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Why 'working wealthy' can't give half away

By John P. Avlon, CNN Contributor
  • John Avlon says 40 billionaires' pledge of fortune is inspiring act of U.S. exceptionalism
  • But he says it points up gap between the "super rich" and "working wealthy" couples
  • These $250k couples may be in Buffett tax bracket, but struggle to stay in upper-middle class
  • Avlon: Working wealthy aren't suffering, but they pay high taxes, get few benefits

Editor's note: John P. Avlon is a CNN contributor and senior political columnist for The Daily Beast. He is the author of "Wingnuts: How the Lunatic Fringe Is Hijacking America."

(CNN) -- Last week, nearly 40 billionaires announced their intention to give half their wealth to charity at the encouragement of bridge-playing buddies Warren Buffett and Bill Gates.

This unprecedented action brought to mind Winston Churchill's famous line about the Lend-Lease plan as "the most unsordid act in the whole of human history."

There has lately been dark talk of the American Dream and American exceptionalism slipping away, but I believe this billionaire compact shows both are alive and well.

The majority of individuals on this self-selecting list are self-made men and women who built their fortunes in their own lifetime. Among them are New York City Mayor Michael Bloomberg and Oracle CEO Larry Ellison. Separately, it was announced earlier this week that the estate of the late Johnny Carson was also donating more than $150 million to a charitable foundation.

It's difficult to imagine any other nation in history whose wealthiest individuals would voluntarily decide to give half their wealth to charity, not only at home, but around the world. And whether the money goes to cure river blindness in Africa or help finance charter schools in this country, it is something that reflects well upon the United States.

Those who pledge do us proud.

There is another issue raised by the billionaires' compact, beyond the increasing gap between rich and poor in the United States.

It is the gap between the "super rich" -- who really do have more money than they know what to do with -- and what might be called the "working wealthy," who are taxed as though they're rich enough to able to give away half their money.

These are individuals whose household income might bring them into the top tax bracket of $250,000 a year but who, with two parents working, might still find themselves struggling to stay in the stability of the upper-middle class in the expensive urban areas where they often work.

Much of the anger about the scheduled sunset of the Bush tax cuts for the increase in top-bracket taxes comes from this productive group of Americans.

The super rich are looking for charitable donations to deduct from their taxes each year, while the working wealthy are still trying to pay all their bills. But they are taxed at the same rate as the private jet set (what a few years ago might been called the Bernie Madoff crowd).

The super-rich rule high finance or might have started a high-tech company before the bubble. In contrast, the working wealthy might include someone who owns a small business or works as a mid-level executive in a top-line traditional corporation. But they are the ones most feeling the squeeze of expectations in the Great Recession, while getting lumped in with the super rich.

Let's be clear: The working wealthy aren't suffering in any objective sense, but they feel they are paying most of the taxes and getting few of the benefits.

Small-business owners create almost 70 percent of the new jobs in America, and they are the ones who feel most left out of the current economic recovery. At the same time, the Metro Wealth Index shows that the number of millionaires is increasing in cities across the country. And the bankers who triggered the economic collapse got billions in bailout money and even got to keep some of their taxpayer-subsidized bonuses.

The forgotten American middle class saw no real gains in income over the past decade despite the tax cuts because of rising health care and energy costs.

Big business and big government seem indifferent to the struggles of small businesses, and it's got small-business owners feeling angry and alienated, like forgotten American citizens. Meanwhile, politicians slobber over the super rich for campaign donations while they pander to voters with class-warfare populism.

The billionaires' compact is worth viewing with uncynical eyes. It is an historic and selfless attempt to leave the world a better place. And if the charitable contributions are directed carefully, funding innovation and fostering independence (like Andrew Carnegie's public libraries did a century ago), rather than dependence, then they can help more people to achieve their own American dreams.

But the stark fact is that such largess in a time of recession also highlights the growing gaps in our society, not just between the rich and poor, but between the super rich, the working wealthy and the forgotten middle class.

America remains a meritocracy with long odds and high-payouts -- and is infinitely better than any alternative.

The opinions expressed in this commentary are solely those of John Avlon.