How Rich Are the Superrich, Exactly?
- September 09, 2022
- CBR - Inequality
Zwick and his fellow researchers built on the tax-return approach but introduced some innovations: they better appraised interest rates for those at the top and linked individuals to their privately held companies and sources of capital income, to name two. They then combined their new data with refined estimates of housing, pension, C corporation equity wealth, and pass-through business returns. (Pass-throughs are businesses that aren’t subject to corporate income taxes and instead pass profits through to proprietors, who pay individual income tax rates.)
In terms of calculating wealth concentration, their method results in numbers that land somewhere in the middle of those produced by the other approaches. The study suggests that the top 0.1 percent of Americans held 15 percent of total assets in 2016, and that the top 1 percent, 0.1 percent, and 0.01 percent all expanded their already large pieces of the pie since the 1980s. They estimate that the wealth of the top 1 percent of Americans about equaled the wealth of the bottom 90 percent of the country.
Some of that wealth came from higher interest income. The researchers used tax records to disaggregate taxable interest income, allowing them to estimate the interest rate earned by individuals more accurately than in previous methods. The interest rate paid on investments owned by those at the top is about three times higher than the average, they write. Zwick stresses that this isn’t a huge source of income for the superrich, however. “Their primary source of income is from equity, stocks, and private business,” he says. Nevertheless, getting the top interest rate right is crucial to developing accurate estimates of top wealth, he adds.
The researchers find that corporate equity and pass-through businesses are the primary sources of wealth for the richest Americans, while houses and pensions account for most of everyone else’s net worth. (For more background on their assets, see “Never mind the 1 percent. Let’s talk about the 0.01 percent.”)
“Pass-through businesses ended up being more important than previously thought,” Zwick says. “We were able to assign wealth to people that generate tax losses—they show losses for tax purposes, but the company itself is worth a lot.” Previous estimates didn’t account for this pass-through wealth.
- Matthew Smith, Owen Zidar, and Eric Zwick, “Top Wealth in America: New Estimates and Implications for Taxing the Rich,” Working paper, July 2022.
- Wojciech Kopczuk and Emmanuel Saez,"Top Wealth Shares in the United States, 1916–2000: Evidence from Estate Tax Returns," National Tax Journal, June 2004.
- Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, "Distributional National Accounts: Methods and Estimates for the United States," Quarterly Journal of Economics, May 2018.
- Emmanuel Saez and Gabriel Zucman, "Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data," Quarterly Journal of Economics, May 2016.
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