Who Wants to Think They’re Millionaires?
posted by Frank Pasquale
Lots of Americans, apparently:
A Time Magazine poll in 2000 found that 19 percent of those surveyed believed themselves to be among the richest 1 percent of Americans. Another 20 percent said they expected to one day be among the richest 1 percent.
But as Citizens for Tax Justice estimates, “This year, the best-off one percent will have an estimated average income of $1.5 million each. Just to get into this elite group requires an income greater than $466,000.” And the middle class of, say, ABC debate moderator Charlie Gibson is also pretty expansive–it includes people with adjusted gross income over $250,000, though CTJ notes that only about 2% of taxpayers fit that category.
As the “millionaire’s amendment” in our tattered campaign finance laws comes under attack, misperceptions about wealth feed into Supreme Court arguments as well:
Consider Tuesday’s oral arguments over the so-called Millionaires’ Amendment, the federal law that lifts some political fundraising limits for candidates facing wealthy self-funded opponents, defined as those who pour at least $350,000 of their own cash into their campaign.
Justice Antonin Scalia suggested that practically anybody had that cash available for political activism, if he or she really wanted to tap some family assets. “Are we talking wealthy people here? What’s the average price of a home in the United States? I think it’s a good deal above $350,000, isn’t it?” he said.
Actually, it’s nowhere near that. According to provisional figures from the National Association of Realtors, the average single family home price last month was $246,000. And falling.
As I noted two years ago, even the assumption that everyone has $200 to spare for a political campaign is pretty objectionable. And it is downright nonsensical to deny that donating $200 “hurts” a poor family far more than one with disposable income to spare (just think of the parable of the widow’s mite). The legitimacy of our current “dollar primary” politics probably rests in large part on the erroneous perception of 38% of the population that they are (or someday will be) in the top 1% of earners.
UPDATE: Given my title, I should note that about 3% of the US population are millionaires (i.e., have assets over and above principal residence that are worth over a million dollars). Nevertheless, given that the median net worth of the top 10% in the U.S. was $833,600 in 2001, and that of the bottom ten percent was below $7,900, Americans live in very different economic worlds.
UPDATE 2: I forgot to add in one good part of the CTJ report, which helps explain the source of misperceptions like Scalia’s:
We have heard anecdotally that people who work for members of Congress (from both parties) in Washington tend to overestimate the percentage of Americans with incomes over $200,000 a year. We also have seen people in the media, like Charlie Gibson, express their belief that families at this income level are “middle-class.” Why?
Part of the reason surely is that the people who influence the political discourse — people working in the media or in politics — tend to live in or around cities where incomes and the cost of living are higher than elsewhere in America. These cities include New York, Washington, D.C., Los Angeles, Boston and San Francisco. In these cities and their suburbs, owning a house and two cars and raising two children who go to good schools — what many people consider the American Dream — is thought by some to require a six-figure salary.
There could be other reasons as well. Perhaps the people who work in politics and media are disproportionately highly educated people who come from wealthier families, which could result in expectations of higher incomes and higher standards of living than are enjoyed by the true “middle-class.”
April 23, 2008 at 8:38 pm
Posted in: Behavioral Law and Economics, Tax
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Responses (3)
Logical Extremes - April 23, 2008 at 11:46 pm
I’m curious about the definition of millionaires in the update. Shouldn’t it simply be net worth (all assets minus all liabilities) over one million dollars?
Also, I’d urge more clarity in discussing income vs. net worth. They can be very different beasts in terms of demographics and lifestyle.
radar72 - May 19, 2008 at 11:17 pm
Regarding the first comment, millionaires have assets (yes, minus liabilities, but completely ignoring the primary residence) in excess of $1 million. It is a common misconception that your primary residence (your house) is included in your real net worth. Many people in the real estate boom liked to believe they were “rich” when all they really had was an over-appraised McMansion and a few thousand in the bank. Millionaires have over $1 million in cash, stocks, bonds, business interests and equity, investment land (not their house), etc. The primary residence is usually a very small piece of a millionaire’s overall assets. I think magazines like Money contribute to this misconception to make readers feel better. But ask any financial planner and they’ll ask you what your assets are OTHER than your house. Wikipedia has some good definitions for millionaire status as well.
Ava - October 31, 2008 at 2:23 pm
A friend and I were discussing some of the reasons that so many Americans vote against their best economic interest in favour of the best interest of the wealthy. We quickly began to realize that the truth had to be that most Americans really do think they are richer than they are, or that they will be richer than they truley are likely to become. It says something sad about America that we need to delude ourselves economically in order to feel good about ourselves. I believe it can truely be said that the one true thing that many Americans believe will provide peace is money.
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