Proposed Tax Increases on Six-Figure Earners Highlight Mounting Costs of Living -- and the Relativity of Prosperity

Ellen Parnell and her husband, Donald Parnell Jr., seem like the kind of well-off couple President Barack Obama has in mind when he suggests raising taxes on families earning more than $250,000 a year. A surgeon at Fort Sanders Sevier Medical Center in Sevierville, Tenn., he drives an Infiniti. They vacation at a beach resort every year.

"I'm not complaining, but the reality is Obama may call me wealthy, but I thought we were just good old middle class," says Ms. Parnell. "Our needs are being met, but we don't have a load of cash to cover wants."

It is a tricky situation in which some Americans find themselves after a long boom: They are by no means struggling, compared with the 98% of Americans who make far less, but depending on where they live and the lifestyle choices they have made, they don't necessarily feel rich, either. Worse, in their view, they are facing the same tax rates as those making millions. Some of the expenses are self-inflicted -- like private-school costs and conspicuous consumption. Others, though, are unavoidable, like child-care costs, larger health-care deductibles and education expenses, especially college.

Under Mr. Obama's budget proposal, two of the highest tax brackets would see rates rise, and deductions would be reduced for households earning more than $250,000 annually. President Obama said Wednesday, "We've made a clear promise that families that earn less than $250,000 will not see their taxes increase by a single dime."

By any statistical measure, that income level is at the top of the bracket. But for those closest to the line, the money might be less a sign of affluence than it is of the industry of dual-income couples. It is possible, say observers, that veteran civil servants could fall into the higher tax bracket.

The political calculation is dicey. The White House needs the additional revenue to cover some of its ambitious policy agenda, especially a health-care revamp. But some polling data suggest households that earn above $200,000 went heavily for Mr. Obama in November.

Until more details of the tax changes are disclosed, it is unclear whether people making big six-figure sums will be affected at all. They may, for example, be able to avoid tax increases if any number of deductions pull them below the threshold. But that isn't stopping those who earn near the threshold from worrying about it.

Already, many members of Congress are seeking to scale back some of the proposed tax increases, which call for raising the top federal tax rates to 36% from 33% on households earning $250,000 or above.

Wealth and comfort "depends on where you're coming from," said Lois Avitt, a sociologist and founding director of the Institute for Socio-Financial Studies in Charlottesville, Va. To a family earning $50,000, $250,000 is well off, but for the family earning $250,000, rising college and medical costs and dropping home values make the perception debatable.

The reasons for the insecurity are that net worth is declining at the same time that expenses like education and health care, two of the biggest concerns cited by members of that income group, are going up faster than wages and income, says Heidi Shierholz, an economist at the Economic Policy Institute in Washington. "Those are the biggies. They are huge parts of the set of middle-class aspirations, and the prices of those have increased way faster than income." The bursting of the housing bubble makes that more stark.

Mark Zandi, chief economist at Moody's Economy.com, says data show that over the last 10 years, education costs have risen 5.91% annually, and health- care expenses have gone up 4.16% annually, while wages and income have risen only 3.7% over the same time span. That means many families are seeing a greater percentage of their income going toward those two areas.

Education costs, which are far outstripping wages and income, are especially worrisome for this income bracket because upper-income earners are much less likely to receive the kind of financial aid that lower income levels can expect.

The drop in net worth has been staggering. The Federal Reserve, in a recent report, found that U.S. households' net worth dropped by $11 trillion, a decline of nearly 18%, during 2008. That wealth includes everything from home values to mutual funds and life insurance, college and pension funds. The decline equaled the combined output of Germany, Japan and the U.K.

Changes to the tax code don't generally make adjustments for high costs of living in particular areas of the country.

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.

Van Moore, an optometrist in Sevierville, makes just enough in his practice that he worries he might qualify for the tax increase. Mr. Moore said he was contemplating adding two staff workers and another doctor to his practice, but then the economy went soft. In the years after he finished optometry school, his first job brought in less than $20,000 a year. Then he made $50,000 for several years, all the while dealing with his $150,000 student-loan debt, which he still has. Now he is making just above $250,000.

"I'm not in a mobile home with no utilities or running water and holes in the floor," he said. "I'm not poor, but I'm not rich."

