The fiscal cliff debate, in particular the fight over tax hikes on the wealthy, brought up a sticky question: who is really rich anyway?
There are different answers to that.
According to the Federal Reserve, the top 1% of households have a net worth over $6.8 million or $521,000 or more in income. And the top 5% of households have a net worth of $1.9 million or income of $209,000.
According to the SEC, investors with a net worth of $1 million (excluding their home), or $200,000 in income for the past two years, are “accredited investors”…meaning they are allowed to put money into private offerings and hedge funds.
According to financial institutions (with some variance), an investor with $10 million in net worth is an “ultrahigh-net worth” individual.
This past week it was up to politicians to decide who was wealthy and what would happen to their money.
And they decided that individuals making $400,000 will be subject to a tax increase from 35% to 39.6%. Capital gains and dividend taxes will increase from 15% to 20% (better than the 39.6% the White House was hoping for). And estate taxes will increase from 35% to 40% for those above a $5 million threshold.
On average, the very top .1% of households (with incomes over $2.7 million) will be hit with $444,000 more in taxes, according to the Tax Policy Center.
The Tax Policy Center estimates that 77% of American households will face higher taxes under the deal (in part due to the AMT and a 2% payroll tax increase), but Washington managed to lock in the heaviest increases on the wealthy…and with no expiration date.