Ever wonder how much money do the top income earners make? Once you know how much the top income earners make, then you can better shoot to be a top income earner yourself. After all, everything is relative when it comes to money. You're not rich making $500,000 a year when everybody else is making $600,000 a year!
Americans are rich by world standards. With a median household income of roughly $76,000, America consistently ranks in the Top 20 richest countries in the world. Many of the world's top income earners live right here in our great country. Just being born into a rich country makes us very lucky.
Other rich countries that have a higher GDP per capita than America include Liechtenstein ($139K), Qatar, Monaco, Macau, Luxembourg, Bermuda, Singapore, Isle of Man, Brunei, Ireland, Norway, Falkland Islands, UAB, S. Maarten, Kuwait, and Gibraltar. Countries with similar GDP per capita to America include Hong Kong, Switzerland, and Saudi Arabia.
If at birth, you had the mental capacity to choose where you'd like to live for most of your life, living in a top 20 richest country will more than likely help you become a top income earner as well.
Even if you end up being the most mediocre producer, you are still miles ahead of much of the world. Too bad many of us can't pick where we want to grow up and earn a living. As such, it's nice to understand how we compare against the rest of the world to give us some perspective.
Let's take a look at what the top income earners make in America. Once you know the income figures, you can then strategize on how to get there.
Top Income Earners Invest In Real Estate
In addition to building wealth through stocks, also invest in real estate. Real estate provides the powerful one-two punch of principal appreciation and rental income growth over time Fundrise manages over $3 billion in private real estate investments, mainly in the Sunbelt region where valuations are lower and yields tend to be higher. With the Fed embarking on a multi-year interest rate cut cycle, there should be increased demand in real estate in the coming years. I've personally invested over $270,000 with Fundrise so far.
What The Top 1%, 5%, 10%, 25%, and 50% Income Earners Make
Based on the Internal Revenue Service's database, here's how much the top Americans make for 2023. These are estimates due to rising inflation. Since the previous financial crisis in 2008 – 2009, the top 10% have significantly widened the wealth gap.
- Top 1%: $650,000+
- Top 5%: $250,000+
- Top 10%: $170,000+
- Top 25%: $95,000
- Top 50%: >$50,000
The rich have gotten much richer during the pandemic. Therefore, the top income earners are making even more than ever before. Sadly, the wealth gap has widened as we continue through a K-shaped recovery.
Summary Of Top Income Earners Tax Data
Here is data from the IRS that highlights what the top income earners made back in 2015. A top income earner is considered someone who makes a top 10%, top 5%, and top 1% income. Notice how much the top income earners are making today, partially thanks to inflation.
There is not a lot of data about the mega-rich, those in the top 0.1%. However, I also write a huge post highlighting people who make over $1 million a year and how.
Based on a previous 1000+ survey study on Financial Samurai, about 80% of readers are in the Top 25% income earners ($95,000+). Good to know that many of you are doing well.
The table also tells us a number of things about equality or inequality, namely that the top 1% of tax payers pay 38% of all income taxes yet only have a 20% share of total AGI.
Further, the top 50% of tax payers pay practically all of the nation's federal taxes (97.3%) while commanding 87.25% of total AGI. One could easily argue the rich pay more than their fair share of income taxes.
This table from the IRS is the source for the often politically bantered argument that 47% of American income earners pay zero federal income taxes.
If you do another little exercise and compare the top 25% of American income to the Top 10 per capita income countries in the world, you can once again see how lucky most of us are.
Once you earn a top income, you need to save and invest aggressive to achieve a top one percent net worth. After all, it's often not what you make but what you keep.
Broaden Tax Collection Beyond Just The Top Income Earners
If only we could get all American wage earns to pay some taxes. It would go a long way to help shoring up our budget. Congress constantly holds the nation hostage by bickering over whether to cut $10 billion here, $50 billion there. All we have to do is encourage those who earn above the poverty line to pay some tax. We'd raise billions a year right there for example!
Let's have everyone contribute to the welfare of our country. We are all in this together! For those who are just struggling to keep their heads above water, let's lend them a helping hand.
