Monday, June 16, 2014

At what income does one become "rich"?

I asked survey respondents to tell me how much money the people in their household would have to earn in a year for them to consider themselves rich. I evaluated answers that began at $10,000 and went through $4 million. In households in the lowest quartile of income, those earning less than $25,000 a year, people thought they needed about $293,000, on average, to consider themselves rich. And in households earning between $30,000 and $60,000 of annual income, the magic number was closer to $394,000. As people earn more, the multiplier on current income goes down, but the absolute number goes up in a somewhat linear fashion.

In households with annual income between $60,001 and $120,000, the dream of becoming rich comes true at $426,000, on average; and, for the top 15 percent of incomes ($120,000 and up), the average number was $501,000.

Most of us, it turns out, are chasing the elusive dream of multiplying our income to become rich, and, like Joe the Plumber, would be surprised if someone told us we were already rich. In the 2008 campaign, Mr. Obama was trying to tell voters that he would raise taxes on other people, “rich people.” This works because most voters don’t think they are rich. ...

The next time you hear candidates talking about “the rich,” ask yourself what they mean by that. Better yet, ask them. And remember some basic facts about American household income: According to the Census Bureau’s 2012 Current Population Survey, roughly 4 percent of households earn $200,000 a year or more. Median household income is about a quarter of that — near $51,000 a year. And 25 percent of the households in America are getting by on less than $25,000 a year.

Still, about a quarter of the population thinks they could be rich one day — something both Democrats and Republicans agree on — and the pattern is clear: The more you make, the more you think it takes to be rich.
--Lynn Vavreck, The Upshot, on the ever-receding green light