Did you know that the most downwardly mobile members of society are millionaires?
It's true, and what's more, we have the data and math to prove it!
Our featured chart today was originally produced by Veronique de Rugy of the Mercatus Institute, which is based upon data from the IRS and analysis by the non-profit Tax Foundation.
Here, the story begins in 1998, when the IRS reports that there were approximately 675,000 tax returns with adjusted gross incomes of $1 million, or more.
[Side note: The traditional definition of a millionaire was someone who had accumulated at least one million dollars in total assets. However, since the word was first documented back in 1826, the effect of inflation is such that perhaps a more modern definition would be those who earn incomes of at least one million dollars in a year. In any case, $45,000 in 1826 dollars is roughly the equivalent of $1 million in 2012, going just by changes in the Consumer Price Index.]
Then, beginning in 1999, following the tax returns filed by the same people, the number of those with incomes over $1 million begins to drop dramatically - by nearly 50% in the first year!
And then, it continues, at an ever declining rate, until by 2006, some eight years later, of the 675,000 millionaires of 1998, only 17,000 made a million dollars or more, just 2.5% of the original number.
Expressed a different way, the probability that a millionaire after eight years would be able to make $1 million or more is just 2.5%!
And that's the math our newest tool tries to estimate! Just enter the number of years after which a millionaire has made a million dollars, and we'll give you the odds that they will have done it again!
Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.
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