The top 1% income earner in 2024 is now earning at least $650,000 a year. But in some states, like Connecticut, the top income earners make over $800,000 a year.
Who Are The Majority Who Pay No Federal Income Taxes?
Back around 2015, roughly 47% of Americans pay no income taxes. In 2023, roughly 60% of working Americans didn't pay any federal income taxes, largely due to the pandemic. As the pandemic becomes endemic, the likelihood is that more Americans go back to work, make more money, and pay more taxes.
The Americans who pay no income taxes fall into three groups:
The working poor. The earned income tax credit and the child credit can help families making $50,000 or more pay no taxes or get money back. About 60% of those not paying income taxes do contribute to payroll taxes. Meaning they must have some source of earned income.
The elderly. An increased standard deduction for those over 65, and an exemption on part of Social Security earnings, means that many older Americans pay no income taxes. Please remember though that the elderly have paid their dues through decades worth of federal taxation during their careers.
The low-income. A family of four claiming only the standard deduction and personal exemptions pays no federal income tax on its first $27,700 of income. The standard deduction per person is now $13,850 in 2023. Further, each family gets a $500 child tax credit.
Not Everybody Has The Ability To Make A Top Income
As you can see, being poor or elderly likely means you don't pay net federal income taxes. We're all going to grow old one day, so let's give this group a pass. The elderly paid into the system, so let's take care of them. I don't think any of us would rather be poor so we can pay no federal taxes. Therefore, let's give them a pass too.
This leaves us with a low-income group that may have made some suboptimal decisions. Some of these decisions include having children while not being able to support themselves. Children are estimated to cost roughly $250,000 from the ages of 1-18. Perhaps having multiple children on a low income is not ideal. But, how do you deny passion?
Living In America Is Rich
If you work in America, you can see from a top down and bottoms up perspective you're doing fantastic. If you are in the bottom 50% of Americans who earn less than $33,048 a year, know that you can earn more if you want to.
Part of battle to making more money is moving to areas where there are more opportunity. Earning a top one percent income for your age is a numbers game that also requires a lot of luck.
Billions of dollars are flowing through cities like San Francisco due to technology innovation. It's not like you have to brave the high seas to reach America to get rich. It's not like you need to ride a horse for three months to get from New York to California. All you've got to do is hop on a bus or a plane to be where the action is.
25 years ago, I remember making $550 a month working at McDonald's for $3.75/hour. With wages 3X higher now, I'd be pulling in $1,650 a month or $20,000 a year! Heck, tack on driving for Uber for 20 hours a week part-time at $36/hour. You'll make another $2,000 a month and be in the top 50% of income earners no problem.
There's an entire gig economy out there for freelancers to make extra money after work, or freelance full time. Why not take advantage to become a top income earner yourself?
Top Income Earners Still Experience Stress And Anxiety
Despite earning a top income for your age group, you might still feel anxiety, especially if you have children. The reason why is that your income is dependent on effort. The minute you stop working, your income drops, hence the importance of generating passive income.
Another reason for general angst and anxiety, despite earning a top income, is the fear of downward mobility for your children. Given your income is so high, chances are also high your children won't make a similar level of income.
As a result, your goal may be to strive for generational wealth to help your children maintain the same lifestyle in adulthood. However, to accumulate generational wealth, often defined as at least $5 million to pass down to your children, will require an enormous amount of effort.
Please Put In The Work To Grow Your Income And Wealth
If you are only working 40 hours a week or less and complaining why you can't get ahead, you need to seriously re-evaluate your work ethic and expectations. Anybody can do it. You just can't be delusional enough to think that you'll be able to compete when everybody in the world who wants to get ahead is working 60+ hours a week and getting paid much less to boot!
Spend some time online understanding global wages from our biggest competitors in China and India. In order to maintain our incomes, we must constantly be updating our skills.
