Meet two families—the MidAmericas and the WellOffs. Both have two children. The MidAmericas earn $39,000 annually (average where I live). The WellOffs earn $1,000,000 per year.
The MidAmericas pay $700 monthly for housing. After adding utilities, insurance, phone and repairs/improvements, their housing costs are $13,100 annually. That is 33.59% of their total income.
The WellOffs pay $2500 monthly for housing. After adding the same items, their annual housing costs are $85,000 annually—8.5% of income.
Transportation costs for the MidAmericas are $6,600 (16.92% of income), while the WellOffs pay $57,000 (5.7% of income).
Those two categories are necessities!
The MidAmericas have already spent 50.51% of their annual income.
The WellOffs have only spent 14.2% of theirs.
Medical costs for the MidAmericas are $6,600 (16.92%), while the WellOffs can afford to pay $33,600 (3.36%).
The MidAmericas budget $4056 for food for four (10.4%) and the WellOffs allocate $73,000 (7.3%).
Clothing for the MidAmericas totals $600 (1.54%), while the WellOffs allot $12,000 (1.2%).
The MidAmericas pay the maximum percentage (4.2%) for Social Security, but the WellOffs only pay 0.66% of their income into Social Security, since only income up to $106,800 is taxed.
Both families pay the same percentage (1.45%) into Medicare.
The actual rate for the MidAmericas is 12.85% and the WellOffs pay 32.03% (first $16,500 is taxed at 10% for both, with gradually increasing rates for higher levels).
EXPENDABLE CASH is the only remaining category. Sit down.
The MidAmericas have exactly $50.70 left—for everything else.
The WellOffs have $398,000.00 left for their non-necessities.
Families making $1,000,000 annually have to pay more for income taxes, and choose to pay more for everything else.
Even with extremely high estimates for necessities in our example, they have 39.8% of their income that they can save, invest, and spend on non-necessities.
When an average American family has to spend over 99% of their annual income on necessities alone, something is drastically wrong. There’s none left for savings, retirement, or even college.
This is a travesty of gargantuan proportion.