The Millionaire Next Door

Tax Cheats in Super Cars?

This respondent edited the printed screener, wrote outside the boxes:

“I don’t own a Ferrari, I own three!  . . . Rolex? I have three plus . . .Breitling, Cartier, Movado, Omega, Tag Heuer . . . (wine collection) 2,000 bottles.”

Mr. Multiplinski, aka Mr. M, was first profiled in Stop Acting Rich. But it is time for an update.  Mr. M is a member of  the glittering rich club, extremely wealthy with a net worth that exceeds $100 million, and a taxable income in the multimillions. 

He is not shy about communicating his financial achievement. . . has a very strong need . . . to separate himself from his dirt poor working class family background. . . . those who travel the longest distance along the wealth scale in one generation (tend to) hyperspend on status symbols.

Mr. M’s first full time job was in sales.  He was an instant success.  He paid 100% of his college expenses via “commissions. . . solely on commissions.”  He purchased his first home at the age of 21 and crossed the $1 million net worth threshold when he was 32.  He was not yet 30 when he was offered an equity position by his employer.

Mr. M is 100% self made.  But he is also a big spender.  To spend big one must earn big.  And if you earn big you pay big bucks to the tax man.  As an example, consider Mr. M’s cash purchase of a $330,000 Ferrari.  Given what he allocates to federal, state and local income taxes how much earned equivalent income did he have to generate to make this purchase?  He had to make $600,000 just to pay (cash in this case) for this Ferrari.  ($600,000 X his share 55% = $330,000.  The balance of $270,000 goes to Uncle Same and his relatives.  The glittering rich as I wrote in The Millionaire Next Door:

Real patriots . . . big incomes (huge tax bills) mint a new medal for this type of patriotism.

Too many people in this country don’t understand the important role played by the members of the glittering rich population. Some think that the Mr. Ms of our nation don’t pay their fair share of taxes. Some even believe that none of the glittering rich got that way on their own. Rather it was via hook, crook and/or inheritance.  It is this belief that can be ammunition for some ambitious politicans.  

For a moment, consider the following scenario. Imagine that a glittering rich couple decide on day to spend a long weekend at a plush mountain retreat.  It is a great drive in their top of the line Ferrari. Just as the couple approaches the resort their car and several other “high-end cars” are pulled over, and the drivers are asked to sit tight while the home office checks tax records! One in six- 42 vehicles in total- were being driven by someone who had reported a mediocre annual income insufficient for super car ownership. (Elsewhere) tax cops set up checkpoints . . . and even dropped in on a Ferrari owners’ club together.  It was a PR win for a government under fire for cutting social services.   . . . (Now) the government is initiating an automated check of tax records for anyone making large purchases. (Justin Berkowitz, “Checkpoint Carlo,” Car and Driver, April, 2013, p. 14).

This actually happened last year in Italy.  There class envy was leveraged politically as the subtitle indicates, “How Tax Cops Killled Italy’s Super Car Market.”  What if this system is adopted in America?  Not only will we lose markets for “super brands.”  Tired of being hounded the Mr. Ms may stop buying multiple $330,000 sports cars, etc.  As a result, they won’t feel the need to continue generating high levels of taxable incomes to pay for these symbols of success.

Let’s salute the glittering rich. Don’t hate them. Many pay the equivalent of 50% of their earned income in tax.  Interestingly about 50% of American households pay 0% of their income to the tax man.  But what about those 6 out of 42 drivers found by the Italian police to have too little income to pay for their super cars?  Could it be that most or all are just living off of their considerable capital?

1 thought on “Tax Cheats in Super Cars?”

  1. Rich is all relative. Mr. M feels he has enough…some people believe once you rich at a certain level, then number don’t much matter afterwards. Just like in MND you mention once you reach $100k-$200k then it matters less what you make but what you do with it. Mr. M level of wealth $100 million is alot as long as he avoid yachts and planes. Again it is all relative.

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