There are plenty of six figure jobs out there for the taking. You just need to have the desire, motivation, work ethic, and perseverance to get there. Did you know the San Francisco police chief makes $320,000 a year? Further, when he retires, he'll get a $200,000 a year pension for life! It's not just doctors, lawyers, venture capitalists, bankers, movie stars and athletes who make healthy sums of money.
A Variety Of Jobs Pay Well
Even my friend who is a union electrician makes $120,000 a year. He also gets a $5,000 a month pension when he retires at 55. What's more, he isn't allowed to work more than 35 hours a week. Let's not count the $30,000 a year he makes doing side jobs with all that free time. There are six figure earners in practically every single industry, including the non-profit industry!
Back to my point where if everybody earns a million dollars a year, nobody is rich. Living in San Francisco, it certainly feels like most are in the top 5% of income earners ($159,619). Train janitors and elevator technicians in the Bay Area can make over $250,000 a year with overtime.
I'm sure many who live and work in Manhattan, and potentially LA and Chicago feel the same way. The cost of living is expensive out here, and that's predominantly driven by high wages.
Combine two income earners with these amounts, and you can really start understanding why surpassing what the government deems as wealthy ($250,000) is not too difficult. Thankfully in 2024+, President Biden only wants to raise taxes on households making over $400,000 a year. But it doesn’t look like he’s gonna get this income tax hike through.
In fact, I argue that in many of the larger cities in America, you've got to earn closer to $300,000 a year just to live a middle class lifestyle. It sounds crazy. But it's true if you take a careful look at the budget I put together. A middle-class lifestyle means owning a home, being able to raise two kids, and save for retirement.
The Top Income Earners Pay The Most Taxes
The top 1% of income earners will likely continue to pay a higher percentage share of overall income taxes than their share of income justifies. If things were fair, the top 1% would only have to pay 20% of total income taxes since 20% is their share of total income. Alas, the rich pay almost double what they owe.
Therefore, it's not worth constantly demonizing the rich for “not paying their fair share.” The rich donate the most and employ the most people.
On the flip side, the bottom 50% who earn 12.75% of total earnings only pay 2.7% in total taxes. But, as we learned above, most of the bottom 50% are elderly or poor. Nobody is asking the bottom 50% to pay more taxes.
It's impossible to create a fair tax system that everybody will agree on. But we can look at the data to understand who is making the most and least income. We can see who is paying the most and least in taxes.
It's great to be a top income earner. However, it's even greater to be happy. Find your balance!
Here are three things top income earners do below.
Top Income Earners Invest In Real Estate
Real estate is one of the favorite asset classes to build wealth by top income earners. Real estate is tangible, provides utility, and generates valuable income. With mortgage rates staying at record-lows and more people working from home, the growth of real estate will likely be strong for years to come.
Top income earners invest in rental properties for cash flow and capital appreciation. Top income earners tend to also be extremely busy. Therefore, they like to invest in real estate crowdfunding and private real estate to earn 100% passively.
Best Private Real Estate Investing Platforms
Fundrise: A way for all investors to diversify into real estate through private funds with just $10. Fundrise has been around since 2012 and manages over $3.5 billion for 2+ million investors.
The real estate platform invests primarily in residential and industrial properties in the Sunbelt, where valuations are cheaper and yields are higher. The spreading out of America is a long-term demographic trend. For most people, investing in a diversified fund is the way to go.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. These cities also have higher growth potential due to job growth and demographic trends.
If you are a real estate enthusiast with more time, you can build your own diversified real estate portfolio with CrowdStreet. However, before investing in each deal, make sure to do extensive due diligence on each sponsor. Understanding each sponsor's track record and experience is vital.
I've invested $954,000 in real estate crowdfunding so far. My goal is to diversify my expensive SF real estate holdings and earn more 100% passive income. I plan to continue dollar-cost investing into private real estate for the next decade. Both platforms are long-time sponsors of Financial Samurai and Financial Samurai is a six-figure investor in Fundrise.
Here's a conversation with Ben Miller, CEO of Fundrise, about his outlook for real estate now that we're in a declining interest rate environment.
Top Income Earners Own Businesses
We are in the technology and internet age now. If you really want unlimited earnings potential, you might as well be your own boss someday. It costs so little now to just start your own website so you can brand yourself online.
