What It Takes to Be in the 1% Around the World

[Shanachie]

The easiest way to explain it is that the top 10 percent of households in the U.S. own 89 percent of stocks.



And the market went up 25 or more percent this year alone. So a person with a modest $1 million in investments made, on paper, $250,000 to $300,000 without lifting a finger.



If you have sizeable wealth and know how to invest, there is no need for you to work. Instead, you own stocks, bonds, real estate, etc., and live off the proceeds generated by the people who actually do the work in the companies you own shares of.



The craziest part of the U.S. economic system is that people who don't work pay far lower tax rates than the people who do go to work every day, as I outlined previously.


Thanks, Congress.



I'm sure you've read about the FIRE movement, in which people live lives of incredible austerity for a decade or so to amass a large chunk of money to invest in assets.


At 35 or 40, they often have accumulated one or several million dollars and propelled themselves toward or into the top 10 percent.



Most can retire forever because they can now meet their financial needs, as long as they don't blow $1 million on a house, 100K on a pickup truck or $200 on fancy dinners.


(Ahem, we won't talk about boats here ...)

[Ericson38]

Originally Posted by valhalla360

It won't eliminate the worker entirely and new jobs are likely to arise...but in highway design:
- A survey crew used to be 4 guys and you got a cross section every 50ft. They might do a 1/4 mile per day if it was a simple survey. If they missed something, you had to send them back out.
- Now our survey is generally obtained via LIDAR. They have trucks that can get you a cross section (really a point cloud) every inch or so while running at 55mph down the road. There is a bit of work in post processing but no where near as much.

Of course, since it's available, clients expect more. In the old days, it wasn't uncommon for a signal design to just send a design tech out with a wheel and he would draw something up. Now, a full 3 dimensional survey is expected, subsurface geotechnical survey and everything dimensioned to the nearest tenth of a foot. Honestly, it's kind of silly and a waste 99% of the time.

Interesting. I was a surveyor for a Positive Train Control project in Australia between Perth and Adelaide, including yards and sidings. About 15 years ago.

I used a Trimble R8 base station tied to the Australian Geodetic Network (CORS) and a Trimble Real Time Kinematic capable rover receiver mounted on a Land River high rail to map the rail centerline at 1 meter spacing (top of rail) at an accuracy of 3 cm 95% in East and North and 5 cm in vertical. We ran 20 km/hour, and stayed within 10 km of the base station (for accuracy), and post processes raw data for hours. This was for the Australian Rail Track Corporation.

For Norfolk Southern, we experimented with LIDAR since you stayed above the action and didn't have to get dispatched around trains. The biggest problem was the accuracy, since the LIDAR image centerline of the rail track was subject to accuracy of the 3-D alignment of the sensor on the helicopter and its ability to know local level, as well as positional accuracy of the airframe (with DGPS).

In post processing, the LIDAR back end SW tool would allow you to select features in the image, including track lines, switch points, cross overs, grade crossings, etc. But you could not pick out speed boards and track circuits well, which were needed so that PTC could run as accurately (in parallel) to conventional ABS Dispatching with track blocks.

[GordMay]

The Ontario government has raised the general minimum wage from $14.35 to $15.00 per hour, effective January 1, 2022.

Under the changes, the special minimum wage rate for liquor servers would be eliminated, and they would be entitled to the general minimum wage.

Students under 18 [$14.10], homeworkers [$16.50], and hunting, fishing and wilderness guides [$75.00 for working less than five consecutive hours in a day, or $150.05 for working five or more hours in a day whether or not the hours are consecutive] would also see an increase in their special minimum wage rates.

General minimum wage rates from January 1, 2022 to September 30, 2022: $15/Hr.

More ➥ https://www.ontario.ca/document/your...0/minimum-wage

[AKA-None]

So at 15/hr what do we think expenses will be that allows for savings or investment?

[Mike OReilly]

It's already been noted that this increase falls far short of a living wage in Toronto, and likely most other urban areas. In Canada's largest city, a living wage is calculated to be about $22.

[Shanachie]

I put together some numbers to show just how much wealthy people benefit from the U.S. tax system. Let's take a couple with a gross income of $125,000 in 2021.


