What is Wealthy?

Chai wrote:

OCCOM BILL wrote:
It would take two typos and one hell of a coincidence for the math to still work. I'm not buying that.

Anyway, upon further thought, my point remains unchanged. 2 million out of 100 million + means 1 out of 50. Surely the wealthiest 2% of households should be considered wealthy?

This started while debating the fairness of Estate Taxes. I wonder how many people really know what Bush slid past them here. The $2,000,000 is a deduction.

Example: Man worth $3,000,000 will only pay tax on $1,000,000, at 39%... which equates to paying only 13% on the total (assuming he does nothing towards tax avoidance which is dubious. Before Bush's present to the richest 1%; he would have paid 55%. Which means, this year, millionaires will duck multiple billions in taxes and who do you think is going to make up the difference? If you guessed the poorer 99%, you're close, but not there. The answer is your children. That's right; people with the good fortune to accumulate millions of dollars during the course of their lives are returning the favor by F**king not just the poor and poorer, but their sticking it to the next generation as well. Seems more than a little ungrateful to me.

Next year the deduction will be 3.5 million and obscenely; the year after that it's completely free. All this because they called it the death Tax.

Consider these very rough numbers: Approximately 200 million tax payers hold approximately 50 trillion dollars in wealth. Each year; about 2.5 million of them are going to die (1.25%)... holding estates totaling about 625 Billion Dollars. For easy math let's cut that to $500 Billion, and then cut it in half to reflect the Estate Tax potential of $250 Billion (Roughly triple the amount we'd collect under current law when the deduction resets to 1 million, mostly on account of BS shelters) Anyway, $250 Billion per year would mean an extra $1,250 per year that your average Tax payer wouldn't have to pay some other way.

Would you rather owe $250,000 when you're dead or pay an extra $1,250 in taxes each year between 18 and 65? Seems easy, doesn't it? Simple math tells us that $1,250 times the 47 years is only $58,750... which sounds pretty petty... and it is but it's much too simple.

The wise man throws that $1,250 in an investment and with an annual return of 10% it'll be worth just shy of a million bucks by time you're 65 when you stopped contributing... but if you didn't touch it; it would mature to 4.5 million by the time you croak (80 average used throughout equation). The down side is; you now have to pay an extra couple million in taxes... but your net gift is now 5 times bigger as well. The truth is; it would take slightly more than a 5% R.O.I. over the course of your life to break even. The world's worst investor should manage that. Now here's the really fun part for poorer and the poor: Giant stagnant Estates will have money changing hands each generation which is what these days? 20 to 25 years? That's that much less money that you have to pay. Is this unfair to the holders of stagnant wealth? Not really. A mere 4% R.O.I. over 20 years is all it would take to sustain stagnant wealth perpetually.

I'm having a hard time following you from point A to point Z Bill.

Could you please rephrase this is a more step by step fashion?

I'll try.

Chai wrote:

It's not the math I'm having a hard time understanding, but how you are making the connection from the 2% that owe estate tax, to the 200 million tax payers and from that point on.

I can't talk about this until I understand your points.

Would you rather owe $250,000 when you're dead or pay an extra $1,250 in taxes each year between 18 and 65? Are you coming up with this $250K figure as the average of what an estate liable for estate tax owes?

Yes, it is an average and 200 million is the approximate number of Tax payers I used to arrive at that average.

Chai wrote:

I'm confused what you're saying.... Are you saying the choice is paying $1,250 extra each year, and my heirs don't pay any tax on the extate? Doesn't that say there shouldn't be an estate tax?

That is precisely the option. $1,250 more each year or an Estate Tax. The math is oversimplified, but make no mistake; every dollar not taxed on an estate WILL be taxed elsewhere. You can't save money on one tax, without collecting it elsewhere if you want to be fair (though that's precisely how kids and grand kids have been screwed into a 10 trillion dollar debt that shouldn't be theirs to pay).

Chai wrote:

Also...my question re Roth IRA's, the best comparison I can make between a large estate being taxed twice, once while it was being earned and once when the heirs go to collect....to me it would be the same principle as taxing roth earnings.