For the Parnells, their perception of themselves is based on the math. The value of their house is down $60,000. Ms. Parnell says the couple's gross income last year was about $260,000. Taxes, premiums for medical care and deductions for Social Security and their 401(k) contributions cut the gross to about $12,000 per month. The family tithes $1,300 a month at their church. Their mortgage, second mortgage and payment on land they bought is nearly $4,000 a month. Other expenses, including their family car payment, insurance and college funds, as well as basics like food, utilities and donations to charities, leave them with about $1,200 left over each month.

"I'm not after sympathy. We are blessed. What I want is a reality check on what rich means," Ms. Parnell says. "I can pay my mortgage and I can buy some clothes. I'm not going without, but I'm not living a life of luxury."

BOSTON – IBM Corp. withdrew its offer to buy Sun Microsystems Inc. for about $7 billion this weekend, clouding the prospects for a deal that would have shaken up the computing industry, The Associated Press has learned.

Talks were in their final stages in recent days, but IBM took its offer off the table after Sun terminated IBM's status as its exclusive negotiating partner, according to two people familiar with the situation, who spoke on condition of anonymity because they were not authorized to disclose the negotiations.

One of these people said the two sides were still meeting Sunday.

Armonk, N.Y.-based IBM was believed to be offering about $9.50 per share for Sun. That was about double the price the Santa Clara, Calif.-based server and software maker was trading for when the discussions leaked last month. Sun shares closed Friday at $8.49.

Sun was one of the darlings of the dot-com era but spent most of this decade struggling to find its place, wrestling with huge losses and thousands of layoffs. As a result many analysts were not surprised Sun and IBM were in talks.

Sun still owns key server and business-software technologies that might fit in IBM's product and services lineup. But a deal likely would face antitrust questions, and in addition to haggling over price, Sun has been pushing IBM to make certain commitments to seeing the deal through such scrutiny.

Asian markets rise as G-20 pledge and China factory growth buoys optimism, but gains limited

HONG KONG (AP) -- Asian stock markets climbed Friday after the world's major powers pledged more than $1 trillion to combat the global economic crisis and China's hard-hit factories showed signs of new life.

But gains were somewhat subdued as caution began to set in after a spectacular rally that's lifted leading markets from Japan to New York by double-digit percentages in recent weeks.

The latest catalyst came Thursday as the Group of 20 industrial and developing nations promised $1.1 trillion to the International Monetary Fund and other development bodies to lend to less well-off countries reeling from the global economic turmoil. They also vowed new efforts to clean up banks' tattered balance sheets, shut down tax havens and tighten financial regulations.

Investors, their expectations for any meaningful progress low, cheered the moves -- the latest as governments everywhere bring unprecedented resources to bear against the worst economic slump since the Great Depression.

"There was a fear at the G-20 was going to turn out to be damp squid and it appears instead there was some unity and progress," said Miles Remington, head of Asian sales trading at BNP Paribas Securities in Hong Kong.

Also boosting sentiment were new figures showing Chinese manufacturing expanded slightly in March for the first time in six months. The data supported hopes the Chinese economy -- the world's third-largest and a key source of demand for other Asian countries -- is nearing a bottom.

Japan's Nikkei 225 stock average added 30.06 points, or 0.3 percent, to 8,749.84, but traded well off its highs. Hong Kong's Hang Seng climbed 73.79, or 0.5 percent, to 14,595.76. South Korea's Kospi rose 0.5 percent to 1,283.75.

Elsewhere, Shanghai's key index edged up about 0.6 percent. Stock measures in Australia and Taiwan gained over 1 percent.

Carmakers continued to race ahead, with Toyota Motor jumping 7 percent and Nissan Motor up 6.2 percent. Resource firms like Australia mining heavyweight BHP Billiton Ltd., up 3.7 percent, also struck gold.

Overnight in New York, Wall Street's buying spree showed no signs of slowing as investors took comfort in an accounting rule change that will help banks pare their massive losses on bad assets.

Sentiment got a further boost from still more positive U.S. economic data, this time highlighting a large increase in factory orders in February. That followed better-than-expected readings on pending home sales, manufacturing activity and auto sales the day before.