Everyone in the below examples gets standard deductions of $25,100, making their taxable incomes about $100,000.


Two working people will pay the standard rates of 10 percent on the first $20,000, 12 percent on $20,000 through $80,000 and 22 percent between $80,000 and $100,000.



They will also pay 7.7 percent of their gross income, about $9,500, for Social Security and Medicaid taxes. That's about $13,500 and $9,500, or $23,000.


If that couple is retired and living on regular IRAs or doing short-term stock trading, their income is taxed at the same rate, but they don't pay for Social Security and Medicaid because they're not working jobs.



That saves them $9,500 a year.


Now, let's say the couple has several million dollars in inherited or saved wealth and is living off the proceeds.



If the investments have been held for more than a year, the profits are taxed as long-term capital gains. Let's say they took 125K in profits and reinvested the capital.



The first $80,000 in long-term capital gains profits is not taxed at all. Zilch. The other $20,000 is taxed at 15 percent. That amounts to $3,000 in taxes.


There you have it. Go to work every day, do your bit to make the world run and you pay 23K. Sit on your butt and contribute nothing and you pay 3K.


What a system.

[valhalla360]

Originally Posted by AKA-None

So at 15/hr what do we think expenses will be that allows for savings or investment?

For a couple, that works out to around $60k/yr ($5k/month...say $4k after taxes)
- Let's say $1000/month for rent
- $400/month for groceries
- $300/month for misc utilities
- $200/month Health insurance thru obamacare
- $300/month for car & insurance
- $100/month for clothes and misc houshold

That leaves about $1700k/month for other stuff including saving for retirement (plus if they do a 401k, it partly comes out of the tax bill while working)

Not saying it's a luxury lifestyle but certainly reasonable.

PS: If they have kids and work offset shifts, no need for daycare.
PPS: If you are single, consider getting a roommate to split expenses.

[Ericson38]

When growing up in southern Missouri, at 15 I got a job at a Steak and Shake. Pay was minimum wage, which was $1.10. Still in high school. Back in those days, fast food jobs were for kids, not for raising families, although I guess if you were real resourceful, a couple of workers could get together and rent an apartment.

Back in those days, to raise a family blue collar, either a truck driver, mechanic, or welder were common jobs. Or Ralston Purina or Anheuser-Busch up in St Louis.

None of these were min wage jobs, like fast food, window washers, and construction site laborers were.

When I got out of high school, I went to welding school in south Texas for 8 months and got certified. That paid the bills (Boilermaker Union) at 4.15 an hour.

I went to college later (put myself through it, longer than normal 4 years get it all done method).

[NPCampbell]

Originally Posted by Shanachie

There you have it. Go to work every day, do your bit to make the world run and you pay 23K. Sit on your butt and contribute nothing and you pay 3K.


What a system.

Social security is a contributory entitlement. Those folks that sit on their butt won't pay SS and they won't receive the benefit from it either. It's a wash.

I would hope those folks making $125k that did their bit to make the world run also invested in a healthy mix of pre and post tax investments during their wealth accumulation years so that when they retire they too can sit on their butts.

[valhalla360]

Originally Posted by NPCampbell

Social security is a contributory entitlement. Those folks that sit on their butt won't pay SS and they won't receive the benefit from it either. It's a wash.

I would hope those folks making $125k that did their bit to make the world run also invested in a healthy mix of pre and post tax investments during their wealth accumulation years so that when they retire they too can sit on their butts.

If it was a direct correlation of dollars in translates to dollars out, I would agree with you.

But if you pay SS taxes based on an average $1000/month over your career (inflation adjusted), you a SS check equal to 90% of your average.

If you average $9000/month, you pay 9 times the SS tax but only get a check equal to around 31% of your average.

This assumes you work 35yrs. If you have a successful career spanning 50yrs, you keep paying in it's going to work out closer to 21% (plus any taxes paid while earning minimal amounts during highschool/college are effectively a total loss).

So unless the taxes on the first $1000/month in earnings are invested by the govt drastically better (hint: they aren't invested at all), those who earn more are subsidizing those who earn less to a very large degree.

This is why I find financial articles talking about how to get the maximum SS check silly. It's a horrible investment as you only get credit for 15% of the final dollars and it's often further offset by eliminating a lower earning year in the calculation meaning you get even less.

