The Millionaire Next Door

Part 3 of 3: The Millionaire Next Door . . . Swiss? Cheese only.

Compare the “rich” people (especially the Forbes 400 crowd I profiled in my previous blog) with the typical Joe and Nancy American household. The typical household in the United States generates a median income of just over $50,000 per year. As explained in an earlier blog, Average Rich? Median Poor?, its net worth is just over $90,000. Therefore, it realizes the equivalent of about 56% of its wealth each year. According to the Money Blue Book blog, in 2009 the federal income tax for married couples with this income filing jointly will be 15% or $7,500. Their tax bill ($7,500) as a function of their net worth ($90,000) means that Joe and Nancy will allocate the equivalent of 8.3% of their wealth in tax. So when asked, “What tax rate do you pay, Joe?,” how should he respond? He can honestly say his rate is over 8 times that of the wealthiest 400 families in America! As a result, he is unable to afford expensive Swiss imports such as cheese, watches, and designer chocolates.

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