quote:Only a small fraction of the wealthy in America have inherited their wealth. The vast majority are entrepenuers.
I'm not actually defining "wealthy" as "having a million dollars in assets," believe it or not. That'd include a surprising number of farmers and small businesspeople living hand to mouth.
quote:The truly wealthy tend to make it themselves and then not spend it.
Depending on how you define "truly wealthy," this is not true. Certainly the majority of people who are "truly" wealthy entered adulthood with at least a million dollars in assets -- which, while I hesitate to call that "truly" wealthy, is certainly enough to tip the scales. After all, everyone universally agrees that the first million is the hardest; it's far easier to focus on income accumulation once you've got enough seed capital to feed, house, and clothe a family for the rest of their lives.
Posts: 37449 | Registered: May 1999
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I'm curious to see how many of the folks making under $15k are adults working full time. Because the only time I made that little was while I was waitressing and going to school. Even as a bank teller when they didn't pay me much, they paid me $18k.
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I'm hesitant about the numbers expressed here; the article doesn't hide its bias and some of its conclusions aren't well supported (ex: the bit on Pfizer).
Posts: 14554 | Registered: Dec 1999
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The numbers there don't match the numbers I've seen anywhere else.
Do you have a different source? Maybe one from a more reliable outfit.
If you all read are slanted articles meant to induce rage, no wonder you don't have a full picture of who gets caught in the "wealthy."
When you rage against the rich but, of course, aren't talking about the "nice" rich who own businesses, it makes me think you don't know who the rich actually are. "Growing Up Gotti" is not a good representative.
quote:Certainly the majority of people who are "truly" wealthy entered adulthood with at least a million dollars in assets -- which, while I hesitate to call that "truly" wealthy, is certainly enough to tip the scales.
This is flat out not true. It simply isn't. Unless you wiggle the definition of truly wealthy to be tautological ("the truly wealthy are those who enter adulthood with over a million in assets"), which is absurd, your statement is flat out wrong. Those aren't the facts.
When you talk about taking the assets or taxing the wealthy to the utmost, there is no loophole for "unless you made it yourself".
If you want to target inherited wealth, campaign for the estate tax to be revved up. But while people do talk about that, no one even pretends it would solve the problem, because there simply isn't enough inherited wealth to tax.
quote:After all, everyone universally agrees that the first million is the hardest; it's far easier to focus on income accumulation once you've got enough seed capital to feed, house, and clothe a family for the rest of their lives
Honestly, you don't know what you are talking about. If you're willing to work and have decent skills, you don't need a million dollars to take care of a family. And if you're spending it on house and food and clothes, then it isn't seed capital.
Depending on what business you're in, it might take that entire first million and then ten years of risk and sweat to make the second and third. You could turn over the business to someone else to run, but that has horrible risks all on its own. It's certainly to be in the position of owning a profitable than not, if business-owning-and-running is your job, but it doesn't magically get easy or less risky once you pass a certain amount.
The amount needed to make sure your family isn't going to starve under most reasonable scenarios is far, far less than one million. (Get good insurance and a year's worth of emergency savings in cash, and then save 15% your whole life for retirement. You'll be fine.)
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Try Megan McArdle at The Atlantic. And the Milllionaire Next Door. And...basically, the Wall Street Journal.
I read financial blogs as a hobby pretty much daily, and it's not all in one place. (This is a side effect of 1) where I work, and 2) being my father's daughter - we chat about money a lot.)
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quote:Originally posted by katharina: When you rage against the rich but, of course, aren't talking about the "nice" rich who own businesses, it makes me think you don't know who the rich actually are. "Growing Up Gotti" is not a good representative.
I keep hearing that small business owners file as individuals. Is this because something is broken in our tax code? Ok, stop laughing. Of course the code is broken. I'm just confused as to why it has to be done this way. It seems that it makes small business owners more vulernable to tax increases on the "rich".
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The author is considered one of the best tax reporters alive today, and is citing publicly-available figures. I'm not sure what constitutes "more reliable" in this scenario. Certainly I wouldn't trust the Wall Street Journal on this topic. The Millionaire Next Door isn't a bad source, but it's talking about a population of "rich" that is frankly antiquated. By modern standards, a million dollars in assets is barely bourgeois.
quote:en you rage against the rich but, of course, aren't talking about the "nice" rich who own businesses...
