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Red Steele
Veteran Advisor

1% ers? Maybe look in the mirror

Had a lot of difficulty finding a measure of what it takes to be in the top one percent in America. THe income test was pretty easy, about $350,000 or so, but the net wealth was very difficult, and the following article illustrates how this is manipulated by using average wealth instead of median wealth and other tricks to make the dreaded "1%" villains look so...well...vile. If you average the net wealth of the wealthiest, like Bill Gates, Warren Buffet, George Soros(for the sake of argument we will call him an American) with the others in the top 1% you get a highly skewed number.

 

The number in reality may be anywhere from $1.5 million to $9 million. Looks like no one really knows. But if you are a sizeable landholder without any debts, you may be in that group. Read it for yourself...interesting stuff. If you think about it, even in a very small town of 2000 people, on average you are going to have 20 "one percenters".

 

http://www.joshuakennon.com/how-much-money-does-it-take-to-be-in-the-top-1-of-wealth-and-net-worth-i...

12 Replies
hardnox604008
Advisor

Re: 1% ers? Maybe look in the mirror

OK. Say you own 600 prime acres with $2 million in debt. Got another $1 million in equipment and inventory.

 

So,  if you're calculating your net worth according to current land sales while you're driving the pickup down the road you have an $11 M net worth.

 

And, you farm 2000 acres and your weather has been decent so you've had an income (real, not farm accounting) of about $500k per year on average for the 6 years since 2006.

 

So what, exactly, would be the policy issues that you would believe would favor you, based on that? Or more specifically, what would help you keep it?

 

Do you believe that you have a lot in common with Goldman partners, senior medical and law practice partners, high corporate execs, mass tort lawyers, others in that group?

kraft-t
Senior Advisor

Re: 1% ers? Maybe look in the mirror

I don't know anyone that wants to tax net worth. We do tax income though and that should mean all income.

 

Estate taxes should be limited to accumulated capital gains.

Red Steele
Veteran Advisor

Re: 1% ers? Maybe look in the mirror

well, I don't think 600 acres is going to put you into the one percenter club, unless it is next to an airport or big town. But the way things are going, who knows? Hopefully you would have some stocks and bonds, too, to go with all of that for some proper diversification.

 

The big thing you would have in common with any of the other groups, and probably more  than many of them, is the concern for estate taxes as you have a business you have worked hard to accumulate and want it to go to your heirs without getting taxed again for the pleasure of dying.

ollie2655
Senior Contributor

Re: give odummer time

he wants to tax you because you die ---he will try anything to destroy the working class --something project people hate

hardnox604008
Advisor

Re: 1% ers? Maybe look in the mirror

I think you are right, Don.

 

Taking the USCOC's "family farm" trojan horse out of the discussion most of the 1% wealth is based on property or securities that  have risen in value and that rise has not been taxed. Most of that wealth is not retained earnings that have already been taxed.

 

If you don't want to pay estate taxes then it is simple, sell the assets before death and settle up with the government at the very attractive CG rate. Or pay the same rate at death.

 

If my Dad had wanted to leave me 1000 acres and I had to pay 15% on the 70% that was above his cost basis I would have been OK with that although if I could have arranged it so I didn't have to pay anything I guess I would have been whining about it too.

 

In an even more rational world the CGs would even be indexed for inflation and then taxed at the regular rate which in the above example might amount to approximately the same at current land values but it does try to remedy the "inflation tax."

hardnox604008
Advisor

Re: 1% ers? Maybe look in the mirror

With, I would think, a near 100% spousal exemption which would take the "poor widow" issue out.

Canuck_2
Senior Contributor

Re: 1% ers? Maybe look in the mirror

I wonder what the difference is and why IF I worked for a high salary and invested in only 'money' things, dividend paying stocks or mortgages or interest paying certificates.

 

At least in Canada I would pay tax on the income from those investments each year and so only have the 'after tax $' to reinvest.

 

So if I buy 'land' I get to keep the annual income from being taxed each year as it increases in value and then I get to pass it on to my heirs with no tax on it at all.

All those accumulated profits with no tax paid at all.

 

Why are some investments treated differently? 

r3020
Senior Advisor

Re: 1% ers? Maybe look in the mirror

Land is taxed every year.

Canuck_2
Senior Contributor

Re: 1% ers? Maybe look in the mirror


@r3020 wrote:

Land is taxed every year.


But only for the 'services' that the land uses.

Not the profit that is made from the value of the land.