The top 1% of the US makes $480k or more in adjusted gross income
bloomberg.comConsider four different people:
1. a lawyer who works 100 hours/week flirting with a heart attack and earns $480,930
2. a small business owner who sells their plumbing co after 4 decades and earns $480,930 from the sale, but never broke six figures before
3. a retiree who sits on the couch 24/7 and earns $480,930 in passive dividends
4. a professional of some kind who works 20 hours/week in a low stress job and earns $480,930
The press likes to talk about these data points, and it's valuable information, but ultimately income tells a very small piece of the story. Source of income, job security, cost of living, and quality of life all matter a lot too.
Pray tell, what kind of low stress job lets you earn $500k/year with 20 hours/week? (Actual job, please, not "4-hour workweek" style passive investment income.)
There are many such jobs available. We discuss this in detail at my weekend seminars, which you may attend for the low low price of $20k.
Seriously though, I think I might know of some semi-retired lawyers who make that sort of money, but that only happens after a lifetime of option #1.
Edit: you could make this kind of money with very little work as a board member of a large corporation. Once again, see option #1 for how to get to that point in your life.
Radiologists? I've heard they can work remote from home working nowhere close to 40 hours a week and pull in well into six figures.
Of course one could argue making a determination if someone has cancer is not low stress.
I know a few people in category 4.
They were all owners of lifestyle businesses that had been running for a while. They either hired a full time manager to manage the business, or everything basically ran on autopilot and required less attention.
Some of them got their by working their butt off, some got there by inheriting the business and never really having to work all that hard.
I've been reading stories about a corruption case and apparently there's a lot of easy money to be had doing that.
Investing $5m of your own capital.
A) That's passive income, and B) I'd like to know where you're getting those steady 10% rates of return.
> I'd like to know where you're getting those steady 10% rates of return.
Index funds?
The funny thing about that is like the press, the IRS does not care about anything you said either
Sure they do. Retiree dividends are mostly taxed at a lower rate than W-2 income. A business sale may be a capital gain instead of income (I'm not sure).
For better or worse, taxes are applied differently to different kinds of income in the US.
With passthrough entities they do now...
> ultimately income tells a very small piece of the story
There may be other pieces but income is a very large one. Change the incomes of those people to $15,000 and we would see very large differences in their lives.
Some of it is just screwy. Like...
The average tax rate for the top 2% is higher than for the top 3%. That is as it should be, if you believe in progressive taxation.
It's higher again for the top 1%, and higher again for the top 0.1%.
But then it's lower for the top 0.01%, and lower again for the top 0.001%.
In fact, the average tax rate is lower for the top 0.001% than it is for the top 3%.
In 2015.
I'm assuming it's dependent on source of income. Salary is taxed differently than long term capital gains which I assume those huge incomes are.
Yeah, I'm sure that explains it, but it doesn't justify it.
Do you see no value in tax incentives for investment?
Also, keep in mind those very top people are likely not at the top that long. As someone else pointed out, those could be people that sold their company.
Unless you are a buying stock at a public offering, most "stock investing" is not investing into a company. The company doesn't benefit from the money you are "investing". If you bought $1 million shares of Google. Google doesn't get that money or use it for its operations.
I'm referring to people who sold the business they owned. To me, that would be the most common way someone would end up with hundreds of millions of dollars of income in a single year.
If you owned stock in a public corporation, you'd be smarted to sell it over time to reduce the tax impact.
that is simply not true. the more you buy stocks in a company, the more its market cap goes up. with higher market cap, it is easier to invest in new businesses, acquire other companies, hire better people through stock incentives, etc...
Market cap doesn't go up based on people buying shares. You are just trading ownership.
In theory, the market cap of the company is the current value of all future returns.
> Do you see no value in tax incentives for investment?
Warren Buffett and Bill Gates say capital gains tax should be raised.
I'd say that too if I'd already made my billions and paid taxes on it.
You are not a billionaire so no point in talking about hypotheticals.
For now actual billionaires don't agree with your statement.
This title, while informative, is unfortunately not super related to the article itself, which is about municipal bonds, who buys them and asking the question, why are people buying fewer muni bonds than before?
It's not that fewer muni bonds are being bought, but that fewer individuals are buying muni bonds:
> What’s disturbing about the data is that the number of investors claiming tax-exempt interest -- the municipal market’s constituency, if you will, is falling, after reaching a peak of almost 6.5 million in 2008.
The likely reason is that muni bonds aren't competitive with ordinary treasury bonds for people in lower tax brackets due to market pressure from investors in high tax brackets. So they make sense for fewer people and rational lower income investors move away from them.
Given the number of muni debt isn't going down - someone must be owning it. I personally sold my munis after realizing I'm paying AMT on most of the bonds anyway so wasn't tax free for me.
What did you buy instead, if I may ask?
At the time stocks, now I'm selling those too and paying down the mortgage. There arent many bargains out there.
Is this household or individual? I only see "tax return" mentioned, so it could be a mix of both.
A common Silicon Valley working couple, 10+ years into their careers are likely to be in the 1% if you roll in things like bonuses and stock/option grants.
And at the same time you have people claiming to be middle class with incomes over $250K.
Social class PSA:
Lower, middle, upper-middle, upper class, etc do not map (as much as news media tries) to income levels. Middle class does not identify a level of income.
To identify income levels use quintiles instead.
Middle class is a social class and annual income has no causal effect on social class.
Depends on the country. I know in the UK class is distinct from income. In the US it's very closely linked.
I think how the term is used is different, as you mention, in the US and UK. I'm trying to prevent Americans from assuming social class and income brackets are linked. Most Americans just assume, likely due to class brackets being used by the media as an economic indicator, that lower, middle, etc class just correlate with one's salary; this form of usage is a misnomer and ought not be used.
You don't feel a 250K annual salary is middle class? That is a king's ransom in most of the country.
I suspect they meant 250K is too high to be middle class.
Certainly is, however you have to look at outgoings too. It's entirely possible a retiree on $50k who owns a 3 bed house in SF is better off than someone on $150k who pays $60k a year in rent for the exact same house.
Yeah but I think you need a much higher income than you used to (relatively) to feel reasonably assured of a comfortable retirement. If you believe that a middle class person should feel relatively certain they'll have a comfortable retirement if they work for 30-40 years, then it messes with the definition of what "middle class" really is.
They didn't say that, they said that there are people that make that much that claim they are middle class there.
A good chart from 2012 to look at might be this
https://archive.nytimes.com/www.nytimes.com/packages/html/ne...
On a side note, you are in top 5% if you make about 200k/year. I guess most of SE in CA are top 5% earners then.
>The average AGI of the 1% in 2015 was $1,483,596 What is the point of this article? Seems like it just spews random descriptive statistics. I guess it gives you an idea of the shape of the wealth graph at the top extreme, but it's too narrow to really say anything.