29 August 2008

How Many Americans Are Rich?

About 47,000 people had a net worth of $20 million or more in 2004, the latest available year, according to new estimates by the Internal Revenue Service. . . . the number of people with a net worth between $10 million and $20 million [was] 79,000 people[.]

The IRS estimates that there are 231,000 people with net worths of $5 million to $10,000,000; 247,000 with net worths of $2.5 million to $5,000,000; and 846,000 people with net worths of $2 million to $3.5 million.

In all, there are 1.45 million Americans with a net worth of $2 million or more. The population of the United States is a little over 300 million. So, a net worth of $2 million puts someone in the 99.5th percentile.

Separate IRS data, released earlier this year, showed the nation's top 400 taxpayers by income reported total income of $85.6 billion on their federal income-tax returns for 2005 -- an average of nearly $214 million apiece. Just to make the cutoff to be eligible for this group of 400 required income of at least $100.3 million, up from $74.5 million for 2004.

From here (citing this story).


Leeschwa- MissDangerPants said...

What I'd like to know, is who these people are? Specifically? What is the proportion of CEOs of major corporations that have duped their shareholders, for example? Of Hollywood stars? And so on...

Andrew Oh-Willeke said...

The boom preceding this current economic slowdown saw Wall Street professionals and managers (particularly managers of private equity funds and hedge funds and to a lesser extent investment banks) increasingly dominant the ranks of the rich, relative to senior executives in companies participating in the "real economy."

The vast majority of the very rich have connection to the fortunes of large publicly held companies (or comparably large privately held ones), as founders, senior executives, CPAs, attorneys, investment bankers, or heirs of such fortunes. A quick pursual of the annual list of wealthy individuals from Forbes magazine sheds insight on this reality. People who have acquired their own fortunes in this manner probably account for 70%-80% of the very rich, with a two-thirds majority or more of those remaining probably constituting heirs.

The "lesser rich" also include many members of the "upper middle class" like small and medium sized business owners, their lawyers, accountants and bankers, their heirs, and the more successful professionals in fields from architecture to real estate sales to medicine to law, often themselves self-employed. These fortunes are similar to their wealthier counterparts, but smaller. People who have acquired their own fortunes in this manner probably account for 50%-70% of the less rich, with a majority or more of those remaining probably constituting heirs.

The number of people who have achieved sustained high net worths from the performing arts, fine arts, fiction writing, athletics, lawyers who engage in contingent fee litigation, or by winning the lottery, are a very small share of the total. I suspect (based on some back of napkin numbers) that these categories of wealthy individuals combined probably don't exceed 5% of the total.

Another category of "lesser rich" that probably makes up as much as 5-15% of the total are merely middle class people who have been exceptionally thrifty all of their lives ("The Millionaire Next Door" types), and made sensible boring investment decisions with their wealth.

Inherited wealth is an important subset of the total, but far smaller than a typical person would suspect. Great fortunes have a powerful tendency to dissipate in a generation or two after they are acquired, and most inherited wealth comes late in life and is overwhelmed by an individual's possession of, or absence of a high lifetime earning capacity imparted mostly through education and "social capital."

Anonymous said...

The govt should be taxing more from these elite multimillionaires

Anonymous said...

I have a relativly high net worth because I did not go thru a costly divorce, nor did I have children, and I had $100,000 in the market when the DOW was only 1000. I paid off my house as soon as I could. Staying in debt.to save on taxes is really a very stupid thing to do. I have nice things like a sail boat a power boat a sports car but they are modest and I never borrowed money to buy them. I could retire and will soon but a big unknown is medical costs. You can accumulate wealth but you MUST start early.