Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“Big business never pays a nickel in taxes, according to Ralph Nader, who represents a big consumer organization that never pays a nickel in taxes.”     Dave Barry

April 8, 2007

Defining “Wealthy”

by Adam Selene

Not long ago I read Richard Kiyosaki’s Rich Dad, Poor Dad. Aside from all of the other valuable things in the book, possibly the most valuable thing I got from it is an appropriate definition of “wealthy”. I’ll put it in my own words.

Being wealthy is defined as owning enough income generating assets to support your standard of living without having to work as someone else’s employee.

That is, wealthy has nothing to do with how much money you are paid by an employer. In fact, regardless of how much money you make, I would argue that if your sole source of income is your paycheck, then you are not wealthy, you are “merely” middle class.

Wealth is much more than how much your paycheck is. Money is not wealth. Money is an intellectual representation of the value of work and property. If your money is generated by work, then it is not sustainable independent of an employer. If your money is generated by property, it is. If you look up the definition of the word “wealthy”, you don’t find, until you work your way through a bunch of other definitions, one that speaks to how much money you have. And none that I could find say anything about how much money you are paid, but all speak to what you own or have.

So, why does the Left spend so much time characterizing those who earn high incomes as “rich” or “wealthy”? Well, I suspect that it has much to do with two things.

  1. Truly wealthy people have spent a lot of time and effort on reducing their real income to avoid income taxes
  2. The Left likes to redistribute wealth and item 1 has left them with folks who earn wages as a focus for their redistribution schemes.

So, the point of all this? Change your definition of wealthy and then re-evaluate every time you hear someone on the left talk about the evil rich or wealthy. They are really talking, generally, about someone with a high wage, not someone who is actually wealthy.

Second point. I highly recommend aspiring to being wealthy rather than highly paid.

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13 Comments

  1. Chris Rock said it best when he said that wealthy people can make poor people rich.

    Also remember that the left like to go after “wealth.” Not only do they love to take the money that you earn through taxes, but they will go after your assets through the estate tax. If the definition of wealth is not necessarily the money that you earn or had but rather your assets that produce said money then the left has to have a way to take that “wealth” too. It’s just another way for the left to fund their projects like iPods for students in school.

    Comment by LLR — April 8, 2007 @ 7:02 pm
  2. Of course the left likes to go after wealth. They have a problem, though, many of the benefactors of the left are wealthy in terms of property (think of the Heinz family, or Soros), but don’t have hugely large incomes. If they go after assets too heavily, they will be destructive to the people bankrolling them. Why do you suppose the left stresses income and income taxes so heavily? Wouldn’t do to piss off Teresa or George too much.

    Comment by Adam Selene — April 8, 2007 @ 10:21 pm
  3. Thank you all for such a wonderful resource and place of encouragement. As a hearty “thank you”, I am awarding you with a Thinking Bloggers Award. Thank you for keeping the cause of Liberty in the forefront.

    Should you choose to participate, please make sure you pass this list of rules to the blogs you are tagging. I thought it would be appropriate to include them here.

    The participation rules are simple:

    1. If you get tagged, write a post with links to 5 blogs that make you think,

    2. Link to this post so that people can easily find the exact origin of the meme:

    http://www.thethinkingblog.com/2007/02/thinking-blogger-awards_11.html

    3. Optional: Proudly display the ‘Thinking Blogger Award’ with a link to the post that you wrote.

    Comment by The Tutor — April 8, 2007 @ 10:29 pm
  4. Now for some light on the subject:

    http://www.johntreed.com/Kiyosaki.html

    Comment by Uncle Jack — April 9, 2007 @ 7:43 am
  5. I guess the rich will not use the word wealthy to describe themselves. They would use the term high net worth instead. :-)

    Comment by Bernard Ng — April 9, 2007 @ 10:05 am
  6. Have you all seen the AP story just breaking about John & Elizabeth Edwards problems with their neighbor?

    Seems he’s a gun-toting, private property rights advocting, libertarian Republican. Elizabeth Edwards calls him a “Rabid, Rabid Republican,” and doesn’t want her kids anywheres near him.

    He can’t understand why not, since he’s just a regular “poor guy.” And Edwards always claims he’s the man on a mission to protect the poor.

    Just because the guy put up a “Rudy Giuliani 2008″ sign at the entrance way to his property, so that the Edwards have to see it every single time they leave their house, doesn’t mean he’s not being neighborly.