This would be an excellent comparison for the double dipping complaint... if the double dipping complaint had merit in the first place. It doesn't. Americans have underpaid their taxes to the tune of 10 trillion dollars since 1980. Think of it like this: The more you pay up front; the less you owe later. We didn't pay enough up front.

The next generation won't be double dipped either. By paying their taxes post-death; they will be reducing their up front tax burden throughout their lives. One way or another; the money has to be paid.

Now if you open a retirement calculator and type $1250 annual contribution in; you will see that anything much over 5% on the very money you would otherwise have paid to avoid "death taxes" returns more than the death taxes would have been. Higher interest pays a lot more. You seem rather astute on this subject, so I'd wager you've probably done better than 10%... and if that's the case then in my "death tax" example your earnings would have netted you an extra $1.75 million for your heirs as well as increased your tax contribution just as dramatically (per $500,000 in your current predicted Estate Value at death). Keep in mind: that $1250 is money you would never have had anyway, because it would have been taxed away in leui of the Death Tax. Hence; with just a little planning, the Death Tax can be used to tremendous advantage because it is really just a way to defer the tax obligation you already have. Get it?

Everybody wins... as long as you don't object to you and I paying our own past due balances instead of screwing future generations. Those of us who've robbed the next several generations get a chance to square the debt... Right the wrong... choose not to screw them. What's not to like about that?

I don't have kids yet myself, but it is a simple matter of being fair. Leaving a negative balance of $10 trillion is the epitome of the sins of the father being visited upon the son. It is straight hypocrisy for any of us to complain about paying twice at least until we've finished paying once. That debt is ours.

Your example about stagnant wealth being taxed into half-lives would be valid only if it didn't earn interest. But it does earn interest... and again; if you use an investment calculator you'll see anything over 4% will sustain it indefinitely.

And these are just the direct results. Something considerably more dynamic happens when stagnant wealth is stimulated into moving around. This type of motivational tool (stiff estate tax), would deliver the type of stimuli the Republican's have fooled people into believing its removal would accomplish.

Naturally, the other important improvement that should be strived for is to stop taxing productivity. Nothing could be more stifling and conversely nothing could be a greater boost than a cessation of same. The sales tax meets the same complaints from those who would feel double dipped; but again I'd counter with the first dip never having been paid in full in the first place.

Naturally people want to leave more money for their children but past due tax money isn't really ours to give. Idea

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OCCOM BILL wrote:

Chai wrote:
numbers: Approximately 200 million tax payers hold approximately 50 trillion dollars in wealth. Each year; about 2.5 million of them are going to die (1.25%)... holding estates totaling about 625 Billion Dollars. For easy math let's cut that to $500 Billion, and then cut it in half to reflect the Estate Tax potential of $250 Billion (Roughly triple the amount we'd collect under current law when the deduction resets to 1 million, mostly on account of BS shelters) Anyway, $250 Billion per year would mean an extra $1,250 per year that your average Tax payer wouldn't have to pay some other way.

Would you rather owe $250,000 when you're dead or pay an extra $1,250 in taxes each year between 18 and 65? Seems easy, doesn't it? Simple math tells us that $1,250 times the 47 years is only $58,750... which sounds pretty petty... and it is but it's much too simple.

Chai wrote:
I'm confused what you're saying.... Are you saying the choice is paying $1,250 extra each year, and my heirs don't pay any tax on the extate? Doesn't that say there shouldn't be an estate tax?

That is precisely the option. $1,250 more each year or an Estate Tax. The math is oversimplified, but make no mistake; every dollar not taxed on an estate WILL be taxed elsewhere. You can't save money on one tax, without collecting it elsewhere if you want to be fair (though that's precisely how kids and grand kids have been screwed into a 10 trillion dollar debt that shouldn't be theirs to pay).

Let me see if I have this straight....you start out saying you don't think people with large estates should have the 3 million exemption, that because of this they are shielding assets and screwing the poor.

Then you say abolish the estate tax and have everyone (including the poor) pay more in taxes to an average of let's say $1,250 a year.

Never mind the retirement calculators. That's taking the subject one more step away, and the initial question that's still there. I'm trying to figure out which one of these you want.

