Democratic presidential candidate Joe Biden says his tax hikes would only affect the wealthy — defining that as those who make more than $400,000 a year.

But according to a financial planning analysis, families making $400,000 a year aren’t exactly living large — especially in major cities. A family of four with $400,000 a year in income is more likely to drive a Toyota and take staycations than drive a Lambo and fly first class.

By national measures, those making $400,000 or more in income belong to a rarified group. They represent the top 1.8% of taxpayers, earning about 25% of the nation’s income. The $400,000 cutoff is also higher than the $250,000 income threshold proposed by President Barack Obama in 2008 when he sought to raise taxes on the wealthy. 

Since Biden’s plan is largely a marginal tax increase, taxpayers will only see tax hikes on income above $400,000. So those making slightly more than $400,000 will see small increases, while the bulk of the $4 trillion in added revenue from Biden’s plan would come from super-earners making more than $1 million, according to the Tax Policy Center.

“People making between $400,000 and $700,000 are going to have a tax increase of only about 1% or less,” said Seth Hanlon, senior fellow at the Center for American Progress, a left-leaning think-tank. “The tax plan is really aimed at the very top — the top 1% or 0.1%.”

A household income of $400,000 a year is well-off by any measure, with Biden saying “they can afford to pay a little more.” It’s nearly six times the median income in the U.S. Even in high-cost hubs like New York or San Francisco, it’s nearly more than two or three times the median income.

Yet while $400,000 may provide for a luxurious life in West Virginia or Alabama, it provides for a less lavish lifestyle in big U.S. cities, experts say. The soaring costs of housing, education and child care can quickly absorb the after-tax income on a $400,000-a-year family.

Sam Dogen, founder of the personal finance site Financial Samurai, calculated what $400,000 gets a family of four in a high-cost city like New York, San Francisco, Boston, Los Angeles, San Diego, Washington or Honolulu.

“Based on the expenses, a $400,000 household income provides for a relatively middle-class lifestyle,” Dogen said. “A middle-class lifestyle is defined as: owning a home, having two kids, saving for retirement, saving for college, going on modest vacations several weeks a year, and retiring in one’s early 60s.”

He said a family of four living in a high-cost city with $400,000 a year in income could afford a $1.6 million mortgage on a $2 million home. He said they would be able to drive a mid-range vehicle — like a Toyota Highlander — and be more likely to shop for clothing at the Gap than Gucci. They would be able to take three vacations a year, but two would have to be staycations and the other would be a road trip.

He said a large chunk of the family’s budget — or over $60,000 a year — would be eaten up by school and child care. While the family could save for retirement, they would only have about $34 left at the end of the year as extra cash flow once their household expenses are paid.

“They are not living it up on $400,000 a year,” he said.


Correction: An earlier version misspelled Sam Dogen’s last name.

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