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Tuesday, 7 May 2013

Are you rich, ultra-rich or uber-rich?

According to Labor MP Andrew Leigh any Australian with an income of $210,100 per year is 'ultra-rich', and an annual income of $688,700 makes you one of the 'uber-rich'. I'd beg to differ, for two reasons. Firstly, although annual income is probably a good guide to who may be feeling 'rich' at any particular time, for a person to be really classified as 'ultra-rich' (or even just 'rich') that income would have to be sustainable, rather than transient. Consider the situation of a recently retired pensioner that has one modest $250,000 investment property that they bought 30 or 40 years earlier, and managed to paid off the mortgage during their entire working life. The year they sell of the property they would have an annual 'income' which, according to Leigh, makes them one of his 'ultra-rich'. Of course that is nonsense, as the money would usually go into a bank account and could provide maybe $10,000 annual income if they want it to last their entire retirement.

The second reason is more basic - why pick a figure of $210,100 per year income as the threshold for labelling a person as 'ultra-rich'? Leigh apparently chose this figure because 'only' 1% of Australians earned more than that according to the latest available (2010-11 financial year) tax office data. Using this criteria means that, according to Leigh, 1 in every 100 Australian should be considered 'ultra-rich'! Now, $210,000+ annual income is certainly enough for nearly anyone with that income level to be considered 'very well-off', and, if that remained their average income over several years they could have a very comfortable life-style and still save enough to eventually end up truly 'rich' (unless they are a divorcee supporting a handful of ex-wives and a gaggle of children boarding at private schools). But, while it's generally reasonable enough to class people with that level of taxable income as the 'rich', the term 'ultra-rich' seems to be pushing it a bit. Then again, as a Labor MP Dr Leigh probably wants to classify anyone who earns more than the average wage as 'rich', as it will make it easier to justify increasing their taxation and eliminate any government benefits they might still be entitled to ;)

And, what is the intent with labelling 1 out of every 1000 Australians as the 'uber-rich'? That term seems loaded with distain and implied disapproval, echoing as it does the loaded term 'uber-menschen' that was used by the Nazis. I'd have expected a former professor of economics at ANU to be more even-handed, but I suppose that would be too much to expect from a politician.

ps. As a federal MP Dr Leigh is on an annual income of $159,060 (salary and electoral allowance only, ignoring the myriad other entitlements politicians enjoy), which means he is 'obviously' one of the 'rich', and just barely avoids being classed as one of the 'ultra-rich' according to his own criteria ;)

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