Millionaires Aren’t What They Used to Be

U.S. President Obama’s plan to apply a “Buffett tax” has been widely described as a millionaire tax. But it doesn’t apply to those who have a net worth of a million dollars; it only kicks in for those whose income is a million dollars per year. These are two very different things.

According to Wikipedia and U.S. census information, one out of every 11 U.S. households has a net worth of a million dollars or more. However, only 1 out of every 230 households has $30 million or more, which is closer to the wealth level needed to generate a million dollars in income per year.

Coming back to Canada, many government workers retire with a pension worth more than a million dollars, but I’m sure that most of them would say they aren’t rich. We’re used to thinking of millionaires as wealthy people, but those who have just $1 million in total assets between a house and retirement savings are quite ordinary.

It is very likely that you routinely meet millionaires, but you may not often come across people whose income is a million dollars per year. Most millionaires live in ordinary neighbourhoods, but the truly wealthy can afford to live in better places than the rest of us.

Comments

  1. JamesSeptember 20, 2011 at 12:54 AM

    Question is, if you manage to earn $1 000 000.00 per year through employment and investments, should you pay higher taxes?

    I often find it interesting that the "Buffet" tax is considered class warfare, but what isn't discussed is how program and spending cuts is class warfare waged against the lower and middle class. The net result of both is a lower standard of living for the affected group.

    ReplyDelete
  2. Michael JamesSeptember 20, 2011 at 8:26 AM

    @James: Perhaps this is what you meant, but the question is whether million dollar earners should be paying more than they pay now so that their tax rate isn't so much lower than the tax rate paid by working people with modest incomes.

    ReplyDelete
  3. JamesSeptember 20, 2011 at 11:44 AM

    I have no problem with progressive taxation. The idea that one who has had success in a system is expected to contribute more to that system seems to make sense. Plus, there are an increasing number of ways for wealthy people to shelter their incomes/reduce their incomes. And in fairness, the poor don't have any more money to contribute and I would argue that the middle class is heading in that direction.

    Obviously I don't want to pay taxes but I realize that the government and services have to be funded from somewhere. I would also support raising the GST (even though it is a flat tax) back to 7%.

    Another question, would you support a lower tax rate but have capital gains and dividends count as income?

    ReplyDelete
  4. Michael JamesSeptember 20, 2011 at 12:11 PM

    @Dale and @James: In his op-ed piece, Buffett explained that he pays less than 20% tax on his income, but most workers of modest means pay somewhere around 35%. The question at issue is whether the tax rate on very high income earners should be raised to bring it closer to the tax rate of typical workers. Increasing it even further is a separate question.

    ReplyDelete
  5. Chris BSeptember 20, 2011 at 8:43 PM

    I think it's more than fair that everyone pay the same percentage of taxes. 35% of a million is quite a lot to pay in taxes, but the 65% you get to keep (PER YEAR) is more than most people's net worth. There will be no tears shed here for the 'poor' rich folks.

    ReplyDelete
  6. Michael JamesSeptember 20, 2011 at 8:53 PM

    @Chris B: Warren Buffett agrees with you.

    ReplyDelete
  7. JamesSeptember 20, 2011 at 9:16 PM

    Michael,

    Warren Buffet is not proposing a flat tax on everyone. He is saying that the system is broken when he can find loopholes that allow him to pay a lower percentage of his income.

    @ Chris,

    How do you propose that someone making minimum wage can pay 35% of their income? Would you be in favour of raising minimum wage by about 50%?

    ReplyDelete
  8. Michael JamesSeptember 20, 2011 at 9:36 PM

    @James: You're right. I meant that Warren Buffett agreed with everything Chris B said after the first sentence. Buffett wants to see the very rich pay at least the same percentage as working people. This is very different from having all people pay a flat tax.

    ReplyDelete
  9. Chris BSeptember 21, 2011 at 10:17 PM

    Thanks for catching that ... I meant to refer to the middle class in the middle/upper tax brackets. On that subject, how much are we really gaining by taxing the working poor? Someone making $10/h will likely pay less than $2000/year in income taxes. Just something to ponder.

    ReplyDelete

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