5 Tales of Overnight Millionaires

MSN Money put together a list of five individuals who suddenly struck it rich. How these people made it big runs the gamut from entrepreneurial spirit, to inventive natures, to being just plain lucky. You can find a snippet from their article below, or click here for the full list.

Andrew Mason, entrepreneur

Andrew Mason, 30, is the brains behind the newest social-media sensation, Groupon.

Playing off the words "coupon" and "group," the site offers daily discounts on services and products. Revenue for 2010 is expected to have hit an estimated $350 million.

Pierre Le Guennec, electrician

For Pierre Le Guennec, a retired French electrician, it was who he worked for that turned him into an instant megamillionaire.

According to recent media reports, while Le Guennec was employed by Pablo Picasso before Picasso's death in 1973, the artist gave him 271 previously unknown pieces over the course of his employment. Although there is some controversy over these works, the collection of drawings, lithographs, cubist collages and notebooks is valued at an estimated $78 million.

Sandy Stein, inventor

At 52, airline flight attendant Sandy Stein invented accessorized key clasps to help women avoid losing their keys in their purses. She called the product Finders Key Purse.

Within four months of launching the product, Stein's company reached had $1 million in sales; at the eight-month mark, more than one million units were sold. Parent company Alexx expected 2010 earnings to total about $6.5 million.

Continue reading at MSN.com...

New Jersey Democrats fail to extend millionaires tax

Do you think millionaires should be charged a hefty income tax? What if it was to solve one of the highest budget short-falls in history?

According to Reuters.com, New Jersey Democrats had wanted to reimpose a one-year, 10.75 percent tax on income above $1 million that would have hit 16,000 people. New Jersey's fiscal shortfall, at 37.4 percent of the current year's budget, is the second-highest among U.S. states, second only to Nevada, according to the Center on Budget and Policy Priorities. However, New Jersey Democratic legislators on Monday failed to gather enough votes to extend a tax on millionaires that would have been used to provide property tax relief for senior citizens and the disabled.

The millionaires' tax would have raised $637 million for rebate checks of up to $1,295 for some 600,000 senior citizens who would otherwise face steep increases in their property taxes during fiscal 2011.

Gov. Christie claimed the tax would keep the millionaire business owners from hiring in our tough economy. However, he proposed a constitutional amendment placing a 2.5 percent cap on annual increases in residential property taxes.

Read the full article here. Tell me what you think on Facebook or @ronideutch on Twitter.

U.S. Minted More Millionaires In 2009

It should come as no surprise that the number of millionaires in the country decreased in 2008 due to the market meltdown, and poor economy. However, I was surprised when I read that the number of millionaires actually increased by around 16% in 2009, according to this article on CNN Money. As it explains, the number of households in the U.S. worth $1 million or more grew to 7.8 million in 2009.

The firm's report, "Affluent Market Insights 2010," also found that the number of ultra high-net-worth households, worth $5 million or more jumped 17% to 980,000 in 2009.

"This is largely attributed to the stock market rebound, since other assets including real estate and private businesses have not rebounded as dramatically," said George H. Walper, Jr., president of Spectrem Group.

The report comes one year to the day after the Dow and the S&P 500 closed at 12 year lows in the thick of the financial crisis.

Continue reading at CNN Money.com…

Tax Rates for Millionaires Continue to Fall

From Tax.com:

Households with incomes over $1 million paid income tax equal to 22.1 percent of their adjusted gross income in 2007. This is down from 23.4 percent in 2004. And from 30.8 percent in 1996. See the chart below. The 2007 data were just released by the Statistics of Income Division of the IRS.

The main reasons for this decline are: the May 7, 1997 cut in the capital gains rate to 20 percent; the 2001 Bush cut in tax rates (scheduled to expire at the end of 2010); the reduction in the capital gains tax rate from 20 to 15 percent in 2003; and the 15 percent rate available for qualified dividends starting in 2003. In addition to these statutory changes, the decline in the rate over the last few years can be attributed to an increasing share of millionaire income coming in the form of capital gains and dividends.

This declining trend is likely to reverse itself shortly. When data becomes available for 2008 and 2009 the rate will probably increase because the size of capital gain realizations typically follow stock prices. The rate will also rise in 2011 if, as President Obama intends, Congress agrees to let the Bush tax cuts expire for incomes over $250,000. This would restore the top individual rate to 39.6 percent and the capital gains rate to 20 percent.

California Court Upholds 1% Tax on Millionaires

Last Wednesday, the California Court of Appeals ruled on Jensen v. California Franchise Tax Board, and rejected challenges to Proposition 63. For those of you who are not familiar, the proposition imposed a 1% tax on California taxpayers who earn more then a million dollars per year to fund mental health services. You can check out the following highlights of the ruling courtesy of the Tax Prof, or download the full text here.