The Dow Jones industrial average gained 216.48, or 2.8 percent, to close at 7,978.08, posting its best four weeks since 1933. Broader market indicators also rose sharply, with the Standard & Poor's 500 index up 23.30, or 2.9 percent, to 834.38.

But Wall Street futures were slightly lower, suggesting U.S. markets might give back some of their gains. Dow futures fell 26 points, or 0.3 percent, to 7,932 and S&P500 futures shed 3.2 points, or 0.4 percent, to 832.30.

Oil slipped below $52 a barrel Friday in Asia after surging overnight on investor optimism crude demand will soon rebound if the U.S. recession has bottomed. Benchmark crude for May delivery fell 68 cents to $51.96. The contract rose $4.25 overnight to settle at $52.64.

In currencies, the dollar slipped to 99.57 yen from 99.79 yen. The euro was lower at $1.3429 from $1.3461, after the European Central Bank cut its benchmark interest rate by a less-than-expected quarter of a percentage point to 1.25 percent, a record low.

NEW YORK (AP) -- Wall Street opened the second quarter with solid gains, extending a four-week rally that brought the market off its lowest levels in 12 years.

AP - Evelyn Davis rings the closing bell at the New York Stock Exchange in New York, Wednesday, April 1, ...

After falling in the early going Wednesday on disappointing jobs data, the Dow Jones industrials closed up 153 points on economic data that showed a rebound in pending home sales and improving manufacturing activity. Major indexes all rose at least 1.5 percent.

The reports continued a run of positive economic news in recent weeks that has led many investors to wager that the recession is beginning to ease. Further signs of improvement in housing were especially positive for banks struggling with bad mortgage debt.

Technology and energy shares also carved out advances. As sentiment about the economy improves, investors have been buying up industries they believe are likely to lead the country out of recession.

The Dow charged ahead in March, rising 16 percent off of 12-year lows hit early in the month, but its movements over the first three months of the year were among the most tumultuous on record. Only three other times in the Dow's history has it experienced 20 percent swings in both directions in one quarter.

Despite the strong gains in March, analysts are still warning against calling a bottom to the market and say more volatility could be in store.

"People seem to swing from one side to the other of 'the recovery has started' to 'the world is ending again,'" said Bill Stone, chief investment strategist at PNC Wealth Management.

The Dow rose 152.68, or 2 percent, to 7,761.60, and broader market indicators also rose. The Standard & Poor's 500 index rose 13.21, or 1.7 percent, to 811.08, and the Nasdaq composite index gained 23.01, or 1.5 percent, to 1,551.60.

Pending home sales rebounded in February from a record low, the National Association of Realtors reported, while the Institute for Supply Management's index of manufacturing activity contracted in March but by a bit less than anticipated.

"It's hard to call it good data in a normal environment but it certainly looks like some of the ... housing activity has at least stabilized," said Stephen Massocca, managing director at Wedbush, Morgan Securities. "That's helping the market quite a bit here."

Not all of the reports came as a relief. The ADP National Employment Report said private sector employment dropped by 742,000 in March. The figure was higher than anticipated, and a rattling sign ahead of the Labor Department's Friday report on nationwide job cuts last month.

The market's advance occurred as the world's finance ministers gathered in London to discuss the slumping global economy. Speculation has risen in recent days that the various countries in the Group of 20 are disagreeing about how to handle the global financial crisis. Amid the backdrop of thousands of protesters, British Prime Minister Gordon Brown said Wednesday that the G20 was close to agreeing on global reforms for the financial system.

This week so far has been volatile, with the Dow gaining 87 points on Tuesday after plunging Monday by 254 points on President Barack Obama's rejection of General Motors Corp. and Chrysler LLC's restructuring plans.

Analysts expect that pattern to continue in coming weeks as uncertainty about first quarter earnings reports remains. "We're in a wait-and-see mode," said Brian Bush, director of equity research at Stephens Inc.

Analysts largely expect the reports to be negative, but with the bar already set so low, it's possible the market could move higher if the reports meet or exceed forecasts.

Among the big gainers in the banking industry, Citigroup Inc. added 15 cents, or 5.9 percent, to $2.68, while JPMorgan Chase & Co. gained $1.56, or 5.9 percent, to $28.14.

Hope for an easing of certain accounting rules this week is also helping banks. "Mark-to-market" rules, which require banks to value assets based on current market conditions, have hampered banks with massive write-downs in recent quarters, and proponents of a change say it could banks boost their bottom lines.

