The People of Plenty
Is there anything more delicious than snooping on the financial lives of the super-rich? You can do it by looking here at the aggregate tax returns of the 400 top earners in the United States, sometimes called the Fortunate 400. It’s an interesting glimpse into a world few can ever experience firsthand.
Average annual income of $202 million
Yes, you read that right. The average earner in this elite group made more than $200 million in 2009, according to the latest data available in this government report, published since 1992. To make the last spot on this list you had to have taxable annual income of $77 million. The People of Plenty make plenty! And pay plenty too – about 40 million each in taxes, on average, or about 20 percent of income.
How do they do it?
The People of Plenty didn’t write the tax code, they just follow it. The Tax Foundation provides an unusual visual analysis of where the income comes from, and the tax rate associated with the source. In general the Plenty get a small portion of income from salary, but lots from capital gains, typically taxed at lower rates than other income.
Who are these people?
We don’t know their identities, but we can guess. Only four have stayed on the list for 19 consecutive years, so there is a lot of turnover. We’d expect most of these folks to be one-timers – sellers of businesses, properties or other assets for a huge one-time gain. Other likely suspects are the hedge fund community. James Stewart of The New York Times points out that the minimum annual income necessary to rank in the top 25 hedgies in 2009 was $350 million. Those 25 are likely Fortunate 400 candidates.
Can we learn anything from the 400?
Definitely. First, what an amazing country we live in that you can make $202 million dollars in one year, or more! Also, the Plenty are generous, giving away over $600m in 2009. In fact, charitable contributions – not sneaky tax havens – are the number one tax deduction for these top earners.
The Plenty – remember, just 400 individuals – pay two percent of all taxes in the US. They pay nearly as much as the bottom half of the tax-paying population, 69 million people.
The source of Plenty income is instructive I feel. It can be natural to evaluate our success based on annual salary; it’s an easy yardstick for comparison. But for most high net worth individuals, the bulk of wealth will come not from weekly paychecks but from the appreciation and eventual sale of assets – a family business, an entrepreneurial venture, or a portfolio of investments.
It would be interesting to see the names of the 400 top earners. I bet we’d recognize only a small sample of the names, perhaps one or two Hollywood producers, a couple richly-sponsored athletes, and a few icons of industry and Wall Street. The rest may be well known only within their own fields, too busy being successful to be famous.
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