What makes a middle-income earner?

In my July 3rd blog post,  San Francisco & the CPI, I wrote about $117,000 in annual income in San Francisco and Marin counties being considered a low income household by US Housing and Urban Development. If over $100,000 a year is the poverty line in San Francisco, what would be considered a middle-income household everywhere else? I don’t think the answer is simple.

During bipartisan tax negotiations last fall, Trump was quoted as saying “…this is a middle-class tax break; this is not for rich guys like me.” NY Times Sen. Ron Wyden (D-OR) called the Republican-led legislation of consolidating tax brackets, “funny math”, and “a bunch of false promises to the middle class.” In the end, the largest tax bill ever passed greatly benefited the wealthy that is certain. But, how much changes to the tax code benefited middle-income earners remains a mystery. We were again promised that corporate tax cuts would surely result in higher profits being passed on to employees in the form of better wages and new job creation. Even with my employer, the director walked into the conference room one day and said, “Everyone’s gonna get a raise!” That’s what he was told.

Nine months later, teachers and other wage earners nationwide are reporting that monthly salaries have barely budged while taxes for corporations were cut from 35% to 20%. Some items for standard tax deductions that had been in place for years are gone now, while what Congress considers middle-class now was regarded as wealthy as of the last legislative session. “To be considered middle class, you have to earn an annual household income of “two-thirds to double the national median…” Yahoo!Finance

The truth is it’s harder to be middle-income earner because the breadth of that earnings bracket has shrunk. If you live in an area, where consumer goods and housing costs outpace the national averages, every dollar earned has less of an impact on financial mobility. Many of the taxation changes have not given a beneficial lift to small businesses either, and small businesses generate the biggest pool of employment opportunities that exists in the country. Sure, the unemployment rate is at an historic low, but wage growth is also.

Should you consider yourself middle-class? Personally, I think people will need to work harder than ever before. Be more diligent about managing cash flows, tracking consumer product incentives, and budgeting. Find that ubiquitous ‘side hustle’ that you can gain some satisfaction from… to inch closer to your goals. Invest wisely, and don’t worry about how much more wealthy people have than you. Put that energy into your own dreams instead.

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