Maldistribution of Wealth in America: New Evidence

Claude Vignon, Croesus Receiving Tribute from a Lydian Peasant, 1629.
Claude Vignon, Croesus Receiving Tribute from a Lydian Peasant, 1629.

Class differences are increasing dramatically in America. Compelling new evidence of that fact is found in a paper published last October by leading economists Emmanuel Saez of the University of California at Berkeley and Gabriel Zucman of the London School of Economics. Titled “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data,” the paper effectively rebuts those who disregard the problem of maldistribution of wealth.

Most recent economic scholarship dealing with class has focused on increasing differences in income, since about 1980. With regard to wealth, however, hard evidence was less readily available. Some have argued that there has not been an upward redistribution of wealth on the same scale as the upward redistribution of income. “Our paper, however, challenges this view,” Saez and Zucman write. “We find that wealth inequality has considerably increased at the top over the last three decades.”

The two scholars report that “almost all of this increase is due to the rise of the share of wealth owned by the 0.1% richest families, from 7% in 1978 to 22% in 2012, a level comparable to that of the early twentieth century.” Let me emphasize that: the richest one-tenth of one percent have more than tripled their share of America’s wealth since 1978. Their cut of America’s wealth is nearly as high as it was in 1929, 24.8%, the highest percentage held by the 0.1% in any year since 1913.

The bottom 90% still hold more wealth than the top 0.1%, for now anyway, by a margin of 22.8% to 22%. But the authors point out that, “for the bottom 90%, wealth has not grown at all,” between 1986 and 2012.

How did the super-rich obtain such a hoard of money? Was it due more to earnings or to inheritance? “Due to data limitations,” Saez and Zucman write, they cannot yet offer a detailed comparison of “the relative importance of self-made vs. dynastic wealth.” Even so, the authors cite another fact that suggests that much of the wealth increase at the top is due to inheritance: “in the 1960s, top 0.1% wealth holders were older than average, which is not the case anymore today.”

Another telling factor is the sharp reduction in federal inheritance tax (known as the estate tax) since 2001. The Center on Budget and Policy Priorities has a useful summary of changes in the estate tax, and the effects of those changes, here. And Figure 1 at the end of Saez and Zucman’s paper shows a sharp increase in the 0.1%’s share of wealth after 2001.

A PDF of the paper and Excel files with raw figures are available on Professor Saez’s website.