Why? The rich tend to make more money from capital gains — rising stock prices and real estate values, for instance — than from salary and wages, and the country taxes capital gains at much lower rates than income. And they have dozens and dozens of tax loopholes to exploit. The Wall Street Journal plumbs one today. The very wealthy often use tax-free life insurance policies to pass funds onto their children without paying the estate tax.

Of the two main life-insurance tax preferences, the one that has faced the most scrutiny from Congress over the years is the provision that lets investment gains accumulate tax free within permanent-life policies.

The Congressional Budget Office last year estimated that eliminating the tax preferences for investment gains inside permanent-life insurance and annuities would raise an additional $265 billion in taxes over a decade.

Some tax-policy specialists contend the provision artificially favors income in insurance policies over things like interest on bank certificates of deposit. Some also say that because the break enables people who can afford large life policies to accumulate earnings free of taxes, it gives the affluent tax advantages far beyond those available to middle-income people through a 401(k) or IRA.

In 2005, a bipartisan panel appointed by President George W. Bush recommended changes that would have severely crimped tax-free investment gains in life insurance, as part of a broader tax overhaul. The panel said life insurance allows some people to get “nearly unlimited tax-free savings” and that a change would “level the playing field.” The proposal went nowhere.

According to Federal Reserve survey data, 22 percent of assets accumulated tax-free in whole-life and universal-life policies were held by the wealthiest 1 percent of U.S. families in 2007 — those with more than $8.4 million in net worth. More broadly, 55 percent of the assets in such policies were held by the wealthiest 10 percent of families. The bottom half by net worth held 6.5 percent of these assets.

Recently released Census data confirm that the wealthy are back on track after suffering only minor setbacks. Incomes fell across the board from 2007, before the recession began, to 2008. Everyone took a hit, from the poorest quintile to the richest. But that’s where the shared pain ends. From 2008 to 2009 almost everyone’s income continued to fall except the rich. The richest 5 percent of Americans saw their average income rise last year by $1,800.

Not so for those in the middle. Median household income continued to slide from 2008 to 2009, falling by $335. In fact, the median household has lost almost $2,200 in annual income since the recession began. That is the largest two-year decline in at least 35 years and amounts to a drop of more than 4 percent.

In short, only the top quintile of earners have gained anything in the past year. And the fourth quintile — those in the 60th to 80th percentiles, presumably mostly low-income earners who make too much for government assistance  — have lost proportionately the most in the last two years.

The No campaign is also getting a boost from the Republican National Committee. An RNC staffer has been helping out the last several weeks hoping to show that the country’s mood is for less government spending and lower taxes. They’re hoping to build on the momentum from last week’s Senate election in Massachusetts where Republican Scott Brown won the seat held for decades by liberal icon Ted Kennedy.

Not hearing a lot on this from the Republican National Committee today.

“Given the size of the change we’re talking about,” Williams College economist Jon Bakija told Donmoyer, ” it’s a modest effect.”

Actually, Obama’s proposed changes to upper-bracket tax deductions wouldn’t affect charitable giving much, according to a new analysis of data from the Tax Policy Center data by Paul Van de Water of the Center on Budget and Policy Priorities.

In a paper released today, de Water makes three points:

First, a substantial portion of charitable giving derives from foundations, estates, and corporations and from individuals who do not itemize their contributions on their tax returns. Itemized contributions represent only 62 percent of total charitable giving.

Second, the proposal would affect only the 1.2 percent of tax filing units that are in the top two income tax brackets. Tax Policy Center data indicate that these taxpayers account for only 18 percent of the charitable contributions that are reported as itemized deductions. Thus, only about 11 percent of total charitable giving would be affected.

And third, Van de Water says, taxpayers in the top two brackets pay “59 cents after taxes for each dollar contributed to a tax-exempt charitable organization. Under the proposal, which would limit the federal deduction to 28 percent, that person would face an after-tax cost of 66 cents — an increase in cost of 12 percent.” Based on research on the effect of tax incentives on charitable giving, de Water says the resulting reduction in giving would amount to “about 1.3 percent.”

In short, the result of the proposal would be to promote a modest but real shift from private charity toward a popular public goal: expanding health care coverage. Do conservatives have any data to contradict Van de Water’s analysis? If they do, I haven’t seen it.

Gross is having none of it. If you are making over $250,000 a year, Gross says, “I regret to inform you that you are indeed rich.” From Gross:

To a large degree, feeling rich or poor is a state of mind, as John McCain recently noted. “Some people are wealthy and rich in their lives and their children and their ability to educate them. Others are poor if they’re billionaires.” But income data can surely tell us something. And they tell us that $250,000 puts you in pretty fancy company. The Census Bureau earlier this week reported that the median household income was $50,223 in 2007—up slightly from the last year but still below the 1999 peak. So a household that earned $250,000 made five times the median. In fact, as this chart shows, only 2.245 million U.S. households, the top 1.9 percent, had income greater than $250,000 in 2007. (About 20 percent of households make more than $100,000.)

This is an interesting debate to be having in the middle of a Democratic National Convention where economic populism has served as a major theme. Everyone wants to help the middle class. But defining what, exactly, constitutes the middle class is a different question entirely. Some people earning $250,000 might actually consider themselves middle class, if they live in Washington or San Francisco rather than Cleveland or Detroit. Or if their neighbors are extremely wealthy and they are doing well, but not quite as well. I’ve always thought a great debate question would have been to ask each candidate how he or she defines the middle class. I wonder what Mitt Romney might have said?