We find no constitutional infirmity in the challenged portions of Proposition 63. An income tax may be rationally based on a taxpayer‟s income level and ability to pay, and there is no need to show that a particular taxpayer personally benefits from a tax assessed for the public good. Taxpayers earning more than $1 million annually do not comprise a “suspect class” requiring a strict scrutiny constitutional analysis. Further, Proposition 63 is valid even if it is not a constitutional amendment. ...

We are unaware of any case authority holding that wealthy individuals form a “suspect class” deserving of a heightened degree of scrutiny. Suspect classifications include race, gender, national origin or illegitimacy. Wealth generally confers benefits, and does not require the special protections afforded to suspect classes. Wealth has “none of the traditional indicia of suspectness: the class is not saddled with such disabilities, or subjected to such a history of purposeful unequal treatment, or relegated to such a position of political powerlessness as to command extraordinary protection from the majoritarian political process.” (San Antonio School District v. Rodriguez, 411 U.S. 1, 28 (1973).) ...

The Taxpayers are mistaken in thinking that taxpayers in a particular tax bracket cannot be singled out for an income tax to benefit society at large. ...

The tax imposed by Proposition 63 is not arbitrary merely because a person earning $1,000,001 is subject to the tax, while a person earning $999,999 is exempt. The government has leeway in “drawing lines” below which individuals are exempt from a tax. ...

The Taxpayers perceive themselves as victims of a populist movement to “soak the rich.” The desire of the majority of the electorate to tax a minority of citizens based on their earnings is not a basis for overturning an income tax. The courts “do not substitute their social and economic beliefs” to supplant the judgment of the enacting body.

Millionaires Go Missing

From the Wall Street Journal.com:

Here's a two-minute drill in soak-the-rich economics:

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

No doubt the majority of that loss in millionaire filings results from the recession. However, this is one reason that depending on the rich to finance government is so ill-advised: Progressive tax rates create mountains of cash during good times that vanish during recessions. For evidence, consult California, New York and New Jersey (see here).

The Maryland state revenue office says it's "way too early" to tell how many millionaires moved out of the state when the tax rates rose. But no one disputes that some rich filers did leave. It's easier than the redistributionists think. Christopher Summers, president of the Maryland Public Policy Institute, notes: "Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it's easy for them to change their residency."

All of this means that the burden of paying for bloated government in Annapolis will fall on the middle class. Thanks to the futility of soaking the rich, these working families will now pay Mr. O'Malley's "fair share."

73 AIG Bonuses Hit Million-Dollar Mark

Just months after getting bailed out by American taxpayers, AIG has once again made headlines by giving out millions of dollars in bonuses to their executives, many of which are no longer working for the company. CBSnews.com has posted an interesting article on the outrage sparked by these huge bonuses, and what President Obama and Congress are planning to do about it. Check out a portion of the article below.

Troubled insurance giant American International Group paid bonuses of $1 million or more to 73 employees, including 11 who no longer work for the company, New York Attorney General Andrew Cuomo said Tuesday.

Cuomo subpoenaed information from AIG on Monday to determine whether the payments made over the past weekend constitute fraud under state law. He says contracts written in March 2008 guaranteed employees 100 percent of their 2007 pay for 2008, regardless of their performance.

President Barack Obama and Washington lawmakers have blasted AIG for paying more than $160 million in bonuses to employees of its Financial Products division, the unit primarily responsible for the meltdown that led to a federal bailout of the company, while the company has received billions in taxpayer bailout funds.

Cuomo said AIG mailed the bonus checks Friday.

The company and some federal regulators have said it was obligated by contract to make the payments. Cuomo said the bonuses might have been fraudulent if AIG officials knew the company couldn't afford them.

"You could argue if the taxpayers didn't bail out AIG, those contracts wouldn't be worth the paper it's printed on," he said Monday.

There was no immediate AIG comment following Cuomo's disclosure Tuesday of the bonus amounts. Cuomo did not release the names of the recipients.

AIG spokeswoman Christina Pretto had said Monday the company was in contact with Cuomo's office and would respond to his requests for information and the subpoena.

IRS Audits More Millionaires

According to ABC News, in 2007 one out of every 11 households with incomes over $1 million were audited by the IRS in 2007. However, the IRS claims it’s auditing rates were up for people of all income levels last year.

The audit rates in 2007 were as follows:

• 9.25% for those with incomes of more than $1 million, up from 6.3% in 2006.
• 2.87% for those with incomes above $200,000, up from 2.5% in 2006.
• 0.93 percent for those earning under $100,000, up from 0.89% in 2006.

The IRS looked at a total of 1,384,563 returns in fiscal 2007. This represents 1.03% of the total individual returns filed with the IRS. The average audit rate was up 7% from the year before. On the business side, the IRS focused on partnerships and mid-market corporations in 2007, especially those with assets between $10 million and $50 million.