Updated: "Who Rules America - An Investment Manager's 2014 Update on the Top 1%"

[photoguy]

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Originally Posted by gunnychapman Allow me to make an observation; regardless of the side one takes in this debate, most of us are members of the ER community.

I'm not even sure exactly what the sides are in this discussion.

[Letj]

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Originally Posted by Gumby That may well be true; I don't know. But what I do know, from long observation, is that for most people what they believe to be true is more important than what is really true. That is why my post said ". . . the increasing appearance that . . ." It actually may be the case that most people who work hard enough and make wise choices can "overcome and succeed" (as you put it). I have serious doubts about that theory, but I'm sure you sincerely believe it. But knowing that you were right will be scant solace when the castle is going up in flames with you inside. Let me give you some context for my remarks. The young wife and I have for a number of years now enjoyed a place among the top 1% in income and, more recently, in wealth.* Yet I was born to teenaged high school dropouts and grew up in poverty, living in a variety of trailer parks and cheap, often dilapidated apartments. I went to generally crappy public schools, sometimes several different ones in a single year, and was sometimes out of school for extended periods of time when my family moved around. I am the first in my family to go to college, and that was only possible because I joined the military. It has taken long years of very hard work, self-deprivation and wise choices to get where I am now. I am the example that validates your own belief, if you will. At this point, I could easily sit back and condemn those who complain about rising inequality as whiners with a "victim mentality". After all, I made it here, why can't they? Yet I never forget that I have been incredibly fortunate along the way. I was born with abilities and interests that society values. People have helped me when they didn't need to. Opportunities have arisen at precisely the right time. Yes, I have made the most of them, but most people will never see those opportunities. For a poor kid, the path to success is a walk along a knife edge - one slip and it's all over. Kids born to wealthy families get many more opportunities to fail. There is a built in safety-net that catches them and sets them back on the path to a successful life. I may be wrong, but I do see an increasingly self-contained world of the elite. They live separately, they work separately, they play separately, and they educate their children separately. It is an entirely separate reality, a gilded life where it is possible for a child to grow up and never know that poverty, illiteracy, hopelessness and despair are the norm for all too many people. Growing up like that, how could they not come to see themselves as normal, not privileged. And how could they not simply assume that if you don't have what they have, it must be because you are lazy, stupid or criminal. The better parents will ensure that their children see life outside the bubble and develop an appropriate appreciation for their own good fortune. But I have spent much time among them and have seen that all too many of those parents do not. You don't have to apologize for being rich, Marko. I don't. But I do believe that mine is a path that most cannot follow. Looking around at our society today, it is my impression that social mobility is in fact dropping in the US, that more and more people are being squeezed out of the middle class, that the elite are becoming more and more distant, and that our government and our financial system are directly contributing factors. I think it is unhealthy for the economy and our democracy. Even setting aside any moral considerations, I care about inequality because when the flames come, they will burn the just and the unjust alike. * Probably. There is some debate about the proper "entry point" for the 1%. This is an interesting discussion about that issue. How Much Money Does It Take To Be In The Top 1% of Wealth and Net Worth in the United States

Excellent post! In some ways you and I have had a very similar path and I do consider myself very fortunate. Even I couldn't not predict where I am today and the good fortune I would have along the way. My earlier life have certainly help me to empathize with the struggles of the poor and understand the obstacles that can keep one in poverty.

[Chuckanut]

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Originally Posted by Gumby I may be wrong, but I do see an increasingly self-contained world of the elite. They live separately, they work separately, they play separately, and they educate their children separately. It is an entirely separate reality, a gilded life where it is possible for a child to grow up and never know that poverty, illiteracy, hopelessness and despair are the norm for all too many people. Growing up like that, how could they not come to see themselves as normal, not privileged. And how could they not simply assume that if you don't have what they have, it must be because you are lazy, stupid or criminal.

Good Point. I grew up in an upper middle class neighborhood filled with engineers, scientists, doctors, electricians, teachers, accountants, plumbers, store keepers, AND several TV stars and sports team heroes.

Today, the TV stars and sports team heroes would not live in that neighborhood. Not because the neighborhood has gone down hill (it is actually nicer than when I grew up there) but because they live in more exclusive places, often with walled access.

They don't live in our world, just as I do not live in the world of people who have to decide if they will get the car's brakes serviced or pay the medical bills this month. It's hard to relate to those poorer than us.

[Gunny]

@Texasproud. Thanks for calling me out on this. My intention was not to single out the US as the sole "land of opportunity". My intention was to give credit to hard work and responsible financial decisions making it possible for most to succeed in the economy referenced in the article, regardless of initial circumstances. My apologies to my non-American ER colleagues.

[frayne]

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Originally Posted by Letj Excellent post! In some ways you and I have had a very similar path and I do consider myself very fortunate. Even I couldn't not predict where I am today and the good fortune I would have along the way. My earlier life have certainly help me to empathize with the struggles of the poor and understand the obstacles that can keep one in poverty.

Similar experience here and agree 100% with Gumby.

[Travelwanted]

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Originally Posted by marko Sorry, I just have a hard time buying into the "you can't win", the-system-is-against-you, victim mentality. Life isn't fair but it's not a zero-sum game, and I do believe that many (not all) can overcome and succeed.