You will connect with like-minded people, find new jobs and consulting opportunities, and potentially make a healthy living online. Take a look at this income statement example of a friend with a simple personal finance blog.
I started Financial Samurai in 2009 as a hobby to help make sense of the financial destruction back then. Today, Financial Samurai is one of my most valuable assets.
You can start your WordPress site like this one with Bluehost for as little as $2.95 a month. Come up with a unique and memorable domain name. Find a free website theme. Then connect your hosting and you'll be up and running in 30 minutes.
The best thing you can do while you have a job is work on your side hustle during off hours. You never know what might happen if you just start.
Top Income Earners Invest In Private Growth Businesses
The greater the net worth, the greater the percentage of the net worth is in business interests. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment.
If you don't want to start a business, invest in private businesses. Check out the Fundrise venture capital product, which invests in the following five sectors:
- Artificial Intelligence & Machine Learning
- Modern Data Infrastructure
- Development Operations (DevOps)
- Financial Technology (FinTech)
- Real Estate & Property Technology (PropTech)
Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!
The investment minimum is also only $10 while most venture capital funds have a $250,000+ minimum. You can see what Fundrise is holding before deciding to invest and how much.
Top Income Earners Track Their Net Worth
Finally, top income earners religiously track their net worths. You can only truly optimize your wealth if you know where all your money is going. Sign up for Empower, the web's #1 free wealth management tool to get a better handle on your finances.
I've been using them since 2012 and have made much wiser financial decisions since. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool. The tool will show you exactly how much you are paying in fees. Further, it will give you insights into your asset allocation. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use the Empower Retirement Planning calculator. It pulls your real data to give you as pure an estimation of your financial future as possible. Your financial future is too important not to take it seriously. You don't want to end up old and not have enough money because there is no rewind button!
Join 65,000+ others and subscribe to my free weekly newsletter. Since 2009, the newsletter has helped people achieve financial freedom sooner, rather than later. If you want to be one of the top income earners, you need as much actionable advice as possible.
Great article! It’s really interesting to see the breakdown of top income earners and how diverse their sources of income can be. Understanding this can give valuable insights into building wealth over time!
Thank you Sam for taking the time to write this article. I came across your blog and it is great! The stats for the top financial earners are very detailed and informative. I know now that to be a top earner you need a higher education to get to know all the ins and outs. Very interesting thank you.
Often overlooked is your age demographic relative to your salary. Someone who makes $80K as a 30-year-old could easily be someone who makes $350 – $500K as a 50 yr old.
Greetings,
Current Population Survey and Census Data provide a better picture of total household income than AGI, which doesn’t include tax-free income, excludes at least 15% of SS income (for many people that will be 50%), and allows certain income adjustments.
1% – $570K
5% – $286K
10% – $212K
20% – $150K
According to this source average household income in 2022 was $102,310 and median $71,181.
Dang. At about 310, I am much closer to the 1% threshold than I thought.
What is the gross income share instead of AGI? Top 1%, 2-5%, 6-10%, 11-25%, 26-50%, 49-100%.
The rich pay the most in taxes. Most of the taxes the rich are paying is from payroll deductions and matching. The more an hourly worker makes. The more effort we put in gets taxes even higher making those efforts worth less. Then you go home to unhappy people because you’re not there during family moments. Eventually breaks down. What breaks the camel’s backs? Tax codes are to blame for many things. Which ones are being me in this this writing. Best wishes
It’s easy to forget, but there really are opportunities abound for those who want to make more money.
In my industry alone (security), the standard seems to be six figures. If you’re willing to move to some of these high cost of living areas, that figure can jump quite a bit.
At what point do you think it’s worth it to live in these high cost of living areas when compared to the more average American city? The raises, while enticing, don’t seem to make up for it. At that point is it just preference?
Thanks Sam. This blog is amazing.
I have a question: do all the top 10% income earners pay most of the tax amount they actually earn?