[capn_billl]

Originally Posted by Tetepare

I don’t remember you detailing that. You mean like just give everyone a million bucks at birth and see what happens?

Nope, nope, nope.

Google Zimbabwe to see how well that worked out for them.

There is no such thing as money, it's just pieces of paper.

The word you are looking for is wealth.

Wealth is goods you need to live.

We currently use money as an accounting system so the people who produce the most goods, get to consume the most goods.

That keeps things equitable.

[capn_billl]

Now, let's say the couple has several million dollars in inherited or saved wealth and is living off the proceeds.

If it's in a mattress, it's not going to last for long.

If it's invested in a fund that buys new machinery for factories, that million is providing a dozen jobs, and a machine that creates several million dollars a year of products.

"Waste?", no, that's how our economy works.

And yes they get a tax break, because they are providing a valuable resource to the economy.

[letsgetsailing3]

Originally Posted by Shanachie

There you have it. Go to work every day, do your bit to make the world run and you pay 23K. Sit on your butt and contribute nothing and you pay 3K.


What a system.

Or sit at home and wait for Uncle Sam to redistribute some wealth your way while paying NO taxes, and then complain about how unfair the world is.

What a system.

Are you really complaining about capitalism, in the world's wealthiest economy? Made possible by, you know, capitalism? Capital markets are available to anyone who saves money and is willing to invest. There is some risk involved, and while markets generally go up, individual investments don't always.

I'm not at all sure that example makes any sense. What did that couple live off of? Did they pay any real estate taxes? Insurance? Surely they're not living in a cardboard box. Did they have social security income as retirees? Did they have any short term capital gains? Did they have no stock losses? No fees to wealth advisors?

Are their savings based on a career of hard work? Were they firefighters and nurses who managed to save enough for retirement? Any pension income?

That "real world" example needs to be a little more "real world" in order to have any relevance.

[GordMay]

America’s Top 15 Earners and What They Reveal About the U.S. Tax System
An unprecedented trove of leaked IRS data shows who reported the most income in America from 2013 to 2018, as well as their tax rates, revealing that the very richest pay lower rates than the merely rich.
To make it into the top 400, each person on this list had to make an average of at least $110 million each year. A typical American making $40,000 would have to work for 2,750 years to make what the lowest-earning person in this group made in one.
Each of the top 11 averaged over $1 billion in income annually from 2013 to 2018. The typical American would have to work for 25,000 years to make $1 billion.
More ➥ https://www.propublica.org/article/a...=pocket-newtab

In 2007, Jeff Bezos, then a multibillionaire and now the world’s richest man, did not pay a penny in federal income taxes. He achieved the feat again in 2011. In 2018, Tesla founder Elon Musk, the second-richest person in the world, also paid no federal income taxes.

Michael Bloomberg managed to do the same in recent years. Billionaire investor Carl Icahn did it twice. George Soros paid no federal income tax three years in a row.
On average, the rate of income tax that people pay does climb as incomes ascend into the top 1%, but when you get to the range of $2 million to $5 million, that trend stops. The group earning in this range, composed mostly of business owners and workers with extremely high salaries, paid an average income tax rate of 29% from 2013 to 2018. After that, average tax rates actually drop the further up in income you go. Their income mostly stems from stock sales taxed at the lower rate. Since 2013, that long-term capital gains rate has been 20%, about half the top rate on ordinary income (37% in 2018).

11 people had an annual income of over $1 BILLION per year, From 2013 to 2018:
Bill Gates: $2.85 Billion per year
Michael Bloomberg: $2.05 B
Jan Koum: $1.93 B
More ➥ https://projects.propublica.org/amer...axes-revealed/

The Top 400 Income Earners
➥ https://projects.propublica.org/#table-jump-link

[dannc]

Originally Posted by GordMay

America’s Top 15 Earners and What They Reveal About the U.S. Tax System
An unprecedented trove of leaked IRS data shows who reported the most income in America from 2013 to 2018, as well as their tax rates, revealing that the very richest pay lower rates than the merely rich.
....

How much did the people pay in capital gains tax?

Later,
Dan