Who is rich?

[Gob]

THE federal government considers an income of $150,000 wealthy enough for taxpayers to no longer receive its help.

But most people think a ''well off''' family with two parents and two children earns about $120,000, according to research by Essential Media. They are inclined, however, to raise the bar to $159,000 before they call that same family wealthy.

The $150,000 benchmark created a headache for the federal government last year when it froze the threshold for family payments and other benefits at $150,000 instead of allowing it to rise with inflation as it used to.
Advertisement: Story continues below

Families on $150,000 were not rich, Treasurer Wayne Swan said last May, but that they were ''rich enough'', a comment that created a talkback typhoon for a day or two.

The government is more careful in its language now but it appears its line in the sand is not all that out of step with what people think. As Mr Swan was railing against the ''rising power of vested interests'' such as billionaire trio Gina Rinehart, Andrew Forrest and Clive Palmer, Essential Media was conducting polling about the definition of rich.

In a survey of 1891 respondents completed earlier this month, most - 69 per cent - thought a ''middle income'' for a single person is between $40,000 and $79,000 a year.

A broader income range was given for middle incomes families of two parents and two children - 69 per cent think it is between $60,000 and $119,000. Most surveyed nominate $80,000 as the starting point for middle income earners.

To be ''well off''', a single person had to earn $69,000, said 63 per cent of respondents, and a family $120,000, according to 55 per cent.

A single person earning $120,000 is considered wealthy by 58 per cent, while the average minimum income for a family to be considered wealthy was $159,000.

The executive director of the Australia Institute, Richard Denniss, said: ''The minimum wage is around $37,000 a year. The median income is between $60,000 and $70,000. Two people earning that gives you a combined income of between $120,000 and $140,000.''

''It's not a lot for people considering buying a $5 million waterfront mansion in Sydney but for 23 million Australians it is,'' Dr Denniss said. ''If people think it's hard to make ends meet on $150,000 a year then they should think about how they would cope if they lost their jobs for three to six months and had to live on the dole, which is about $15,000 a year.''

Asked about the Essential Media research, Mr Swan's office pointed to his recent essay in The Monthly and his new ''fair go'' slogan.

''The Gillard Labor government will continue the fight to ensure more Australians enjoy the opportunities of the Asian century and not just a fortunate few,'' Mr Swan said through a spokesman.

Read more: http://www.smh.com.au/opinion/political ... z1pPi0aqO7

[dales]

In the SF Bay Area it takes an insane amount of money to be even considered "middle class" (whatever the hill that means).

$200 grand here is "living good" but hardly what I would call rich.

While in "flyover country" $200,000/yr is a handsome sum indeed.

[Lord Jim]

Where you live does make a big difference...

That poll shows what many polls show; that a large percentage of the electorate is abysmally ignorant, this time about how much money makes one "rich"...

That ignorance is one of the reasons why the Democratic party has been so successful playing the class envy card.

[BoSoxGal]

You didn't specify size of family, either.

[rubato]

If your household makes, on an ongoing basis, $250,000 and up you are 'rich' because you are in a totally different economic universe than someone making $50,000 /yr.

Even in the Bay area, this is true.

First of all you are making enough for both breadwinners to contribute the maximum to a 401k each year ($44,000 tax-free savings) without any strain, while someone making $50,000 will have to struggle to save $5,000/yr. Over 20 years this yields a difference in savings of $1,662,000 vs $ 189, 000 (using a crude method of calculating investment growth at a rate of 5.5% avg annual.) The rich person can look forward to about $91,400 in income per year vs $10,400 for the median.

Further, the government is subsidising a much more expensive home purchase and at a MUCH higher level. The mortgage interest deduction for someone paying $3,000/month who is making $250,000/yr is the value of their tax rate times the fraction of the mortgage which is interest

$250,000/yr
$3,000/month* .84 * net tax rate (state plus federal= 9.3% + 33% = 42.3%) = $1,1066 month that the govt. is paying for your mortgage
x 12 = $12792 yr annual housing subsidy.

$50,000/yr
$3,000/month *.84 * net tax rate (state plus federal= 4% + 15% = 19% ) = $ 570 month that the govt. is paying for your mortgage
x12 = $5,745 yr annual housing subsidy.

Now, in fact the person making 50K cannot afford a house that expensive ($36,000/yr) so they will be paying more like $1,375 month (if you can find a house for that) so the numbers are
x 12 = $2,633 yr annual housing subsidy.

It looks to me like the higher-earning person is getting a huge advantage. And if you iterate this over 20 years the rules of the game act to accelerate the difference in wealth of these two people. To me you are "rich" when your income is high enough that you are systematically advantaged by the economic rules of the game.

