Ramblings: How rich is rich?

Our local and national papers have been full of storys of how Australian families are struggling.  Now, this isn't something new . . . many families are indeed finding times tough.  But those families in the articles are earning around $150,000 (AUS/USA) per year.    One side of government say this group is "well-off", the other side refer to them as the "forgotten families" who are certainly not rich and should be receiving tax deductions to help them during these tough economic times. 

This got me wondering . . . when is a family well off? When should governments stop providing welfare (through tax deductions) to families?

Depending on choices that families make . . . eg sending children to private schools, buying an expensive car, trips overseas, latest electronic gadgets OR not doing these things plays a big part on how far a family income will stretch. As a result, some families on $150,000 can make their money go a long way and therefore consider themselves to be comfortable, whilst others have many bills (brought on by their choices) will have not spare money at the end of the week.

One academic puts it very well . . . many families on this type of income live in areas with other families earning a similar amount, they work with people earning the same amount and their friends are also earning the same $$$'s . . .

"Therefore they don't feel rich because they are comparing themselves to the people around them" according to Professor Wooden.  He goes on to say "And because people are aspirational, they look to the person with the best house or the best car in the street, and compare themselves unfavourably. But if they looked beyond, they would see many, many suburbs across the country where people earn nowhere near that amount."

Isn't this called "keeping up with the Jones?"

What it comes down to is basically . . . what one families sees as modest income, other families will see it as well off.  It all depends on the choices families make.  Therefore governments, when deciding on who gets tax deductions and who doesn't, are unlikely to please everyone. And that is when it becomes tricky . . . as government decisions can often be made based on "winning votes" rather than logical economic sense or caring for those most in need.

~oOo~

In case you are wondering . . . it is almost impossible to determine a "typical family income"  - there are many different ways of looking income and many different combinations of "family" - however the the gross (before tax) median income of a couple family with dependent children (those under 15) was $99,222 (in 2007-08) and for all types of households it was $66,999.  

~oOo~