These are great résumé examples were getting jobs. I’m thinking about getting a new job in 2021 as the economy opens up.
Supporting the idea that working over 40 hours a week is a good way to live life is at the least misguided and at the worst wrongheaded.
Please take time to review what happened to the majority of those who have choose to work 40 plus hours. Many of them have shortened life expectancy, more chronic illness not even to mention their relationship outside of work are quit poor. This holds in other countries as well. Modern work environment is not a healthy place to spend huge swaths of our time.
Agree and disagree. 40 hours a week isn’t that long IMO. But I did burn out working 60+ hours a week for 13 years and as a result, left my day job in 2012 at age 34.
See: The Ideal Age To Retire Early And Minimize Regret
Liz, you work for what you want. Although this is 2020, and we should expect some comments about health and wellbeing, it’s also 2020; a time when opportunities to hustle have never been greater.
I’m working three jobs. Not because I have to, because I want to improve myself and the life of those around me.
I’ll be extremely likely to retire early as a result.
Thanks Sam. Your financial blog is amazing, I highly recommend it.
This is why I think it’s unfair. And the rich don’t pay enough, My easy way to look at it. All math. Use a roll of toilet paper. Each square is $25,000 in income. after 9 squares the 1st 6 brackets are covered. Yes that covers all the way to $204,102 and these people pay 35% in taxes, So they pay 71,435 in taxes and keep $132,666. go 13 more squares and the finial 7th bracket is covered $510,301 and they pay 37% taxes they pay $188,811 and they get to keep $321,489. so this is when taxes are not fair. But lets go on because if that is screwed up. Then check this out. we have just reached the 22 sheet. these rolls has 350 sheets in 2017 Bill gates made over 4 billion. You make sure you taxed the poor 10% and the middle class 22% so what about bill gates will lets look. it will take 114 more rolls to hit his income he made. But he only paid 37% on 4,000,000,000 and the disabled vet paid 10% on that $1,000 over the $24,000. then you have the nerve to say you need to work harder. how many people get rich stealing from others. How many ran a scam to get rich quick. you rich always want to raise our taxes. and lower yours. I don’t care what you pay but it should be like in the 1970’s at 80% you know Bill Gates would still make $80,000,000 after taxes. how much does a person need. Just enough to buy the congress right.
You did not look at the figures. Otherwise, you wouldn’t have that rediculous example. Half of tax filers don’t pay federal taxes yet they benefit. The ultra rich will always have avenues to mitigate liability, but they still pay a large share. Errbody needs to pay A share.
regardless of whether I agree or disagree that rich people pay too much or too little, I am disappointed in the question “how many people get rich stealing from others”. Perhaps we differ on the definition of stealing, but I just don’t see it that way.
But even still, just because someone might have done something wrong, you argue we should punish everyone similar to them. By that logic, we should cut all medicare, medicaid, social security, and other social services because “how many people steal from these programs” Your logic is divisive and flawed.
I think the fundamental question is what is equal, proportionate, or equitable, and what goal are you trying to achieve? Is it a balanced budget, fairness, encouraging income or wealth, etc. And rather than calling out extreme examples (i.e. Bill Gates or the vet) look to people in the middle of each bracket and what each policy would mean for them. With such varying costs of living, many people in these brackets, would struggle with increased burden. At the same time, many would face economic challenges if we cut back on spending. I think many people believe there can be more brackets, and higher taxes as we go up, but we also have to balance that with the reality that taxing the top fractions of a percent of earners won’t solve the budget challenges. While it may make people feel better, and could be argued as more equitable, it is certainly less equal and proportionate.
How about additional property tax adjusted for national defense spending. Leveraging the homestead act as a way to opt out for disabled and elderly under certain incomes.
The top 1% don’t make $360K.
That is the split point, i.e., the minimum for that tax bracket.
Because it is not readily provided by the press, the Progs always imply that you need to make millions to be in the Top 1%.
And economics is not taught in schools anymore.
They are teaching islam instead.
Can you please share one example of a public school in the U.S. “teaching Islam”? I mean, outside of a Comparative Religion class, which would usually be at the college level.
