Wealth in America -- Factoids and Observations

Class warfare is not a new phenomenon.  The poor versus the rich is not new either.  Politicians, philosophers, economists, clergy and others have used it as a wedge issue for years to bolster their argument or point of view.

Some Interesting Factoids

Who are the rich, anyway?   357 Americans have a net worth of $ 1 or more billions.  They represent 1/100 of 1% of the population, and they constitute the super-super rich.  There are over 500,000 Americans with a net worth of over $ 10 millions.  A little over 1% of Americans or approximately 1.3 million earn more than $ 300,000 per year.  

There are many Americans with assets over $ 1 million, but when you subtract their liabilities, most wind up with less than $ 1 million in net worth. For most, their home is their primary asset.  Since they live in it, the home does not produce income. Net worth, outside one’s own residence, can generate income through dividends, interest, rentals, etc.

Seven of the 10 richest US Senators are democrats; while 7 of the richest US House of Representatives are republicans.  The difference?  Most of the rich US Senators became rich through inheritance; while, the richest members of House of Representatives are self-made millionaires.  Although people tend to view the Republican Party as the party of the rich, the Democratic Party has many rich members as well. 

The rich enjoy more tax benefits.  Income generated from state and federal bonds can be exempt from taxation.  Dividends are treated differently than regular income.  Capital gains are taxed at a lower rate as well.  Many loopholes permit sheltering certain income from taxation.  They have also more and quicker access to capital, should they want to invest, build, or flip assets. 

The 1% pays 60% of the revenues collected by the IRS.  The top 52% pay the rest.  47% of Americans do not pay any income tax, but they do pay many other taxes e.g., sales tax, property taxes, etc. 

Those earning below the poverty line ($ 23,850 in 2014) receive each year a tax rebate, ranging from $ 496 to $ 6,143, depending on number of dependents.  18.1% of the US population lives below the poverty line; most of them in Southern states.  A mother of two children on welfare can receive from a low of around $ 37,500 up to $ 61,500 in tax-free compensation and benefits, depending on the State they live in.  The most generous States are: Hawaii, New York, and California.

Becoming Rich

How do you become rich anyway?  The simplest way is to inherit wealth.  It requires little or no effort of your own to become a millionaire – just the right lineage or benefactor.  The most difficult way is to make it on your own.  Experience has shown that it is very difficult to become rich from wages and salaries, although earning a high salary and bonus, over several years, can provide you with the seed capital to make investments.  Stock options’ and real estate investments’ appreciation can accelerate wealth accumulation.  Some entrepreneurs become wealthy by building successful companies.  However, there are no magic formulae per se. 

Wealth Redistribution

For historical reasons, America has always looked down on the rich by inheritance.  A relic from the British extravagance of yesteryear, for years the practice of taxing inheritances has had many proponents.  Except for short interludes, the tax man/woman in 2014 will take 40% of any estate in excess of $ 5 million (the amount rises slightly every year).  This taxation is especially painful for family enterprises and farms.  How many Americans have the ability to keep a business or farm valued at $ 10 million? Not many!  The tax man/woman demands $ 2 million in cash within 12 months of the death of the benefactor.  The very wealthy can afford to hire expert tax lawyers who can devise legal stratagems to reduce the amount of money due to IRS, but the average, middle class person cannot.

My Own View

Bashing the wealthy is fashionable these days.  Sure, some might be heartless and greedy, but the great majority is generous, witness the number of foundations in America dedicated to worthy projects all over the world.  A few super wealthy give most, if not all, of their money away in order not to spoil their progeny.

I have never met or heard of a person that prefers being poor to being rich.  In fact, we celebrate those who achieve the so-called American dream.  So, why do we hear this double talk?  Why do we engage in divisive dialog?  Envy? Jealousy? You are the judge of that.