Even as I begin to write this post, I have to admit that I am seriously beginning to re-evaluate my preconceived notions about what constitutes wealth and maybe you should, too. Here’s why.
Remember when you were a little kid? For some of us, it’s a little tougher than for others, but stick with me here. When you were asked about what you wanted to be when you grew up, invariably the answers would gravitate toward respectable professions such as policeman, or fireman, or teacher. As you grew up, you began to realize that having a job with respect meant little if you couldn’t afford the Ferrari and yacht you’ve always wanted and so you began to put stock in professions like doctor, lawyer, and stock market guru. These were the jobs that made you rich, right?
Plight of High Income Earners Who Are “Not Rich Yet”
Well, sort of. Shawn Tully of Fortune Magazine got it right when he called these so-called rich folks HENRYs, or High Earners — Not Rich Yet. Before the current financial meltdown, the 5 million or so HENRYs were bringing in somewhere in the neighborhood of $250,000 to $500,000 a year each. Not too shabby, but definitely not what I think of when I hear the word “rich”. Of course, that number has dropped a bit since the onset of the past recession. Those that earned $500,000 a year in 2000 are generally only bringing home about $300,000 a year now. And those who earned less way back when are bringing home even less today.
These folks who pursue the American Dream and harbor the entrepreneurial spirit are some of those who make this country so great. So, why am I asking you to feel just a little bit of compassion for them? I mean, so what if their incomes have dropped a little? Does everyone really need to attend private school or an Ivy League college? My income has dropped too. Besides, these high earners are still bringing home more than I did in a good, pre-recession year.
Let’s hold on just a minute. Think about it from this perspective.
Before the economy tanked, most of these people could afford things that I merely dreamed about: nice cars, big houses, and private school tuition. You know… the lifestyle. But here’s the key difference between the HENRYs and us average folk: taxes. Somewhere in Obama’s Plan for a Better America, he decided that families that make $250,000 a year or more deserved to pay the lion’s share of the taxes. This means that he gets to stay in the good graces of the super wealthy, which works out well when he starts looking for re-election campaign funding; he gets to offer tax breaks for the lower middle class in order to keep votes, all the while securing a good tax revenue stream. This little bit of legislation, sprinkled with a few new rules regarding top tax rates and alternative minimum tax have squeezed the HENRYs to the point of saying Uncle.
Now there are new rules that mandate that health insurance be provided by every small business, while less federal money needs to pay for it. On the other hand, entrepreneurs are unable to secure new loans for business expansion, while more and more are managing failing businesses.
Still not seeing the correlation between you and them? To put it simply, the HENRYs supply the bulk of the jobs that are available in the U.S. economy. No more HENRYs equals no more jobs. Think about it. How many of us work for companies that employ 50 people or less.
Odds are, these companies are privately owned by one person who has clawed his way through years of expensive education, building his empire one brick at a time and who has finally managed to see the fruits of his labor, only to watch the government strip it away from him one law at a time because he is “rich” and should give back to the community.
These high earners have become the targets of endless rhetoric and have even become demonized by the have-nots who begrudge them their success. What we aren’t seeing is that they DO give back to their communities each and every day. They supply jobs, they pay taxes, they participate in community events and they provide valuable goods and services.
So, what happens next? I wonder what will happen to the global recovery effort if we don’t relieve some of the pressure on the HENRYs? Will they give up? Close their doors and run for the hills to become hermits? Probably not. But the what-ifs are the things that keep me up late at night. Maybe, they should be keeping you up, too?