An innovative tax-the-rich proposal now before lawmakers would reverse the wealth concentration that’s suffocating our democracy
We’ve all seen the stats on America’s extreme inequality. Over 20 percent of our nation’s income flows to the top 1 percent. The top 1 percent’s share of our country’s wealth is approaching 40 percent. Our top 0.1 percent hold roughly the same share of our wealth as our bottom 90 percent.
All eye-popping numbers to be sure. But don’t be fooled. These numbers understate our problem. And not by just a little.
Let’s consider, for a moment, what our income and wealth numbers are really telling us. Statistics on how we share our wealth right now tell us where things stand, but not how we ended up where we stand — or where we’re heading. Stats on how we share our income don’t tell us anything about how we’re sharing in wealth’s accumulation.
Take, for instance, the value of the Jeff Bezos Amazon fortune. If this value doubles, the increase doesn’t register anywhere as “income” for Bezos until he sells his Amazon stock. And the resulting income numbers don’t reflect what living expenses and taxes consume.
So our conventional measures of income and wealth don’t tell the whole story. We need to know more about how our society is sharing the real wealth we create, more about what remains from the fruits of our collective efforts after we take into account all the costs involved and after adjusting for inflation and population growth.
Through that lens, we see a rather gruesome picture.
Of America’s inflation- and population-adjusted increase in wealth between 2006 and 2018, over 87 percent went to the top 10 percent. Over 60 percent went to the top 1 percent. The top .01 percent, a baseball-park-sized group of just 32,669 Americans, grabbed over 23 percent of the country’s increase in wealth.
And nearly 10 percent of that increase went to the 400 wealthiest Americans.
The 290 million or so unlucky souls who make up the so-called bottom 90 percent, meanwhile, saw just 13 percent of the nation’s wealth gains between 2006 and 2018, not much over half of what went to the top .01 percent. Our bottom 50 percent actually lost wealth over that 2006-2018 period.
Some may call this level of inequality extreme. Obscene would be more appropriate.
I calculated these wealth-gain shares from data compiled by Emmanuel Saez and Gabriel Zucman, two leading economists now at the University of California-Berkeley. Other data sets — the Federal Reserve’s triennial Survey of Consumer Finances, for one — let us calculate much the same basic story.
In 2018, according to the Saez and Zucman figures, U.S. household wealth stood at $88.662 trillion, up from $68.310 trillion in 2006, with both figures in 2018 dollars.
Between 2006 and 2018, our U.S. population increased by 9.5 percent, to 326.69 million. To create a true, apples-to-apples comparison, I increased the Saez-Zucman 2006 household wealth figure to $74.791 trillion. That total amounts to the household wealth a country of 326.69 million people would need to have to be equivalent, on a per-person basis, to the nation of 298.38 million people we had in 2006. That 2006 nation held $68.310 million in household wealth.
The inflation- and population-adjusted increase in America’s wealth between 2006 and 2018 turns out to bring us from $74.791 trillion to $88.662 trillion, a difference of $13.871 trillion.
My next step: applying the Saez and Zucman wealth-share percentages to this inflation- and population-adjusted increase in America’s wealth.
The end-result of all this number crunching: Of that $13.871-trillion increase in inflation- and population-adjusted household wealth, $12.078 trillion went to the nation’s wealthiest 10 percent, leaving just $1.793 trillion to the bottom 90 percent.
Within that $12.078 trillion for the top 10 percent, $8.537 trillion went to the top 1 percent, $5.519 trillion to the top 0.1 percent, and $3.201 trillion to the top 0.01 percent. And the 400 wealthiest Americans? They pulled down $1.314 trillion of the increase.
Unfortunately, this obscene inequality appears likely to get worse. As the 2006-to-2018 period ended — and after our top 1 percent had already grabbed an appallingly outsized portion of the wealth created during those dozen years — the Trump tax act enacted at the end of 2017 went into effect, a giant giveaway to the top 1 percent.
This is insanity.
Tax the rich.
Bob Lord, an Institute for Policy Studies associate fellow, practices tax law in Phoenix.