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High-Earner Households: Taxes Are Going Up
As the law about federal income tax rates changes, it is important to remember that households with annual earnings of $250 000 or more—the initial White House proposed tax threshold—represent the top 2% of all US households; households with earnings of $500 000 or more represent 0.3% of households, and households earning $400 000 or more represent fewer than 1% of households. To help understand the number of households potentially affected by tax-rate changes, it is revealing to trend households with incomes of $250 000 or more over the past two decades.
When one adjusts for inflation, the "Uh-ohs"—between 2002 and 2008—had about twice as many High-Earner Households as did the 1990s. Since the Great Recession of fall 2008 and the lackluster economic recovery, the number of High-Earner Households remains well below 3 million.
The headline about these households is that slightly more than 25% report, "I have more than I need." An additional 39% say they are financially secure. Overall, the majority (74%) are satisfied with their current financial situation. Annual income is different from net worth. But households with annual incomes of $250 000 or more have a net worth (mean amount $3.5 million) ten times that for all US households.
For the majority of high-earner households, changes in income-tax rates will not greatly change their financial situation or lifestyle. Closing tax loopholes would affect these households to a greater degree than would tax-rate changes. However, tax-rate changes will likely increase their desire to find tax-deferred and tax-exempt products—a potential opportunity for financial-services providers.
MacroMonitor sponsors may access a Segment Summary—The Top 2%—on Strategic Business Insights' CFD website and may request a full presentation about these households. To learn more about High Earner Households and other segments, or for answers to other questions, please contact CFD.