Dear Ms. Pelosi…

No question, tax policy under George Bush favored folks with lots of money. Now the newly empowered Dems want to take some of it back. In principle, I can get behind that. But only if the people who pay really big are the truly rich, people like Bob Nardelli who got paid $210 million to leave Home Depot after six years of limited success.

Where should we draw the line? Over the weekend, House Speaker Nancy Pelosi said any household with income over $500,000 is a target. Trouble is, $500,000 in Peoria (where relatively few make that kind of loot) is not $500,000 in New York or San Francisco or other big cities (where most of this income bracket resides). If you accept that the cost of living, certainly in New York and SF, is around 50% higher than in the Midwest, then to be fair any tax-the-rich strategy should take this into account.

In Peoria, you should start getting soaked at $229,606 of annual income. That, according to the cost calculator at cnnmoney.com, is the equivalent of $500,000 of income in Manhattan. Or, if you want to stick with $500,000 as a target, then gross that up to $770,400 for folks in Manhattan. There is a reason that people in cities make more money. Their houses cost more. In Peoria, $500,000 puts you in a 6-bedroom luxury estate. In Manhattan, the average 1-bedroom condo or apartment goes for $1 million. This disparity exists in big city suburbs too. And it’s more of the same with local taxes, which may be four or five times higher, as are many of the common things we consume everyday, like a can of soda at the gas station. Retailers have to charge more because their rents are higher.

It’s blatantly unfair to draw a line and go after everyone. I know the tax system is complicated enough. But indexing taxes to the cost of living wouldn’t be that tough. (And no one seems to care enough about simplification to get it done, anyway.) You might argue that $500,000 is such a high threshold that regardless of regional cost differences these folks are undeniably well off and able to shoulder more of the total tax burden. That’s true, to a point. Still, it smells a lot like sticking it to people who may be just starting to taste success.

My real worry is that any such tax targeting will have to reach much farther down the income ladder to make a difference in our national budget. If they go there, Pelosi & Co. will end up imposing hardships on folks like cops and school teachers in our metropolitan areas, where we need them most. It’s time for tax policy to formally recognize the cost differences in regions across the nation so that when the Dems go after the rich, that’s all they get.