    Link and story up at Libertarians for Giuliani at http://www.mainstreamlibertarian.com

    Comment by Eric Dondero — April 9, 2007 @ 10:23 am
  7. Bernard:

    I guess the rich will not use the word wealthy to describe themselves. They would use the term high net worth instead. :-)

    What are you talking about? I’m fairly confused here. Are you saying that my definition of wealthy is incorrect? Or what?

    Comment by Adam Selene — April 9, 2007 @ 11:06 am
  8. Uncle Jack,

    I am not a “follower” of Kiyosaki. His book has some quite good points in it and some things in it that really are not good at all. He’s not as bad as Reed says, and not as good as Trump says.

    That said, the definition of wealth that is based on income generating assets rather than employment generated income is quite sound.

    So, what’s your point? To argue with the idea I’m expressing or to discount it because I happen to mention Richard Kiyosaki?

    Comment by Adam Selene — April 9, 2007 @ 11:13 am
  9. Don’t be fooled by the “right” and its love of no taxes. The AMT is a very problematic for the middle-class and working individuals. Why the AMT is ensnaring so many more people is directly related to the tax cuts of the BushCo admin. The spread between the regular tax and AMT tax has been reduced, and thus a greater burden on the masses.

    I have no argument for the wealth definition, quite good I would say. But all the political BS about the taxing left is foolish. How can you run a country (i.e. – the gov’t) when its primary revenue stream is tax collection. Other pertinent income sources are treasury securities, and tariffs & duties. Taxes only redistributes wealth, it is not a destroyer of it.

    My personal problem with Rich Dad, Poor Dad is the notion that those who are employers are above recourse and those who are employed must be faulted for their situation (very simplistic, imo). Everyone cannot be an employer and wealth is often at the expense of others. Over 3 billion people worldwide live on less than $2 /day. A VP at Goldman Sachs talked about the structural flaws of the marketplace in which the Top 10 wealthiest people worldwide have the same economic value as the lowest +2.1 billion people on the planet.

    And if you needed to know a thing or two about the U.S.; the wealthiest 10% of America own/control almost 90% of the stock market. It’s about 300,000 citizens versus a population of 299.7 million. But all wealth is not earned nor ethically gained.

    But the most important question is how does one establish disposable income in which wealth can be acquired (besides the usuals – inheritance, luck, timing, insider knowledge, etc). If business was easy everyone would do it. It is not a simple, replicable model that others can follow was high success.

    Comment by AJK — April 9, 2007 @ 8:38 pm
  10. AJK: Taxes only redistributes wealth, it is not a destroyer of it.

    Taxes don’t destroy present wealth, they destroy future wealth.

    They take money out of the pockets of people who have a proven history of generating wealth with money, and give it to people who have a proven history of not doing so. In the long run, taxes are a drag on economic growth, and thus a drag on wealth.

    Comment by Brad Warbiany — April 9, 2007 @ 10:08 pm
  11. I agree with most of what you said above, other than this:
    “If your money is generated by work, then it is not sustainable independent of an employer. If your money is generated by property, it is.”

    Money generated by propery is independent of an employer, but not independent of other parties. You still need a tenant willing to pay rent on the property to receive income from it.

    In that respect, its just like a job. You are willing to exchange labor with an employer for a salary.

    But with regards to the definition of wealthy, it is true that exchanging the use of property for rent doesn’t require you to give up many hours of time, and makes a person better off than having to work for their income.. unless they love their work more than leisure itself !

    Comment by Jono — April 9, 2007 @ 11:27 pm
  12. Brad,

    I agree in one sense that future wealth is “destroyed”, BUT the asset-producing wealth mechanism(s) is not however. Thus, future additional wealth may be reduced slightly. A billionaire or millionaire is not going to be traumatized. Even someone making over $100K shouldn’t be devastated either, if they lived fiscally-sounding.

    Without taxes, we would not have a US gov’t. And without the US gov’t, the full faith of the U.S. dollar would crash as there is not enough gold to back our currency in the federal reserves. The Bretton-Woods conference saw the US dollar become the world’s reserve currency, displacing a system in which the British pound was replaced with its gold-backed structure.

    Comment by AJK — April 11, 2007 @ 8:04 am
  13. AJK,

    First, you need to figure in compounding. If high taxes reduce economic growth from 4% to 3%, the difference 50 or 100 years down the road is not “slight”.

    Second, I think the dollar will crash anyway, and it’s the actions of the US government that will cause it. But you’re off base with any discussion of gold, because gold doesn’t back our currency. AT ALL. Zero, zilch, nada.

    Comment by Brad Warbiany — April 11, 2007 @ 10:47 am

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