How Rich is $400,000 Where You Live?

In the Big Apple, $400,000 feels like a lot less than it does in Harlingen, Texas.

For months, the cutoff for the "wealthy" in the tax debate has been $250,000. Now it's $400,000.

With the end of the year approaching, fiscal cliff negotiations have reached a fever pitch. The White House has suggested higher taxes for taxpayers earning over $400,000, up from $250,000, the president's dividing line on the campaign trail.

In terms of the average American taxpaying family, $400,000 is unquestionably a high income. Tax filers earning $400,000 a year fall somewhere between the 98th and 99th percentile, according to 2011 tax data from the Tax Policy Center, a nonpartisan tax research group. In this sense, $400,000 isn't a huge shift — filers making $250,000 are still in the upper reaches, between the 96th and 97th percentiles as of 2011.

[ENJOY: Political Cartoons on the Fiscal Cliff]

In addition, tax proposals tend to focus on earners' adjusted gross income — total income minus deductions like contributions to retirement plans. That means that taxpayers with adjusted gross incomes that come in just above $400,000 can often earn far more than that.

Still, earnings are relative. A family earning $400,000 in Manhattan exists in a very different world than one earning $400,000 in McAllen, Texas, according to cost-of-living data from the Council for Community and Economic Research (C2ER), an organization that promotes economic data availability and research.

That organization's cost of living index for the third quarter of this year scored Manhattan at 229.6, with 100 being the national average cost of living across 304 urban areas studied. That means that the after-tax cost of a professional or managerial standard of living in Manhattan is more than twice the average cost of living.

[RELATED: GOP Gets Behind Boehner's 'Plan B']

By this measure, $400,000 in Manhattan is roughly equivalent to $174,000 in cities that have nearly-average cost of living scores, like Champaign-Urbana, Ill. (with a cost of living index of 100.1), or Kansas City (100.2).

Of the 304 urban areas that C2ER studied in its latest cost of living index report, these are the ones where $400,000 buys the least.

Then again, $400,000 is still a large income, especially in cheaper cities. Fully 215 of the 304 urban areas have cost-of-living index scores below 100, led by Harlingen, Texas, where the cost of living is 20 percent lower than the national average. Here are the urban areas with the lowest costs of living, as well as what $400,000 means there.

Reader Comments ()