for free and low-cost bookkeeping tips and tools for today's aspiring business owners. She does bookkeeping work from home herself in Sonoma County, California.