The Russell 2000 index of smaller companies rose 6.41, or 1.5 percent, to 429.16.

Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange, where consolidated volume came to 5.9 billion shares, essentially flat with Tuesday.

Bond prices were little changed. The yield on the benchmark 10-year Treasury note slipped to 2.66 percent from 2.67 percent late Tuesday. The yield on the three-month T-bill rose slightly to 0.21 percent from 0.20 percent Tuesday.

Crude oil fell $1.27 to settle at $48.39 a barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies. Gold prices rose.

Overseas, Britain's FTSE 100 rose 0.8 percent, Germany's DAX index rose 1.1 percent, and France's CAC-40 rose 1.2 percent. Japan's Nikkei stock average rose 3 percent.

Table 1. Figures Depicting Credit Crunch of US

The IMF or the International Monetary Fund looks after the financial scenario of the world by monitoring the following :

exchange rates

balance of payments of nations.

At the same time the IMF also provides financial and technical assistance.

World GDP in Economy Today

The industrialization of traditional economy through modern technical inventions has resulted in a gradual increase in the real growth of World GDP over the years.

World GDP - Real Growth Rate (percentage change) over a few previous years was as follows :

2003 - 3.8% (40.7)

2004 - 4.9% (29.0)

2005 - 4.7% (-4.1)

2006 - 5.1% (08.5)

In 2006, among the countries Azerbaijan stood first in the growth rate of GDP with 32.5 percent, whereas Lebanon with a negative growth rate of -5.0 percent lag at the end of the list.

Economy Today : Inflation

The increase in prices as calculated against a set criterion of purchasing power of the population in a country may be described as Inflation.

It is mainly calculated through :

CPIs or Consumer Price Indexes which takes into account the prices of goods purchased by consumers.

GDP Deflator which considers the prices of goods produced.

Inflation applies a lot of pressure on people in Economy Today, which are basically faced by :

people on fixed income
the industrial sector (production) international trade and commerce (exports)

export and Import : Economy Today

Transfer of commodities and services from one country to another in lieu of liquid assets (cash etc.) constitutes international trade and this forms a large section of GDP of a nation.

In the case of most nations, gross exports always exceeds gross imports.

The general trend is that the technologically advanced developed nations account for the largest share of World exports but of recent developing nations like China and India are becoming increasingly major exporters in the World scenario. The export growth rate of the world during fiscal 2004 was around 22 percent, a large increase from about 6.0 percent in 2003.

In the last fiscal (2006) imports increased significantly in comparison to earlier years but nonetheless it could not exceed the slowing exports.

TEMPO Interactive, Washington: Senate and House of Representatives United States agree economic package U.S. $ 787 billion. This stimulus package was President Barack Obama to restore the country's flagging economy.

Approval in two rooms with the Congress to vote on Friday (13 / 2) towards the middle of the night or Saturday (14 / 2) in Indonesia. Nearly all members of the Republic Party and Democratic Party members all support this package.

Polling in the House of Representatives, all members of the Republic of party - 176 people - refused. Seven Democrats also rejected. However, this package passes because there are 246 others who support the vote.

After the House approved, the package was brought to the Senate. There, similar to its occurrence. Although here, the three members of the Senate of the Republic of voice support so that support to 60 against 38. Two independent Senator also supports this package.

This agreement makes Obama sign to stay on Monday (16 / 2) and the budget could be disbursed.

According to the Republic, because they reject the package is different from that in campaign by Obama. Republic leaders in the House of Representatives, John A. Boehner, said that when the process started, this package is made to create new employment opportunities. But, in it, "Only contain expenditure, expenditures, and spending more."

It is cutting its own taxes, labor-intensive projects, education, health, energy, and technology. The amount is smaller than that originally proposed by Democrats.

According to the Congress Budget Office, more than 74 percent of the budget will be in kucurkan in 18 months so that will not immediately appear successfu.

Evi Mariani, The Jakarta Post, Jakarta

How much does it cost to place art at public spaces?

The committee of this year Jakarta Biennale's Battle Zone has the answer: Hundreds of millions of rupiah, dozens of official letters, several trips to the city hall and a lot of headaches.