+1

I grew up in a lower, lower middle family. I'm now a "1%"er because I went to school, worked my arse off and lbym. The opportunities are there for most (I admit not all) who are willing seek better.

[Independent]

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Originally Posted by NW-Bound Yes. I am not well versed in this area, but would think better laws can protect us here. Yes. I agree on both points, but wonder if any has suggested a feasible solution. I do not think heavy taxes on all high earners to "punish them" equally will work well.

I don't think taxes should be used to "punish" anyone. Taxes are just the cost of gov't. But, we have such a huge range in financial results, that it seems to me that the practical result is that we should collect more taxes from the people who did better financially.

Right now, it's more a matter of closing "loopholes" than of raising rates. Hedge fund managers pay the capital gains rate on their bonuses, while the rest of us pay the ordinary income rate. Wealthy families never pay the capital gains tax on unrealized gains that change hands at death, due to step-up-in-basis. We could change those two rules.

[Spanky]

What's the entry point of top 1% defined as net worth? Is it $9 million according to New York University Economics professor Edward N. Wolff?

Why is it important to be the top 1%? Is it a game?

[Spanky]

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Originally Posted by Travelwanted +1 I grew up in a lower, lower middle family. I'm now a "1%"er because I went to school, worked my arse off and lbym. The opportunities are there for most (I admit not all) who are willing seek better.

Unfortunately, this does not remotely guarantee success to be the top 1%.

[razztazz]

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Originally Posted by Travelwanted View Post +1 I grew up in a lower, lower middle family. I'm now a "1%"er because I went to school, worked my arse off and lbym. The opportunities are there for most (I admit not all) who are willing seek better.

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Unfortunately, this does not remotely guarantee success to be the top 1%.

It really doesn't even guarantee a decent living or "success" at any level.

[Travelwanted]

There are no "guarantees" in life. Death and taxes is it. I think some of us get tired of hearing how we owe the gov't or others for our success. Yes, a very small minority of people have it handed to them. But most have worked for it.

The formula isn't a one-sized fits all guarantee, but it's a damn good start. Better than complaining. The point is opportunity exists. Of all people who should understand that are those on this forum. To say otherwise, well, how are you here?

And, "success" is your own definition. . .not whether you are in some arbitrary percentile of the American population.

[marko]

Well, while were talking about those evil Wall Streeters, here's a link about a 1%'er who worked his way up, made a bundle, and, was trying to give back developing in Africa.

He ended committing suicide because outfits like Greenpeace wouldn't/couldn't see what he was really doing, had labeled him "An evil Wallstreeter", manipulated data, twisted his intentions around and obstructed progress at every turn.

How the suicide of a Blackstone executive shows the difficulties of doing well and doing good

[razztazz]

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There are no "guarantees" in life.

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And, "success" is your own definition. . .not whether you are in some arbitrary percentile of the American population.

And the fans cheer as the Team moves the goal posts

[Travelwanted]

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Originally Posted by razztazz Quote: There are no "guarantees" in life. And the fans cheer as the Team moves the goal posts

So apparently I am not entitled to my own opinion. A childish response to say the least.

[Gumby]

We can disagree without being disagreeable.

[Travelwanted]

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Originally Posted by razztazz Exactly. We only permit The Rich to be rich and have their property if it is agreed that doing so is in aggregate best for all of us. To the extent it fails to be good for everybody the property rights and thereby forfeited.

Personally I find the quote above to be scary. Yet I do not condemn the poster for the remark.

Obviously this has become political, not about FIRE and money.

[Bikerdude]

Those who complain the loudest about the inequality of the rich simply want to replace them.

[MooreBonds]

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Originally Posted by Independent Wealthy families never pay the capital gains tax on unrealized gains that change hands at death, due to step-up-in-basis. We could change those two rules.

It's not just "wealthy families" that never pay the capital gains tax, it's EVERYONE. Imagine every house that is inherited, every share of stock, etc. It's not just the uber wealthy that benefit, although they obviously benefit more from the sheer $ involved.

However, also don't forget the practicality of this! How do you "force" someone to find the records of a deceased taxpayer to determine the cost basis of a house, or shares of stock that are 30 years old, and have been reinvesting dividends? If they can't find them, do you make them assume it's a zero cost basis and the entire proceeds amount is subject to capital gains tax?

Sure, now there are requirements for brokers to track the data (although I don't know if they transfer the records if you transfer your accounts from one broker to another)....but don't underestimate the sheer complications involved if now everyone had to somehow unearth the records and knowledge of deceased relatives for costs. Not to mention executors filing out the estate tax return, who now suddenly bear some tax liability exposure to determining the correct cost basis - from both the IRS going after them for over-estimating cost basis, as well as heirs going after them for under-estimating cost basis and making conservative assumptions in the IRS' eyes.

[Chuckanut]

Apparently, the Rulers are now worried they may have over done it:

Wall Street Worries About the Common Man - MoneyBeat - WSJ

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Without a real acceleration in wages it is hard to get a meaningful pickup in consumer spending,” explained Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch.

Duh.....

[haha]

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Originally Posted by Independent Wealthy families never pay the capital gains tax on unrealized gains that change hands at death, due to step-up-in-basis. We could change those two rules.

Same is true of not wealthy families. What is your point, other than wealth is bad?

Ha