Owning a business doesn't make someone "nice." Nor is it a matter of "nice" versus "evil." The issue is one of accumulated wealth and sources of income. Someone whose assets are tied up in the operation of a business, but who has very little disposable income otherwise, is of course going to be more more vulnerable to changes in the tax code; I would prefer to protect these individuals while increasing taxes on individuals whose incomes are more resilient.
quote:When you talk about taking the assets or taxing the wealthy to the utmost...
Again, I've proposed a 45% maximum marginal tax rate. I'm not sure whom you're talking to, but I don't think anyone here has talked about taxing the wealthy to the utmost.
quote:Honestly, you don't know what you are talking about. If you're willing to work and have decent skills, you don't need a million dollars to take care of a family.
Nor did I say you did. What I said was that entering adulthood with a million dollars was enough to pay for your family's needs for your entire life. In other words, with a million dollars in the bank, you can be reasonably sure that your family of four will never be dependent on your monthly income. This is not a trivial thing. It is a safety net that encourages entreprenurial risk-taking, professional development, and investment among those who have nothing to fear from failure. As I said in the same paragraph, there is a reason that people say the first million is the hardest, and that people starting businesses are obsessed with seed capital.
Posts: 37449 | Registered: May 1999
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You keep talking about the people who enter adulthood already with money.
But when you talk about raising taxes, you mean everyone who makes over a certain amount.
The two populations are not identical. The first is negligable.
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If you are counting on the million dollars in the bank to take care of your family, then it isn't seed capital. The entire point of using capital to building a business is that it isn't liquid - you can't chip off a corner of a machine in your factory to pay the mortgage, and if you do, if you cannibalize your business, you'll quickly kill it.
Confusing your seed capital with your emergency savings or your income to live off of is a good way to become an ex-business owner.
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The two populations are indeed not identical. I wish there were a way to effectively tax wealth, but there isn't; in the absence of a method to do so, we're stuck with sales tax -- which becomes very problematic when dealing with corporations -- and income tax. Any income tax is always going to be an imperfect measure, too, since (as the article I linked noted) it's perfectly possible for people with sufficient assets to live on loans and leases and technically claim no income. I've seen some proposals out there, like a sales tax on stock transactions, that have intrigued me but also seem problematic enough that I can't endorse them.
At the end of the day, though, our debt problems started when we decided to radically slash the marginal tax rate for people who weren't exactly suffering from tax hardship. Given the way the demographics fall, I'm fairly comfortable with the idea of creating a new tax bracket at $400,000-$450,000; we're talking about a level of personal income at which taxes are merely mild disincentive rather than genuinely problematic.
There is a religion running wild that would have people believe that businesspeople in the '50s somehow didn't feel like working because they were too heavily taxed; this is self-evidently false. What we have seen is that lower taxes do not actually encourage the level of community investment that would pay for those cuts. Barring the moral argument that for many people lies at the core of their desire for tax cuts -- the belief, arguably mistaken, that income is earned and deserved and indicative of merit -- there doesn't appear to be a financial one that would justify continuing to treat the rich with kid gloves.
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quote:Confusing your seed capital with your emergency savings or your income to live off of is a good way to become an ex-business owner.
Granted. But here's the thing: with that million in the bank, you can intern for six years without worry. You can go out and take out some loans. You can get yourself an MBA, and almost certainly know some people already. That first million, even if you don't use it to start your business, guarantees that you can take pretty much any risk you want without worrying that you'll have to turn your kids out into the cold. Being an entrepreneur when you've got a safety net that will last your entire lifetime is a far, far different thing than being one when you've got $6,000 in the bank and a mortgage payment due.
Posts: 37449 | Registered: May 1999
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quote:Originally posted by TomDavidson: ... Given the way the demographics fall, I'm fairly comfortable with the idea of creating a new tax bracket at $400,000-$450,000 ...
It wouldn't even necessarily be "new"
quote:Over the years, changing the amount of taxes people pay was accomplished not just by changing rates but by changing the income limits of the tax brackets. Just looking at the top rates does not give the whole picture about who is paying taxes. Before the 1986 tax reform, the income tax had 15 brackets. In the 1930s, there were more than 50. The Wealth Tax Act of 1935, applied the top rate to income over $5 million and had only a single taxpayer: John D. Rockefeller, Jr.
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Of course the code is broken. I'm just confused as to why it has to be done this way. It seems that it makes small business owners more vulernable to tax increases on the "rich".