You can't save money on tax, unless you're going to pay it elsewhere....?

Precisely...that's why I'm saying get rid of the ceiling on social security taxable income, and provide that as benefits to every taxpayer so they have a decent income on retirement.

Getting back to initial subject of wealth...As I've said in the past, I believe there's a "mentality of the poor" and also a "mentality of the wealthy" and I suppose there one for those in between.

While someone with the "poor" mentality may one day change it and through effort develope the mentality of the wealthy, I don't believe you will more than rarely, if ever see a person with a "wealthy" mentality degrade to a "poor" mentality.

A good example are people who win the lottery. You might as well walk up the first person you see on the street, which might be a crackhead, and hand them 5mil. Or you have the odds of walking up to someone with a wealthy mentality and do the same.....Who do you think is still going to have a lot of money in 10 years?

Those who have acquired wealth, be it this generation, or 2, 5 or 7 generations ago did it number 1 for themselves. They will more than likely raise their children with the same wealthy mentality, and will feel safe in leaving them assests. That will change to a more or less degree over the generations, but, you know what? I'm not particularly concerned about the generations of my family that will come after me, past my own child, and to a lesser extent, grandchild. After that they are on their own.

Unfortunatley, the poor mentality people far outnumber the wealthy mentality people.

I think the best you can hope for, for the majority of PM people is to figure a way that they will have a steady income, via let's say Social Security.

The WM people may not have a lot of money at a given point, but regardless, what they do have will be enough, because they know they will get more, and don't need to run out and spend everything they have, thinking it's the last chance they get.

PM people don't have enough, because they don't foresee a time when they will, so spend it while they have it.

Note I'm not saying actual poor or wealthy people, but those with the different mentalities.

Am I willing to forego a Social Security ceiling on my income so people in society can have an adequate retirement flow, thus reducing crime and enabling people to live a more healthy life in old age?

Yes, I am.

I am not willing though, to contribute dollars to people who do not have the mentality to hold on to it.

You speak of fairness.
I don't think it's fair for someone to be told to, and don't damn me for this....throw pearls before swine.

I appreaciate my pearls. That doesn't say I'm greedy. It says I know my worth.

Wealth is like going to an art museum and appreciating a Renoir. If someone in poverty has a PM, that Renior will only be looked at in terms of what it can get at the pawn shop, easy come, easy go.

I'm not going to discuss taxes anymore.

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Somehow; you managed to get it exactly backwards. A person would have to pay an extra $1,250 per year to justify NOT paying the $250,000. My equation proves the Estate Tax is better for the individual, as well as society at large. Short of misunderstanding or misguided selfishness; I don't see how this could be disputed. At least; no one's tried as of yet.

I recommend the Millionaire next door to anyone who wants to better understand the mentalities Chai is talking about with PM and WM. The only thing you got wrong (aside from the obvious over-stipulation of the stereotypical) is that beyond the 1st generation of wealth builders; there is no stereotypical WM beyond a belief in a birthright... that is in part perpetuated by plutocratic entities using government to facilitate the perpetual wealth of the elite. This isn't just a problem of the perceived jealousy of the have nots; it is repugnant to the American ideal.

As things stand today; the rich are getting a free ride from George Bush. Estate Taxes, by their very nature are progressive in terms of percentages paid by the wealthy. This naturally bothers some of the ignorant wealthy... and seemingly a majority of the people it's really screwing.

The opposite effect is observed when you look at sin-taxes or gas taxes. Where the poor man, with a negative net-worth might spend 10% of his income putting gas in his car; the average rich man couldn't put possibly put 1/10th of 1% of his income in his. Hence; Joe Six-pack is paying a 100 times greater percentage of his income at the pump that the rich guy filling up next to him. He gets beat up just as bad on his beer and smokes, too. These regressive taxes is where the balance of Estate Tax cuts will come from. Watch and see.

I see many people reject a flat tax because it isn't progressive... and even solid arguments that demonstrate it as regressive on account of many fixed expenses being the same regardless of relative wealth (like health care), meaning the poor are contributing a much higher percentage of their disposable income than the rich. This is true. But Sin and Gas taxes are worse... much worse.

