Let's get the "rich" to pay!

Inflation, high interest rates, mounting debt, unsustainable deficits etc... all this is intensifying public anxiety. In almost every country I know, economic problems and disagreements over how to solve them exacerbate divisions. The solution we so often hear these days? Let's make the "rich" pay, of course!

But it's not that simple, starting with... Who are they, these "rich"? What does "rich" even mean?

So, let's take a look at the data. All figures annual, in dollars.

1. Rich by net worth

For individual net worth, the top 1% starts at $5.8M in the US, $3.3M in France, $2M in Japan, $1.1M in China, $430k in Brazil, $175k in India and $109k in South Africa (Knight Frank, 2023-24).

So first, obviously very different realities depending on where you live.

2. Rich by income: statistics vs beliefs

In the US, the top 10% of household incomes starts at $261,000 a year before tax. Asked what they would need to feel rich or financially free, 55% of Americans say $200,000 or more (Census; Bankrate). Fairly consistent.

In Brazil, the top 10% starts at about $10,000 a year per household member. But 30% of people surveyed thought they would need over $108,000 to join that group (IBGE; Datafolha). Very inconsistent: more than ten to one.

In France, there is actually an official statistical definition: rich means earning twice the median standard of living, which gives $58,000 a year after tax for a single person. It represents 7.5% of the population (Observatoire des inegalites). The public's answer is $67,000 (Odoxa). Quite consistent.

3. But then why does (almost) nobody feel "rich"?

Simply because... the bar moves with your income and wealth!

- Americans in households earning under $50,000 put rich at $100,000; those on $50,000+ put it at $200,000 (Gallup).

- Only 36% of surveyed Americans with $1M+ in investable assets called themselves wealthy (Northwestern Mutual).

- Two thirds of France's top-income fifth described themselves as middle class (DREES).

- In India, only 3% of the top 1% of households by income said rich (PRICE).

4. What it means for the debate

First, "tax the rich" is often understood as a proposal about somebody else. A Manhattan lawyer on $400k a year may still feel middle class. A single engineer in Paris on $84k a year after tax clears the French threshold by a wide margin but may feel merely comfortable. They might both love the slogan, but neither expects the bill!

Second, income and wealth are different questions, yet political debates keep mixing them. A high salary is not the same as assets that let you stop working.

Politicians should drop the word and use numbers: this income, this level of assets, this tax rate. People can disagree on what is fair. At least they should know whether they are being asked to pay.

Analysis: NeuronVentures