Correct, that’s the minimum amount to be considered a 1% for that year. Even among the 1% there is a big divide of the working class doctor and. millionaire business owner.
You had me until your comment about Islam. It’s the largest religion in the world and does teach fiscal responsibility. Don’t judge the 1.8 billion Muslims in the world by a small fraction of a small percent of bad actors.
FS,
Great article.
The IRS data is (for certain) very accurate but I wonder if it paints a picture that there are *less* well-off people than there actually are. If so, your point is proven even further.
Here is why I think the incomes reported to the IRS are lower than we realize:
* Small business owners are notorious for avoiding taxes by making everything a business expense
* Many high-paid freelancers such as hairstylists, makeup artists, photographers, painters, roofers, etc prefer to be paid in cash and also receive cash tips. This doesn’t apply to all their contracts, but they may receive a share of their income in cash.
* The “landed” well-off tend to derive their income from their assets. They only pay taxes when they realize gains on these assets, whether it is stocks/business income/real estate…
Almost all of these high earners come from the self-employed and entrepreneurial corner.
Anecdotally, there is a large number of expensive houses in US cities. Far more of these “wealthy” houses than there are high income earners if you go by the IRS definition.
What do you think? Is the income data skewed downward?
Not sure actually. There’s a lot of stealth wealth in America because of populist angry towards the wealthy.
Also, the average net worth in America is pretty huge now at $693,000 according to the Federal Reserve.
Actially adjust gross income is a bad way to tell. The main complaint is the wealthy have so manyloopholes available to them to get out of paying taxes. Those loopholes and breaks get applied BEFORE agi is calculated. It seems alll the info on gross income of the 1% has been censored but the last data I saw was in 08′ the 1% make 80% of the income before deductions. By 2018 they had 90% of the total income before deductions. So if that 90% gets adjusted down 80% I would say thete is an issue. Comapre that to the average earner at 63,000 who gets adjusted down to 38,000.
It’s crazy how poorly the top income earners are treated in our country. They are the job creators and the biggest tax payers in the entire nation. I believe there will always be resentment from the middle class toward the rich.
This resentment is exactly what makes it hard for the rich to want to have a healthy dialogue with the middle class. It’s definitely an issue to keep an eye on as wealth/income inequality continues to grow.
It’s demand that creates jobs. People can become rich by meeting that demand, but people that are already rich are better situated to more quickly exploit the opportunities.
And, while the top income earners may pay the majority of taxes (debatable for many of the richest), the one percenters pay proportionately less. If you and your wife earn 200k in wages, and pay 30k to the IRS, is it fair to see a couple next door, that is making 600k per year, and paying 60k to the IRS? Yes, they are bigger tax payers if you go by dollars, but is that really the way to measure it?
And, of course, you probably won’t see it because it considered socially unacceptable (and possibly even a bit dangerous) to discuss personal wages and income in this country. And, even if you knew how much they were taking in, through wages and investments, and you are emphatically not allowed to see their tax returns. The only reason these numbers ever emerge on this forum is because most of us, including Sam, are anonymous.
I get tired of hearing that the wealthy don’t pay their fair share. I ask my left leaning friends what is a “fair” income tax rate. Almost none of them have an answer or if they do it is less than the effective tax rate that my wife and I pay(44.1% last year on our gross income). My tax rate if I would have stayed in California this year would have been 37% federal and 13.3% state. My wife is an executive at a fortune 100 company so all of my income is taxed at the highest marginal rate. If you add social security(on most of my income) and Medicare taxes, my effective income tax rate would be about 59%. Is it right or “fair” that I have to work for the government for 7 months every year before I get to keep any of my income?
We made the decision for me to retire this year and move to another state with lower taxes. It was no longer worth my time to go to work when most of my labor was going to pay the government. We no longer employ a gardener, pool service, or nanny which amounts to about $1900 per month in savings. Along with the income tax saving and lower property taxes, our take-home pay is nearly identical to when I was working(My salary and bonus put me in the top 5% of income earners) Many on the left don’t realize that as you increase the marginal income tax rates people will work less or like me, stop working altogether. I’m guessing now that the SALT deduction is capped at $10,000, the high tax states will find out that a lot of their citizens will be moving out of state like we did to escape the exorbitant taxes.
