As for a hypothetical to help explain this, if Bill Gates put all his assets into non-interest bearing or non-dividend generating investments would he no longer be rich because he has no income?

Wouldn’t that automatically require the rich to be less than .1% of the population?

The distribution of income isn't normal but, yes. Go check the stats in my post. Three standard deviations may not be as large an income as you may think.

That’s by design. I don’t think that anybody who’s one paycheck away from default (as a remarkable number of people with large dollar salaries are) should be characterized as “the rich”.

I guess we disagree then. If someone make $10 million a year but spend $9,999,999 a year then I would call them rich. Foolish but rich.

Lets put it this way- the rich may be one check away from default but that's through their own choices and not necessity. They could easily have had a perfectly adequate car and house and whatever but decided to splurge on something beyond their inflated means.

I qualify for both #1 and #2, but am not rich. I just choose to live within my means.

Second, the income of the “the rich” must be no less than three standard deviations above average income.

Wouldn't that automatically require the rich to be less than .1% of the population? Assuming a standard distribution 99.8% of all results should be withing 3 deviations of the mean (and half of the .2% remainder would be on the low side). I wouldn't put the number nearly that low.

That has potential but it excludes some I think are pretty damn rich.

That's by design. I don't think that anybody who's one paycheck away from default (as a remarkable number of people with large dollar salaries are) should be characterized as “the rich”.

First, the majority of their income must be derived from the ownership of assets.

That has potential but it excludes some I think are pretty damn rich.

Perhaps what we need is not a single definition but a series of modes of richness...

Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

In my post cited above I expand a bit on why this definition makes sense. Defining it solely on the basis of income includes people who really don't fit comfortably into an intuitive notion of “the rich” e.g. longshoremen. Defining it solely on the basis of the source of income includes people who don't fit comfortably into an intuitive notion, either, e.g. the non-indigent elderly.

It's more complex than this, of course, due to regional differences and any number of other factors. But I think it works pretty well as a rule of thumb.

It's not, however, what Congressmen generally mean when they say “the rich”. As best as I can tell they mean anybody who makes more than a Congressman.