So what should we do to level the playing field? Well, tax the rich, of course! But, when we overtax the Rich's productivity, there are in turn less jobs for the poor. This isn't just Reaganomics; it is an undeniable economic certainty.

This is what I consider the Income Tax Paradox. Income Tax the rich less; obviously hurts the poor because they have to pay the difference. Income Tax the rich more; and the poor suffer from less employment opportunity and consumption by the rich. Lose, lose.

So, Income Tax isn't the solution. What about an Estate Tax? This is the one Tax that as demonstrated; can be defeated in terms of effect by WM minded financial planning, while simultaneously leveling the unfair burden distribution established and perpetuated by virtually every other tax you can name. Meanwhile, it frees up Joe Six-pack and the rich guy's incomes alike to purchase more products or invest more freely which in turn, benefits both of them and the poor at large alike. Win, win.

You want to know what bugs me most of all? NO ONE seems to want to admit that we owe 10 trillion dollars let alone is showing any interest in paying it. Sad

This is truly disgusting. It seems like the age old prophecy that once the general public realizes it can vote wealth from the public treasury into its own pocket, a democracy will inevitably fail. It looks like the baby boomers and all of us who came after have decided to do just that, take the money and run. Pathetic.

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This started while debating the fairness of Estate Taxes. I wonder how many people really know what Bush slid past them here. The $2,000,000 is a deduction.

Example: Man worth $3,000,000 will only pay tax on $1,000,000, at 39%... which equates to paying only 13% on the total (assuming he does nothing towards tax avoidance which is dubious. Before Bush's present to the richest 1%; he would have paid 55%. Which means, this year, millionaires will duck multiple billions in taxes and who do you think is going to make up the difference? If you guessed the poorer 99%, you're close, but not there. The answer is your children. That's right; people with the good fortune to accumulate millions of dollars during the course of their lives are returning the favor by F**king not just the poor and poorer, but their sticking it to the next generation as well. Seems more than a little ungrateful to me.

Next year the deduction will be 3.5 million and obscenely; the year after that it's completely free. All this because they called it the death Tax.

I gathered from this you were anti-estate tax as you seemed to be upset that an amount of the estates are exempt.

Doesn't matter though, as you've changed this from a Finance question to Bill's political thread.

Regarding my speaking of PM and WM, please don't tell me what I got wrong or right.

As I clearly stated, it's my personal view of it, which is just as valid an opinion as any other person who has given it thought. I hardly think you're in the position to declare someone's opinion as wrong. Then again, you may think you do have that authority, which is your opinion.

Just as you have given an opinion on where the line is drawn for all of us as to what is acceptable "selfishness", which, is a totally individual thing and fortunatley is something you as an individual can't enforce.

Anyway, since this is now a political thread, I've lost interest.

I'll check back in a day or two and if it comes back to the original subject of the thread, I may have renewed interest.

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Ah, no that wasn't just my opinion Vs. yours. That was a summary conclusion established after decades of specific research on the topic by the two authors of the book I recommended. 2nd and subsequent generations are no better at wealth management than poor people. This is, do in large part to the tendency for the actual accumulators of wealth trying to help them "have better lives", rather than teaching the financially sound lessons that accomplished it to begin with. Nothing too complicated; save.

Interesting how you check out for other reasons, without even a comment on the $10 trillion we owe.

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i'm immensly wealthy, I share my life with the lady Diane.

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dyslexia wrote:

i'm immensly wealthy, I share my life with the lady Diane.

That goes back to what Noddy said on page 1 - it's a state of mind.

I come from an extended family that even the Republicans would define as "filthy rich", but they are always complaining about how stressed they are because they do not have enough money. What the heck is "enough" ? I'm probably richer than most of them because I have no debt; they are all saddled with big mortgages, ivy league school tuitions, leased cars, wardrobes that have their own room, hi-tech entertainment centers, etc. They are all very hard workers and have picked careers that are lucrative, but I think the salaries motivated them more than the actual work. Given the freedom from their perception of social judgment, I think a few of them would have preferred to be poets or tuba players.

Oddly, the one person I know who has always referred to himself as "wealthy" just declared bankruptcy.

