How Much do the Rich Keep? - Scott Adams' Blog

How Much do the Rich Keep?

What percent of a rich person’s income does he spend on himself?

To simplify the writing here, assume our hypothetical rich person is a guy. Let’s say he pays about half of his income in taxes. That sounds about right, especially if you include sales taxes and property taxes. Now let’s say he has a wife and three kids. Most of his living expenses, such as his houses, benefit all five members of the family. So divide most of his expenses by five to get his individual piece.

In our complicated world, the rich guy might have a first wife to whom he pays alimony, or he might support some other family members who need some help. And let’s say he donates a healthy part of his income to charity.

So far, we’ve only discussed the money that flows in and out during the rich guy’s lifetime. The bulk of a rich guy’s wealth passes to heirs.

Net it all out, and I’ll bet your typical rich guy spends only 5% of his income on himself. The rest goes to the government, family members, and charity. Therefore, arguably, every time a rich guy gets up and goes to work, it’s 95% charity, roughly speaking.

Now let’s say the rich guy made his money by starting a company that employs a hundred people. Half of the firm’s gross income might flow to employees and investors. Then there is an economic multiplier effect as those employees buy goods and services, and pay their own taxes. A wealthy founder of a business might spend on himself only .001% of the gross income his company generates.

I know, I know: You still hate our hypothetical rich turd because he has a lot of toys, and lots of control over how his money is used. And every time he buys a Rolex instead of feeding a homeless family, he’s not exactly walking with the saints. That’s what society teaches us to think.

I prefer to divide the world into two groups: People who are trying, and people who aren’t. I respect anyone who is making a constructive effort to improve any part of the world, including his or her own little piece. When people apply effort, wealth is mostly a result of luck, in terms of genetics, geography, or timing. I don’t begrudge anyone their luck.