The Very Rich Are Not Like You and Me

Monday, 3 June 2024

Legend has it that American novelists F. Scott Fitzgerald and Ernest Hemingway exchanged comments on how the rich are different from you and me. According to one seemingly reliable source (see quote-counter quote link, below, for details), the exchange probably never happened except in their fiction, years apart.

The gist of it is that Fitzgerald wrote (in his short story, “The Rich Boy”)—

Let me tell you about the very rich. They are different from you and me. They possess and enjoy early, and it does something to them, makes them soft where we are hard, and cynical where we are trustful, in a way that, unless you were born rich, it is very difficult to understand. They think, deep in their hearts, that they are better than we are because we had to discover the compensations and refuges of life for ourselves. Even when they enter deep into our world or sink below us, they still think that they are better than we are. They are different.

F. Scott Fitzgerald (1896-1940)

And Hemingway essentially said that the only real way they’re different is that they “have more money.”

This Letter is not an attempt to analyze who was right about the nature of the rich. It’s also not primarily an appeal for fairer, more progressive taxation of the rich. (Do I want to “soak the rich”? Maybe some would see my views that way.) I do think returning to the much higher (more progressive) income tax rates the US had under Republican President Dwight Eisenhower would make sense.

Do I think money is simply and rightfully the property of the possessor? I don’t, but it’s complex, nuanced, and needs a Letter of its own to explain—this isn’t that essay. (My ideas have much to do with thinking that those who benefit much more and can afford much more should pay much more.)

I just want to try to show a bit more clearly just how different in terms of money they really are.

Bear with me here—imagine five different guys (in real life, men and women vary greatly in terms of financial power on average; same goes for ethnicity or race, etc.—for this set of examples, for this Letter, pretend they don’t.) Names of the five are just for easy reference: Bob, Chris, Jake, James, and Jeff. Each is 60 years old; all live in the same US state. All have jobs; most have income from other things, like the stock market. All are subject to paying US income taxes. But their money is different.

Their “bios”—

Bob earns the US federal minimum wage, about $15,000 a year. Bob has never had enough money to invest in the stock market or bonds or real estate and has never inherited any money. He pays no federal or state income tax, though he does pay around $2000 every year in sales taxes and roughly $1200 in social security and other such taxes. He has roughly $11,500 a year after taxes to live on. His net worth is actually under zero.

Chris does over twice as well as Bob, earning about $35,000 a year. Chris has managed to invest a little in the stock market and has accumulated about $50,000 in the market. He pays about $700 in federal income tax, around $2500 every year in sales taxes and roughly $2800 in social security and other such taxes. He has roughly $29,000 a year after taxes to live on. His net worth is about $60,000.

Jake does well over twice as well as Chris, earning about $100,000 a year. Jake has also managed to invest a little in the stock market and has about $150,000 in the market. He pays about $2000 in federal income tax, around $6500 every year in sales taxes and roughly $8000 in social security and other such taxes. He has roughly $83,500 a year after taxes to live on. His net worth is about $250,000.

James does much better than Bob, Chris, or Jake, earning about $1,500,000 a year. James has managed to invest quite a bit in the stock market and has about $8,000,000 in the market. He pays about $300,000 in federal income tax, around $12,000 every year in sales taxes and $10,453 in social security and other such taxes. He has roughly $1,177,000 a year after taxes to live on. His net worth is about $11,000,000.

Jeff does far better than Bob, Chris, Jake, or James, earning about $550,000,000 a year. Jeff has managed to invest quite a bit in the stock market and has about $800,000,000 in the market. He pays about $6,050,000 in federal income tax, some state taxes, and around $200,000 every year in sales taxes and $10,453 in social security and other such taxes. He has roughly $525,000,000 a year after taxes to live on. His net worth is about $197,400,000,000.

Now for a little more comparison. If income taxes go up a full 10% on everyone, Bob won’t pay any more. Chris will pay $70 more. Jake will ante up $200 more. James will be hit for $30,000 more, and Jeff will get stuck paying $20,000 more. James will presumably feel this the most, though Jake might be pained more. Jeff likely wouldn’t notice.

What if federal income taxes are reduced a straight 10% for everyone? Bob won’t pay any less. Chris will pay $70 less. Jake will ante up $200 less. James will be hit for $30,000 less and would probably be grateful, and Jeff will get by with paying $20,000 less. James will presumably feel this the most, though Jake might be relieved a little. Jeff likely wouldn’t notice.

What if the stock market went up 23% over the next year (as it has over the last 12 months)? Bob would gain nothing from this. Chris would come out $11,500 ahead before taxes. Jake would pick up $34,500 in worth. James would clear around $1,840,000. And Jeff might say, “Oh my, the rich do get richer”—as he noticed his $184,000,000 bonanza.

Are these real numbers for real people? Not precisely, no (mostly no). But, aside from ignoring some complexity, the numbers are roughly realistic.

And what’s the point? Well, imagine that Bob, Chris, Jake, James, and Jeff each saw a $100 bill on the sidewalk:

Bob would probably consider it a huge piece of luck. Chris would be pretty happy about it. Jake would count it lucky and a bit of good news. James might pick it up. Jeff might not, even if he had just dropped it. A dollar is a dollar—ten dimes or four quarters. James brings in about $100 every fifteen minutes of his life, day and night, 24/7/365, whether he does anything or not. Jeff clears $100 every four seconds of his, around the clock. The same amount of money doesn’t mean the same thing to different people. Not even close. The very rich really are different, at least in this way.

Remember that the next time you only tip the waitress at Waffle House a lousy $100.

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http://www.quotecounterquote.com/2009/11/rich-are-different-famous-quote.html

Here’s a book I read decades ago—it was published in the 1970s—that has influenced me ever since—it’s dated as to specifics but well worth reading—

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