My retired neighbor shared a recent story on wealth inequality and the war on success in this country:
I arrived in the waiting room at the hospital. Because of my insurance plan, the desk clerk offered a private room.
That started some snickering behind me.
“So the rich get better treatment than us peasants,” one woman whispered.
“You know, it’s really not fair,” another sneered. “It’s not right.”
Other remarks followed. It felt like I needed apologize for my success. The next half hour were scowls of class envy over magazine covers.
Sure, I’m a little well off. What these people didn’t see were four decades of busting my butt. They don’t see the years of driving a used Ford to save for retirement. Should I be ashamed for scratching together a little nest egg?
The No. 1 Problem in America
My neighbor is just the latest to experience the “hate the rich” meme floating around.
Generation Y is embracing socialism in record numbers. The attitude fueled Occupy Wall Street and Bernie Sanders’ bid for President.
His story led me to do some research on today’s millionaires. Based on the coverage in the press, the rich grow up with a silver spoon and need to pay more of their “fair share.” You only need to glance at the numbers, though, to see most of what the media is peddling isn’t true.
First, take the idea getting rich requires wealthy parents.
Today, 9.6 million households in America have more than $1.0 million in assets. Of this total, 86% of them are first-generation rich; in other words, they earned their money. (Source: “10 Things You Didn’t Know About Millionaires,” CNN Money, July 31, 2014.)
Most millionaires are working, and not sitting on a beach drinking cocktails. In terms of jobs, you’ll find them employed as managers (17%), educators (12%), executives (7%), business owners (6%), and professionals. (Source: “29 Valuable Facts about Millionaires,” FactRetriever.com, December 27, 2016.)
Education is a key theme. Most millionaires have a college degree. Many hold advanced certifications, including a Master’s degree (18%), law degrees (eight percent), medical degrees (six percent), and PhDs (six percent). (Source: “$1 Million Isn’t Worth What It Used To Be,” Visual Capitalist, November 22, 2016.)
They’re experienced, too. The average millionaire takes 32 years to hit the seven-figure mark. While the media focuses on startup founders, real wealth building is a slow process. (Source: “It takes the typical self-made millionaire at least 32 years to get rich,” Business Insider, March 5, 2015.)
Skills attained. Customers served. Ladders climbed. Not a trust fund in sight.
Second, we often hear the rich need to pay their “fair share.”
The idea gained steam after Warren Buffett wrote his famous wealth inequality op-ed. In 2011, the billionaire investor pointed out he paid a lower tax rate than his secretary. Capital gain taxes, he argued, were unfairly low compared to levies placed on earned income. (Source: “Stop Coddling the Super-Rich,” The New York Times, August 14, 2011.)
Fact is, the rich are paying a bigger load than ever. In 1950, 89% of Americans paid income taxes. Today, only 47% do so. (Source: “T15-0138 – Tax Units with Zero or Negative Income Tax,” Tax Policy Center, October 2, 2015.)
On average, the top 20% pay $50,176 in income taxes. In total, this group pays 87% of all income taxes collected. By comparison, four in 10 people at the bottom end of the income spectrum end up collecting money from the government. (Source: Ibid.)
Buffett’s affairs are not typical, either. Only about a quarter of those making more than $1.0 million per year pay a lower tax rate than middle-class taxpayers, according to a 2012 study by the Congressional Research Service. Never mind that these studies often skip the corporate taxes owners pay as well. (Source: “An Analysis of the “Buffett Rule,”” Congressional Research Service, March 28, 2012.)
And finally, the idea that America’s wealthy class is some sort of gilded elite.
Once again, the numbers don’t bear that out. Nearly 70% of millionaire families lose their wealth by the second generation. Over 90% are out of the country clubs by the third. (Source: Visual Capitalist, November 22, 2016, op cit.)
The old saying “from shirtsleeve to shirtsleeve in three generations” still holds true. Indeed, membership in the top one percent is pretty fluid. According to a government-sponsored study on wealth inequality, by age 60:
- 70% will have at least one year within the top 20% of income earners,
- 53% will have at least one year within the top 10%, and
- 11% will join the ranks of the top one percent of income earners for at least one year.
Liberals think poor conservatives “vote against their own interests.” Many of these voters, however, have been top earners at some point. They rationally believe–based on the data, anyway–that they will one day join that group again. (Source: “The Life Course Dynamics of Affluence,” PLOS, January 28, 2015.)
What the Media Won’t Tell You About Wealth Inequality
No one is saying the system is perfect. Real barriers exist. Dimwitted gamblers strike it rich all the time.
Most millionaires, though, act nothing like they’re portrayed in the media; no monocles and top hats here. Most stories are about rolled up sleeves, stretching every dollar, and some smart investments for good measure.
I don’t expect journalists to change their turn. Politicians certainly won’t, either. But the next time you hear a sob story about wealth inequality, don’t feel like you have to apologize.