How the Rich Got Rich

The huge amount that comes from capital gains got me thinking... why is the return on capital, versus say the return on labor, so high? Our society is awash with capital. We apparently have more of it than we know what to do with (see, e.g., the real estate bubble, the tech bubble). If the capital markets were efficient, shouldn't supply and demand equilibrate things to drive down the price of capital?<p>I think the structure of the capital markets, VC's and funds and the like, are still holding back efficiency by limiting the market of sellers. Things like Kickstarter that "democratize" the capital markets may also play a huge role in making them more efficient.

when we see these reports/analysis it seems the answer is always the same: Capital Gain. However, I think this whole line of inquiry is mis-titled: these reports always tell us how the rich people are making <i>now</i> their income. Which, I feel, is not a good hint as to how you can <i>become</i> rich.<p>For the greater public, the question of "how the rich people went from 0 to $1B" might more interesting than "how the rich people maintain their $1B+". Definitely I find the latter more interesting than the former (probably because I don't have $1B+)

The Rockefeller quote is interesting<p><pre><code> "If your only goal is to become rich, you'll never achieve it." </code></pre> But I've always felt Citizen Kane's was more accurate:<p><pre><code> "It's easy to make a lot of money, if that's all you want to do is make a lot of money."</code></pre>

Here's the IRS pub that's the basis for the article: The 400 Individual Income Tax Returns Reporting the Largest Adjusted Gross Incomes Each Year, 1992-2009 <a href="http://www.irs.gov/pub/irs-soi/09intop400.pdf" rel="nofollow">http://www.irs.gov/pub/irs-soi/09intop400.pdf</a><p>The Tax Foundations take (<a href="http://taxfoundation.org/article/fortunate-400" rel="nofollow">http://taxfoundation.org/article/fortunate-400</a>) is a little different. Interesting that in the 18 years that the report covers none of the taxpayers were on the top 400 list for all years. &#38; only 4 (1%) were on the list for 17 years. 73% were on the list for just 1 year.... Their take was that most folks were on the list due to one time event...sale of assets, etc<p>Also wages were flat for all 17 years (as a % of total income). Partnership &#38; S Corp income was up ~400%, which could be because of the growth in publicly traded partnerships.

Given that the tax structure massively prefers capital gains to other forms of income, it is unreliable to look at the reported tax percentages as a measure of where the money is actually coming from. For example, many of the uber-rich structure payments for their labor such that they are taxed as capital gains.

No no no. If capital gains tax is less than income tax, then of course the IRS stats show most income comes via capital gains.

In this article, Inc Magazine confirms what any follower of Marx or George could have told you long ago: the rich get rich from owning things, preferably productive assets like businesses, rather than from working.

Their parents mostly.

I remember reading some article about how a private banker had a ultra-high net worth family who wanted to name their latest blind trust, 1066 - as in 1066 - the year in which their family acquired most of their wealth.

Anybody who has a 401k or IRA in the US is benefiting from capital gains, and as we all know from 4 years ago, it can be very risky.

great example of why arguing over the income tax rate is a distraction from the real issue: the capital gains rate

I like that "do a lot of small things right"....kind of sounds like "the more I practice, the luckier I get"