If a person earns a million dollars during a year, many people, especially liberals seeking to raise income taxes on higher income earners, call such a person a “millionaire.” But earning a million dollars, even counting only taxable income after deductions and exemptions, does not necessarily make one a millionaire, for he who earns a million dollars is not necessarily rich, just as he who earns nothing or loses money is not necessarily poor.
As I have posted previously (See my post from January of 2012, The Corbett Administration is Right to Include Assets in Measuring Wealth, http://williamcinfici.blogspot.com/2012/01/corbett-administration-is-right-to.html), wealth is measured in terms of assets, not income. A millionaire is commonly defined as one who has a net worth of a million dollars, regardless of his annual taxable income.
A person could have so much debt that a million dollars does not even raise him out of poverty. For example, if a person has two million dollars in debt and earns a million dollars, he is still in debt, although by half as much. Only if a person has debt less than a million dollars does he earn a net income, no matter how government calculates his taxable income. Any debt or other liabilities less than a million dollars must be subtracted from his annual income in order to generate positive net worth, in addition to the value of any other assets. Conversely, a person could earn far less than a million dollars in taxable income a calendar year, or even earn nothing or lose money, and remain a millionaire.
Studies of income in the
have demonstrated that class (e.g. defined by annual income quintiles) is not
static. A significant number of people
move up for down from one income quintile to another from one year to the next,
depending on a wide variety of circumstances.
The “rich” of this year are not the same of next year, just as the
“poor” of this year are not the same of next year. Thus, the rich as a class remain rich and the
poor remain poor, but the individuals whom these groups comprise are not the
same. The individual “rich” do not
necessarily get richer and the individual “poor” do not necessarily get poorer.
In fact, one of the many reasons that some people enter the highest quintile, (the “rich,”) is through the sale of the family farm or business or of bonds or other securities. In other words, they report a high annual income only because of one-time events. These people are not necessarily “rich,” but have one good year, just as a billionaire who makes one bad deal in a year is not “poor,” though he loses money and reports such a loss in annual taxable income. They do not “earn” a half million or more dollars “a year,” but only “earned” such a sum within a particular calendar year, regardless of whether they had any debts. These people may or may not be millionaires in terms of assets, but not in terms of annual income, except for one year. I daresay it would be unfair to tax such individuals as if they are “millionaires” or the “rich” at a substantially higher income tax rate for only a one-time windfall, just as it would be unfair to tax someone at the highest rate who is hundreds of thousands of dollars in debt because of unfortunate circumstances.
I call upon the United States Congress, as well as States or other entities that tax income, to consider a system whereby income is more fairly calculated, such as over a two-year period, and that takes debt more into consideration, such as beyond mortgages. Regardless, I urge my fellow conservatives not to fall into the habit of using the Left’s language in regard to class and instead to start identifying the wealthy or poor by their assets, not by income.