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Walter Hinteler wrote:

shewolfnm wrote:
I can see how someone from another country can hear 2 million is needed to be wealthy in this country and think that is impossible and untrue.

In america, one million is not a lot any more.
Yes, you can live on it and do it well but everything is so inflated here it isnt even funny.

You could take my household income >30,000 a year , or around 1,700 a month and plop that on someone else in another country and all of asudden THEY are wealthy.

... ... ...

I suppose, inflation (or kind of) is everywhere, prices for energy (especially petrol/gas) are much higher elsehwere than in the US (gas/petrol is the double or even more where nimh and I live) etc etc

My experiences which everyday stuff (only from a handfull states) is that the US is much cheaper than e.g. Europe (and that's not only due to the exchange rate!!!)!

The average disposable incom in Germany in 2005 was 15,617 Euro = $ 22,708.66 per person, btw.

One million is not poor at all, two million is wealthy.

I was going to post something similar about cost of living in other countries. Somethings are much cheaper in the US. The bigger difference is in what we think is necessary for a certain standard of living.

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bookmarking

(In a rush this morning. Back later for a proper read. Interesting, k!)

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I am Elmo J. Fudd, I am a millionaire, I own a mansion and a yacht.

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2PacksAday wrote:

I am Elmo J. Fudd, I am a millionaire, I own a mansion and a yacht.

....oh christ.... Laughing

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wealthy is over 25,000 a year. anything over that is "hyper-wealthy" "mega-wealthy" and "ultra-wealthy".

its a joke but its actually true. at 10 an hour i felt like a king. but then i dont waste my money on bs so i might be better off than most at 14 grand a year.

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Considering the minimum wage for WA is now at $8.07, excluding exceptions, $10.00 an hour doesn't go far.

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I gotta stop wasting my money on BS like mortgage, health insurance and electric and heat.

Oh....and food.

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OGIONIK wrote:

wealthy is over 25,000 a year. anything over that is "hyper-wealthy" "mega-wealthy" and "ultra-wealthy".

its a joke but its actually true. at 10 an hour i felt like a king. but then i dont waste my money on bs so i might be better off than most at 14 grand a year.

Pffttt.....I spend 25,000 a year on A1 sauce.

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Chai wrote:

I gotta stop wasting my money on BS like mortgage, health insurance and electric and heat.

Oh....and food.

You have to pay for health insurance. At least I don't have to pay for that.

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2PacksAday wrote:

Pffttt.....I spend 25,000 a year on A1 sauce.

Hah! I bought the Rolls just for the Grey Poupon.

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This was an interesting read.

My conclusion is that it is about a state of mind, and also - accomplishment.

Wealthy people have put and continue to put work into their state of mind, their life, and what is going on in their world. They have some control over their situation.

It's distinguished from rich that way. Rich can be just a load of cash, or an inheritance that sits there or gets pissed down the drain, or what you are given.

And it's different from poor, or scrapping by because quality of life and security is relatively assured.

I grew up and am surrounded by a family who 'scrape by', live 'as best you can' , always close and sometimes being - poor, broke, in trouble, in survival and crisis mode.

Part of what I've wanted to do is to become wealthy. So once you decide that, for yourself, and it doesn't matter where you are from or what you got - you can do it. You can do it because you define it and take back control.

I think wealth involves sustaining. Rich doesn't have to. Poor is basically taking, taking, taking and trying to meet your needs now now now.

Wealth to me is having what you NEED to live available to you, when you need, and opportunities to grow and make something with your own work. And doing it.

It's different in character from simply having a lot of money, living a lavish lifestyle, or being rich or even just good with money.

Some of it the rare circumstances around a person, but I think it's like Noddy said - it's ultimately in the control of a person's mind and their power to make what they want to happen happen.

Wealth, in my personal definition, is that sweet spot of being comfy with money and the use of it in the world without being consumed by it or at the mercy of it.

It's the sweet spot of being responsible and still living good, materially, to what a human being needs.

There is only so many clothes you need, a certain housing you need, food, most of the stuff a LOT people think they need and work for is exactly why they end up living strapped to their cash in the end anyways. Just my 2 cents.

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