In 1985, the top tax bracket was 50 percent, compared to the 35 percent top rate in 2012. Home interest rates were at 12.5 percent compared to the 4.5 percent interest rate in 2012. The unemployment rate in 1985 was 7.3 percent compared to the 7.9 percent unemployment rate in 2012. The minimum wage in 1985 was $3.35 an hour compared to the $7.25 an hour minimum wage in 2012.
A family who earned $47,000 in 1985 dollars is equal to a family who earned $100,000 in 2012. The least complicated comparison is to compare these as taxable income after al deductions have been taken.
The family of four with $47,000 in taxable income paid $10,228 in federal income taxes in 1985. That same family paid $16, 804 in federal income taxes in 2012. Their 2012 tax bill was 25 percent lower than their Ronald Reagan mid-term tax bill in 1985.
A home purchased for $141,000 (three times annual income) required a 20 percent down payment for a conventional loan. Home mortgage interest rates were 12.5 percent. So the household earning $47,000 would have to save $28,200 before getting their mortgage. The monthly mortgage payment at the 1984 prevailing rate of 12.5 percent would cost $1206 principal and interest or 37 percent of the household’s monthly take home pay.
A home purchased for $300,000 (three times annual income) today requires a 3 percent down payment for a conventional loan. Home mortgage interest rates in 2012 were 4.5 percent. So the household earning $100,000 in 2012 would have to save $9,000 dollars before getting a mortgage. The monthly mortgage at the prevailing rate of 4.5 percent would cost $1506, or 22 percent of the household’s monthly take home pay.
Now let’s look at the families living at the poverty level in 1985 and 2012. The poverty level for a family of four in 1985 was $10,650.00. The minimum wage in 1984 was $3.35 per hour. So the family had to work 3,179 hours at the minimum wage to stay above the poverty line. The average work year for salaried employees is 1,775 hours per year. So the family had to work 1.8 full time jobs to survive independent of assistance.
In 2012, the poverty level for a family of four was $23,050. The minimum wage was $7.25 per hour. So the family of four has to work precisely the same number of hours – 3,179 – per year to survive independent of assistance.
The rich and the middle class are doing just fine under Obama, and much better than they did under Reagan. The entire outcry over his leadership must be about his inability to budge the poor one inch ahead of where they were 30 years ago.