The Rich Really are Different…

They have more money. But they don’t really have all that much more stuff:

Looking at a far more direct measure of American families’ economic status — household consumption — indicates that the gap between rich and poor is far less than most assume, and that the abstract, income-based way in which we measure the so-called poverty rate no longer applies to our society.

… if we compare the incomes of the top and bottom fifths, we see a ratio of 15 to 1. If we turn to consumption, the gap declines to around 4 to 1. A similar narrowing takes place throughout all levels of income distribution. The middle 20 percent of families had incomes more than four times the bottom fifth. Yet their edge in consumption fell to about 2 to 1.

Let’s take the adjustments one step further. Richer households are larger — an average of 3.1 people in the top fifth, compared with 2.5 people in the middle fifth and 1.7 in the bottom fifth. If we look at consumption per person, the difference between the richest and poorest households falls to just 2.1 to 1. The average person in the middle fifth consumes just 29 percent more than someone living in a bottom-fifth household.

3 thoughts on “The Rich Really are Different…

  1. Well, I gues everything I rad about how people who are rich behave is true… rich people really don’t spend money.

    so when then do people who are not rich taxed so much? if a middle class person making 50-100 a year pays outta little more than 1/3 of his wage to the government… a rich person, say 500-1 million pays half of his earnings.

    but who ends up being the big consumer that everyone wants to spend money? the 50-100 guy. why cause he actually spends his money. marginal propensity to spend vs marginal propensity to save… who should get the tax cuts?

  2. Good question. Among other things, this suggests that moving to a consumption tax such as the so-called Fair Tax would reallocate the tax burden massively away from the rich. It also implies that sales taxes and income taxes are very different beasts. It’s long been recognized that sales taxes, without exemptions, are regressive. But I don’t think people have appreciated the extent of that regressivity.

  3. Rich people invest. Normal people spend. One is wealthy (rich), one has money (normal). Guess who comes out on top?

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