Friday, April 10, 2015

How the Rich Really Spend

A recent post refers you to data showing upper-income people spend more on education and financial products and less, proportionate to their incomes, on basics such as food or transportation.

Eeven B. Owen, prominent hedge fund manager, has expressed outrage:
Do you know how much I spend on meals? Even my breakfast – full English, with kippers, flown in daily from London– costs me a fortune. Transportation? When you need a private jet to get to Greenwich from your yacht in the Caribbean, your commuting costs are off the chart!
 Sorry, couldn't resist. Anyone who doesn't realize that people with high incomes spend proportionately less on the basics isn't likely to read The Atlantic or The Wall Street Journal.

What do upper-income people really spend their money on? Federal income tax. The top 20% of earners pay 84% of the tax.  The bottom 40% pay nothing; most receive money via tax credits.

When you expand the data to include payroll taxes, the bottom 40% does pay a little, but only 5% of the total. And as an expert at the Tax Policy Center observes, payroll taxes are different from the federal income tax because paying them brings the promise of a future benefit.

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