What is “working class” in Silicon Valley?

Apparently the current administration’s tax plan will raise taxes for families that make more than $250,000 a year.

I thought this quote was pretty interesting:

Wealth-Less Effect: Earning Well, Feeling Otherwise – WSJ.com
San Jose, Calif., Mayor Chuck Reed calls a family living in Silicon Valley earning $250,000 “upper working class.” That is about what two engineers working at a technology firm can expect to make, but “a family earning $250,000 a year can’t buy a home in Silicon Valley,” he said.

James Duran owns a human-resources company in Silicon Valley and is president of the Hispanic Chamber of Commerce in California. He supported Mr. Obama, but is worried about the tax proposals. He has laid off some employees in recent months and has been wondering how he can fund an extension of those workers’ health-care benefits.

Mr. Duran said he and his wife earn about $400,000 annually, but “I’m barely getting by.” They have high property and state taxes, as well as college tuition and savings to cover. “I’m an Obama man, but this side of him is a difficult pill for me,” he said.

To put things in further perspective, here are the guidelines from the City of Mountain View (a fairly “middle class” city) on who qualifies for Below Market Rate housing assistance:

Affordable Housing

BMR ownership housing is targeted to median income households earning between 80 percent and 100 percent of the median household income. BMR rental housing is targeted to low income households earning between 50 percent and 80 percent of the median household income. In 2008, the median household income for a one-person household was $73,850 annually and, for a four-person household, it was $105,500 annually.

Yep… so if your family of 4 makes $84,400, you could still qualify for housing assistance.

It seems that perhaps the tax code should take into account local conditions, but that would only make things even more complicated. But then again, since most people in Silicon Valley spend 40% of their gross income on mortgage interest, their actual taxable income is dramatically lowered. Perhaps an optimal solution would be to repeal the mortgage interest tax deduction, and move the tax bar back to $300,000.

Complicated stuff!