January 31, 2007

Changing Demographics of the "Middle Class"

Married Couples with Children No Longer in Statistical "Middle Class"

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For media inquires please email Brian Phillips or call 202.464.5102

WASHINGTON, D.C. - This week, the House Ways and Means Committee will hold a hearing on the economic challenges facing the "middle class."

The purpose of the hearing is to investigate the notion that today's families are experiencing economic pressures greater than those faced by their parents' or grandparents' generations.

To understand this issue, however, Members first need to understand how different today's families are from those of 40 or 50 years ago and how demographic changes have affected the notions of who is "middle-class" and who is upper-income in America.

The demographics of today's middle income group have almost flipped entirely. "What was once predominantly a group of Ozzie and Harriet-style families now looks more like the cast of Friends," says Tax Foundation President Scott Hodge.

The most recent IRS data reveals that roughly two-thirds of today's middle income group ($24,330 - 40,100) are single. Less that one-fifth are married and have children. (See chart below)

"The vast majority of working families trying to put their kids through college have moved into the upper income groups, or the so-called "rich'," says Hodge. "If you and your spouse both make an average of $18 per hour, you're in the highest fifth of taxpayers."

Many of these families live in high-cost urban and suburban areas and have incomes commensurate with the cost of living. Because of the progressivity of the federal tax code, these couples end up facing the highest federal income tax rates even though they live distinctly "middle-class" lifestyles.

As lawmakers look for solutions to the economic challenges facing today's "middle-class" but upper-income families, they would do well to consider the way in which taxes--federal and local--are contributing to the problem.

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See also: What Does 'Average Income' Really Mean?

For media inquires please email Brian Phillips or call 202.464.5102