Now a final point is that the rich person is paying a much smaller proportion of income on a house here, even if their mortgage is $5,000 mo it is less than 25%.

yrs,
rubato

*cakculation used the amount of payment which is interest at the beginning of the mortgage usu. about 84%.

PS sorry about the rough editing. Gotta go.

[rubato]

You didn't specify size of family, either.

Family size matters a lot more at $50,000/yr than it does at $250,000/yr.

yrs,
rubato

[Gob]

At the risk of derailing the topic;

There are a number of factors which will affect the perception of some one being rich, size of family, area of living, outgoings, size of mortgage etc, but as a general idea who is rich?

The funny thing is that when we were back in the UK we met with, and dined with, a couple we are very friendly with, I've known them for 30+ years. He is a handyman, she is a nurse. They live quite well on £35k ($55,463 US) per year, (between them, not each,) but they have an enviable lifestyle. They live in Devon in a beautiful traditional village, they own their own house which is a perfectly presented place, they have no kids, they both fly paragliders as a hobby, and he climbs and also flies hangliders and microlights. They enjoy a great social life with many close friends who share interests and hobbies. They own and have fitted out the most wonderful campervan, and use this to tour Europe for flying purposes, they both work part time. When not flying they have the whole of Dartmoor on their doorstep, and the beautiful South Hams to spend time in.

I consider them "rich" even though they earn a quarter of what me and Hen bring home. Their lifestyle is one we aspire to.

[rubato]

Ahhh right. well you can be spiritually rich while not being economically rich. I think that is a well-accepted principle. My grandfather helped to found 4 hospitals and more than 6 schools in Ethiopia between 1922 and 1936 and then returning in the 1940s to start them all up again after the Italian Catholics killed them. He was never rich economically speaking but very rich in the effect of his life.

But let us stay on topic.

yrs,
rubato

[dgs49]

Income is only one factor, and it is the most volatile.

A baseball player with a modest background who makes $500k a year is not "rich," because his high earnings could end in an instant, and he hasn't had time to accumulate any wealth.

The ubiquitous real estate programs make it abundantly clear that the income level required for a wealthy lifestyle varies tremendously from one location to another. Riding around yesterday with my wife, we were observing virtual mansions (say, 6,000 ft2 houses) that one could purchase today for $500k in suburban Pittsburgh. That same budget wouldn't even get you a nice condo in New York. I saw an article last week that was mentioning $1,500/ft2 as a "normal" price right now.

As for what constitutes wealthy, consider some traditional indicia of wealth:

Domestic help,
Vacation home or homes,
Yacht, or expensive recreational boat,
Country club memberships,
Private schools for children,
Expensive toys - mainly with wheels on them,
Large, opulently-appointed house,
Luxury cars

Aside from self-delusional scams like leasing expensive cars and going overboard on a mortgage, you can't have much of this on an income of $150k. I don't have any of it, on household income that is much higher.

But over $150K you shouldn't be getting any freebies from Uncle Sam.

[rubato]

If you're shopping for groceries and ask "what would I like" and not "what is in the budget"; you might be rich.

If you can spend $10,000 on a non-emergency (new furniture, vacation, remodel) and not have to budget and save for months and years; you might be rich.

yrs,
rubato

[Beer Sponge]

If you can, during an election debate in the Republican primaries, without batting an eye, bet $10,000 that your opponent is wrong on an issue, you might be rich.

[dales]

[rubato]

If you give $2,000 to a political candidate you are rich (and almost always Republican, statistically).

yrs,
rubato

[rubato]

Being rich means being immune from the effects of external economic forces:

If you bought the same wine and went on the same vacations in 2010 that you did in 2007, you are rich.

yrs,
rubato

[dgs49]

Yes, unfortunately for rubato's theories, most successful people are Republican. Conversely, virtually all of our most wretched souls are died-in-the-wool Democrats, hoping desperately that some handout (or collection of handouts) from Gub'mint will make their lives a little more tolerable.

[rubato]

Yes, unfortunately for rubato's theories, most successful people are Republican. Conversely, virtually all of our most wretched souls are died-in-the-wool Democrats, hoping desperately that some handout (or collection of handouts) from Gub'mint will make their lives a little more tolerable.

And yet I'm much more successful than you are.

I don't get canned every few years like you do; because you are a miserable asshole.



yrs,
rubato

[Rick]

Woo Hoo! I'm staying with the same deer camp I've been with for the past 8 years and joining the one my grand children are in!

I'm rich!!!!

[dales]

You camp with deer?

Must be a "family thing".

[Rick]

A loose collective of individuals that pool their money to lease land to kill cute little animals.

The camp part is where the not so nice folks go to smoke and gamble and use foul language...

[Rick]

Before it starts no my grand kids don't smoke or gamble, however I have threatened to introduce Bean to the Dove.

If he liked it we'd try the Dial...