Everyone thinks they are middle class: The false perceptions many Americans hold.

We have a deeply held belief in America that if you work hard enough, anything is achievable.  This is something built into the core of our nation.  If you go back to the Great Depression, while other countries were overturning systems and shifting deeply held ideology, Americans held steady and went out and voted.  The system remained with tweaks.  Today, the idea of the middle class that emerged after World War II is still held very deeply.  Yet there is a clear definition for middle class if we simply look at data.  But people think they are middle class if they make $22k or $200k.  The median household income in the U.S. is $56,000.  That is the middle.  Let us look at the figures here.

Middle class perceptions

The media has a distorted perception of what the middle class is.  There have been politicians saying that $200k is middle class.  That is absolutely not the case.  And the media also makes it a point to rarely talk about income because they have started to wise up.  Many people don’t make that much.  Bring that to the audience’s attention and they simply may refuse to spend money they don’t have by going into debt.

Take a look at the income distribution in the U.S.:

middle-class

Does the above chart align with your perceptions?  No one likes to think that they are “poor” or below average.  I think there is a psychological defense mechanism here.  People want to think of themselves as above average, whatever that may mean.  This applies to income as well.

The middle class was a majority not too long ago:

middle-class

In 1971 70% of Americans were middle class.  A clear majority.  Today the middle class is now a minority.  It is interesting that within one generation we have pushed the middle class into minority status yet most people still think they are middle class when the data clearly states otherwise.

This misperception is probably at the root of a lot of the political anger this year.  If everyone is middle class and you are struggling, surely it is the system to blame.  Forget about the cronyism on Wall Street and the deep capture of big money in D.C. – the answer is simple.  The politicians are wrong and there is a simply solution to be had.  There is no easy solution unfortunately and that is why anger is the currency of the day.

We recently talked about the mind numbing amounts of debt the U.S. is carrying.  This money will never be paid back.  This is absolutely clear and inflation is a slow destroyer on your purchasing power.  Little by little you fall back until you realize the middle class is no longer a majority.

I think part of the reason for this misguided perception is that debt accessibility has given many Americans the trappings of middle class living with the albatross of debt. You are basically mortgaging your future for instant gratification.  Yet this covers up the fact that you are not really stable but simply in debt up to your eyeballs.

You also get high income earners thinking they are middle class.  People that make $200k or more per year will talk about taxes and other issues yet they are in the top 5 percent or households.  That is not middle class but clearly in the upper class.

This perception on the tax front does make sense since those that make $250,000 or more a year pay half of all income taxes:

ft_15-03-23_taxesind

But this is simply income tax.  You still have state tax, Social Security, Medicare, sales, and property taxes that everyone pays.  And when you pay that much for a poor performing government, people start to get angry.  But somehow, most still think they are middle class.

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4 Comments on this post

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  1. laura ann said:

    Can anyone explain why the dip in taxes on the second to last bracket where they pay only 5.9%?

    September 25th, 2016 at 6:33 am
  2. juser_bogus said:

    the rich pay most of the taxes because that’s where the money is! it’s that simple. especially when you control for basic life support.

    35+ years ago the middle class held a lot higher percentage of the tax burden precisely because of the more progressive policies of the time. As the middle class became smaller and poorer, it share of that burden obviously becomes smaller.

    mathematically it’s pretty simple… as taxes were drastically slashed on the upper classes in the 80’s it reduced the incentive to invest in people as most employers would rather invest in employee paychecks and benefits than pay government taxes. if the tax disincentive to keep their money is removed, people will tend to give it to themselves. so since it was now easier to keep money around at the top… that’s where it stays.

    And now, since the overall economic pie is just a bit bigger in relation to population… but taxes are lower… this leads to some of the funding issues (percentage wise) we see for government services.

    September 25th, 2016 at 7:20 am
  3. James Stamulis said:

    There is practically no middle class any more. My dad made 100 dollars a week in Boston and raised 5 kids and had more buying power than i have today including he paid off his house long before he even retired. I have seem the dollar worth less and less my entire life and it is criminal the way our government allowed this and MSM hid it!

    September 25th, 2016 at 10:30 am
  4. Jim Winston said:

    No one hid this fact. Sadly, most Americans are too involved in the latest iPhone, which sports team is winning or losing or who’s for or against what bathrooms folks choose to use.
    While this has been happening, the wealthy and corporations have organized and thouroughly infested every level of government from your local town to State to Federal. They are literally able to buy our politicians and do so openly. In spite of that, you hear almost no outrage. Instead we see articles like this that seem to imply that the wealthy pay all of the taxes and that’s the problem. Juser_Bogus is absolutely right. Reagan cut taxes in half on the wealthiest and told us a story about trickle down. It never did, it never will, yet no one has ever sought to fix it. We’re mirroring the 1920’s right now. The income inequality is comparable and just as that time ended in a financial collapse. Now add to it corporate greed, active subjugation of our government by big business and the wealthy facilitated in large part by the corrupt Citizens United ruling by the owned members of the Supreme Court and we’re heading for another fleecing of the common man.

    September 29th, 2016 at 2:40 am

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