The cost was incurred even though the event was organized by the city's own Jakarta Arts Council and was included in the city budget and program.

One of the artists commissioned for the international art event, Ari Dina Krestyawan, wanted to run text around a crossing bridge on Jl. Thamrin about the people who used the space every day. The bridge has equipment to display text for advertising.

The Battle Zone committee asked for a time slot to use the equipment for Ari's project.

"We were first told by the billboard association that the time slots were being used by [a cellular phone provider]," Ardi Yunanto, the curator for the Battle Zone, told The Jakarta Post on Monday.

"But, the city administration has some slots there. We were led to the general bureau at the administration."

Three officers and several letters later, Ardi's team got nothing except an instruction to write more letters and wait longer.

"Time was running out. It was January and the art work needed to be on display early February. Finally, I told the artist to make an audio visual simulation about what would happen if we're allowed to run the texts there," Ardi said.

Battle Zone has brought artworks to several public spaces: Menteng Park in Central Jakarta; a wall along Jl. TB Simatupang toll road in South Jakarta; several roads in East Jakarta; four billboards in Central, West, and South Jakarta; two train stations; National Monument (Monas) Park in Central Jakarta; and the space under a flyover in Tebet, South Jakarta.

"The mural along the toll road and exhibitions at train stations received permits with relative ease.

"We met with an officer of PT Kereta Api at station city [in West Jakarta] and he gave us a permit for the exhibition at city and Tanah Abang stations," Ardi said.

"The toll road operator was also quick to give us a go ahead."

For the exhibition of Daniel Kampua's work at Monas, the committee only met twice before receiving the green light. Kampua could display his photo exhibition about Monas' mobile photographers without any charge.

Menteng Park was a whole different story.

Artist Cecil Mariani planned to have three billboards at three spots in the park. The billboards would bear pictures of Persija stadium, which previously stood at the park.

After several meetings and clinching the permit, the committee was asked to pay a fee of Rp 100,000 (US$8.9) per day for each board.

"That's on top of `wisdom' money asked for by the park attendants. One of them told me, `to ease closer ties between us here and your products', they wanted Rp 200,000 per day," said Ardi. The closer ties he was talking about included fixing the position of the board should they fall, Ardi said.

He said for each set of letters, his team attached a letter from the city's tourism and cultural agency, saying the event was a city program. But he said many officials from other agencies just ignored it.

Many of them said they would were complying with a gubernatorial decree, Ardi said.

Money wise, the four billboards cost Jakarta Biennale the most. The owners of the billboard, who happened to know some committee members, let the artists use them free of charge. The advertisement tax, however, was not waived.

"For each billboard, the tax is Rp 150 million. Meaning we should pay Rp 600 million for all. But we got 80 percent discount from the city's tax agency, so we were told to pay Rp 120 million," Ade Darmawan, Jakarta Biennale's program director said.

"The city administration gave us Rp 2 billion for the whole event. Our expenses reached Rp 3 billion," he said.

He said Governor Fauzi Bowo had verbally lent his support to Jakarta Biennale, citing the need to improve the city's creative industry.

In his speech read by his assistant for people welfare to city secretary Effendi Anas during the opening of the event on Feb. 6, Fauzi mentioned the relationship between the creative industry and potential tourism.

Head of the city's tourism and cultural agency, Arie Budhiman, recognized the need to support cultural events in Jakarta to increase tourist numbers.

"We are listing international events in Jakarta which will attract tourists -Jakarta's Java Jazz, Jakarta Fashion Week, Jakarta Great Sales, Jakarta Biennale as well as Jakarta International Film Festival," he said on Wednesday.

He said he believed such events would help increase the number of tourists to the city. Thus it was reasonable, he said, for the events to receive tax exemptions for publication, for example.

"But for total exemption, we haven't got the regulation yet, so we need a new bylaw. Right now, the most we can do is give tax discounts," Arie said.

"From the top officials, we get support," Ade said. "But it should become a policy, not only verbal support.

The policy should also be translated into operational rules.

"This year, Jakarta Biennale received international attention. We welcomed several international press members here. And arts, we have potential big spenders who are willing to fly to see the event," Ade said.

"And Indonesia, given our interesting social and political history, we are the next big thing among international arts events."