How to Make a Fortune
ONE persistent bit of modern business folklore is that a man can no longer make a million, that the day of opportunity in the U.S. is past. The best evidence against such a pessimistic view is the number of new millionaires sprouting up from coast to coast every day. On that basis, the U.S. millionaire is more alive in 1954 than he ever was in the golden '20s.
A prime example of the new breed is Los Angeles' Howard F. Ahmanson, 48, who made his fortune in the savings-and-loan business, real estate, oil and fire insurance. Says Millionaire Ahmanson: "When I was a kid of 16, all the greybeards used to say: 'It's too bad, son. There's no opportunity any more for youngsters of your generation.' Well, they were wrong. And today, I've got fifty million bucks to prove it."
The big reason the skeptics are wrong is that they look solely at the statistics on incomes, and the high income-tax rate. During the 1920s, an executive could make $1,000,000 a year in salary and take home $850,000. But now, under taxes that take as much as 87% of such income, he can take home less than $150,000.
FLAW IN THE FIGURES
THE misleading flaw in the figures is that none of the new millionaires count on salaries alone. By whatever energy, invention or imagination they make their big stake, they keep it by taking careful advantage of the capital gains tax,* under which assets held for six months can be sold as a long-term capital gain and the profit taxed only 25%. A single man who invests his money in an apartment house, for example, then sells it six months later at a $300,000 profit, would have to pay $247,280 to the Federal Government if the profit was taxed as income. By taking his profit as a capital gain, the tax bill drops to $75,000.
Such big rich Texas oilmen as Clint Murchison and Sid Richardson (TIME, May 24) have made their millions by a variation of the capital gain—the depletion allowance. Others have made their millions in a dozen different ways, helped by capital gains. They have built up old companies, formed new ones, invented new products or services and even entire new industries—all with profits (when and if they sell out) subject only to the capital-gains tax. Los Angeles' William Lear, for example, has built his Lear, Inc. into a $50 million company making automatic pilots and other electronic gadgets, has also taken capital gains by selling off inventions.
THE ROADS TO RICHES