The other fact that gets overlooked is very income level are fluid throughout someones life and very, very few stay in the top 1% for very many years. 73% of Americans get to the top 20% of income for at least 1 year of their lives. Only 0.6% will stay in the top 1% for 10 consecutive years. Many view the 1% ers as a group that is born that way and stays there their entire lives and that is the exception rather than the rule.
except you still are working. Your wife is essentially paying you to do all the work she was paying the gardener, the nanny, the pool guy, etc
I’m with you, Tahoebum. I could support the liberals “rich don’t pay their fair share” argument if they put an actual percentage to what constitutes “fair share”. But of course they never will, because if that tax rate was implemented, how would they get more money in the future and who would be their “villian” when the country wasn’t doing well economically? I find it humorous that they bemoan that the wealthy aren’t paying enough, while at the same time trying to get the SALT deduction increased (cap removed) Who do they think pays more than $10k a year in state and local taxes, the school teachers? No, it’s the wealthy. Simple way to make everyone pay there “fair share”—FLAT TAX, NO DEDUCTIONS. The politicians could have as many brackets as they want and start the tax at any level. For instance, first $30k is tax free, next $20k is taxed at 5%, next $50k at 10%, etc. up to some top, borderline confiscatory rate (e.g.70%), at whatever level the politicians deem “ultra-wealthy” ($5M+). The key is to remove all deductions/special treatment, which would remove all loopholes. No SALT deduction, no mortgage interest (most of that benefit goes to the upper middle class and above anyway),no special dividend rate, no oil and gas drilling credit, etc. Of course, deductions that supposedly “help” the poor—EIC, std deduction, over-65, etc. would vanish as well. Solution—Set the tax -free amount and lower income brackets accordingly. The added bonus is that filling out your taxes in April would be simple. Of course, this scenario is as unlikely as Trump and Pelosi being BFFs, because despite their comments, politicians (both the liberals and conservatives) actually want a complex tax code, so they can give financial benefits to their preferred constituents.
My wife and I were both making 6-figures. When she started getting close to 7-figures, I looked at how much of my pay was going to the gov’t and what expenses would be lower if I retired, and decided I would prefer to be retired. It will be 10 years in June and I’m loving it. Even better, when she retires next year and we have no more W-2 income, we will be able to “game” the system by picking and choosing which assets we sell to generate income. We’ll have a 8-figure net worth and have over $500k/yr to spend, but thanks to the tax code we won’t be considered “wealthy” –courtesy of the short-sighted, unwilling to work with the other party, politicians on both sides of the aisle. God bless America!
The big problem isn’t that people who work for a living aren’t being taxed enough. It’s that rent-seeking isn’t taxed enough, and if anything, labor is taxed too much.
Labor is taxed at extreme rates. Capital is taxed at a much lower rate. Land is taxed at an almost negligible rate.
This is entirely backwards from how it should be. If you tax labor, you get less labor. If you tax capital, you get less capital. If you tax land, well, you get the same amount of land.
We should have a nationwide land value tax of probably 5% or so, capital taxes roughly where they are but taxing stock buybacks at the same rate as the top bracket of capital gains, and significantly reduce taxes on labor. Then we’d have fairly well-aligned incentives with minimal distortions.
Most of the actual arguments for increasing taxes on the rich are about closing loopholes — making those 10-100 times richer than you pay their fair share. Consider the carried interest loophole and various forms of off-shoring. The “little millionaires” get stepped up basis upon death of real-estate and tax deductions for business expenses that may actually be consumption; these ought to be closed too, but gotta spread things around a bit to keep a critical mass of support.
The really cool trick is how the uber rich trick the moderately wealthy into thinking the libs are coming after them. The real unfairness in taxes is in the 0.1%, and especially the top 0.01%.
Whilst I agree with everything you’ve written some people don’t want to make more money, although they do want to complain about not earning enough! There are two types of people in this world – the talkers and the doers. It’s the doers who make shit happen – most people reading this are doers -> go and get everything you deserve!
Hi,
Lord’s blessings to you, your family, friends and colleagues.
Profanity and colorful language is
painful to me.
I usually stop reading and listening when I hear & read it.
I automatically assume the person is not literate/ well read.
I gather they are not reading books and they do not have the words to describe their point or feelings. I could be wrong.
People like me who avoid profanity and colorful language stop reading/ listening when they experience it.
I hope my feedback was helpful.
In recovery meetings there is a saying, take what you like, leave the rest.
Blessings,
Sam
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FullyFreeFilms.com
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Romans 3:1-25
I love this blog! I am in the 94th percentile in terms of net worth, according to the online calculators, but I certainly don’t feel “wealthy.” Reason is that I was talking to a buddy of mine that has also done well, and we conclude that when you make it, you are even more protective and appreciative of what you have and what it took to get there. I think that many times folks need a win, a boost if you will, to give them some confidence. It pays to to walk the line in every regard (e.g., don’t drink or do drugs, don’t get into debt, get a lot of education, always retool your skills, network, etc.). Any know that one thing can bring down an entire lifetime of work in an instant. Boring makes wealth, and that often means spending more time in school and staying up late working on your moneymaker instead of hanging out at the local bar all night.
Hi Sam,
Great post. I agree with you; if you want to be rich be your own boss. Luckily, blogging helped me to become a full-time blogger and be my own boss!
Thanks for sharing!
Just noticed Joes comment about “lazy zionists”, whom probably went to Harvard and out earn him 20:1, but whom, probably, aren’t even Jewish.Most Billionaires, Gates, Buffet, Slim, Trump aren’t. Some, like Zuckerberg, are. None are lazy. You sir, are lazy.You blame others for your own troubles.
You are a also a bigot, and I’m so glad you will never be prosperous.
If I could take away the Salk vaccine(damn Zionists), lasers and GPS (damn Einstein), the atom bomb that won the war (damn Einstein Slizzard and Oppenheimer) from your life I would, but alas, you benefitted and ignore it. Over a third of US nobel winners were jewish, hardly lazy eh?
To Financial Samurai: read the comments. While religious bigotry probably isn’t contagious to anyone with an IQ over 100, leaving those comments up is like forgetting to flush the toilet.
Bob
I love that phrase “forgetting to flush the toilet”.
Bigotry is just wrong and here, inexcusable
Most comments are fair enough and there are anecdotes for every reason why someone can or cannot get ahead. I believe there are simply not enough opportunities in the USA for well qualified people to get a paying job that is reasonable to their potential. Rather in my world, I’m often seeing lesser qualified people (for many reasons) running the show and making most of the money. Let’s not forget about luck. There are some people whom are just lucky to have been given the opportunities they have. Not saying these folk are not hard working, just saying they were more than likely not the best in many ways to get a great paying job, they were just lucky……Working 50+ a week may be needed at times, but I don’t think people competing in that or standardizing that is good for our society, nor should it be necessary just to get ahead in life.
Money goes to people’s heads. Everyone can discuss all the anecdotal evidence they want, but the concern is the distribution. Yes, if you work hard, you have a chance of succeeding, and some people do. But more of the people that work hard should succeed.
This doesn’t square up with our taxes. Under $300000 and paying 28% as homeowners. Working 60 plus hours. We would love to pay 23%.
Start a side gig and deduct the losses until profitable, then the operational expenses. Refinance tour mortgage at 3% and invest your savings. So many ways to gain an edge fairly but we don’t really h finance well enough. That said, most bankruptcy is medically related. Im all for opportunity and a stronger safety net.
Excellent article. I will add that living your life being grateful for what you have and counting your blessings is a surefire way to be happy. You can always be worse off, and if you complain too much, the universe might teach you that. Love your life!
Thanks Sam. Your thoughtful insight is always appreciated. Got some new financial goals to strive for!!