Home
About
Store
Action
Articles
Predictions
Donate
Links
Contact us
globe
NewsExtra

 

 

newsheadlines

How Rich Are The Top 1%?

January, 2014

www.helpfreetheearth.com

Ever wondered how much wealth someone needs to be in the Top 1%?

In the United States, wealth is concentrated in few hands. As of 2010, the top 1% of households (the upper class) owned 35.4% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 53.5%.

That means that just 20% of the American people own 89%, leaving only 11% of the wealth for the bottom 80% of wage and salary workers..

 

 

Table 1 lists the dollar amounts associated with income levels.

Table 1: Income, net worth, and financial worth in the U.S. by percentile, in 2010 dollars
Wealth or income class Mean household income Mean household net worth Mean household financial (non-home) wealth
Top 1 percent $1,318,200 $16,439,400 $15,171,600
Top 20 percent $226,200 $2,061,600 $1,719,800
60th-80th percentile $72,000 $216,900 $100,700
40th-60th percentile $41,700 $61,000 $12,200
Bottom 40 percent $17,300 -$10,600 -$14,800
From Wolff (2012)

Table 2: Distribution of net worth and financial wealth in the United States, 1983-2010

  Total Net Worth
  Top 1 percent Next 19 percent Bottom 80 percent
1983 33.8% 47.5% 18.7%
1989 37.4% 46.2% 16.5%
1992 37.2% 46.6% 16.2%
1995 38.5% 45.4% 16.1%
1998 38.1% 45.3% 16.6%
2001 33.4% 51.0% 15.6%
2004 34.3% 50.3% 15.3%
2007 34.6% 50.5% 15.0%
2010 35.4% 53.5% 11.1%
  Financial (Non-Home) Wealth
  Top 1 percent Next 19 percent Bottom 80 percent
1983 42.9% 48.4% 8.7%
1989 46.9% 46.5% 6.6%
1992 45.6% 46.7% 7.7%
1995 47.2% 45.9% 7.0%
1998 47.3% 43.6% 9.1%
2001 39.7% 51.5% 8.7%
2004 42.2% 50.3% 7.5%
2007 42.7% 50.3% 7.0%
2010 42.1% 53.5% 4.7%
Figure 1: Net worth and financial wealth distribution in the U.S. in 2010

The top one percent of households have 35% of all privately held stock, 64.4% of financial securities, and 62.4% of business equity. The top ten percent have 81% to 94% of stocks, bonds, trust funds, and business equity, and almost 80% of non-home real estate.

10% of people own the United States of America. See Table 3 for details.

Table 3: Wealth distribution by type of asset, 2010
  Investment Assets
  Top 1 percent Next 9 percent Bottom 90 percent
Stocks and mutual funds 35.0% 45.8% 19.2%
Financial securities 64.4% 29.5% 6.1%
Trusts 38.0% 43.0% 19.0%
Business equity 61.4% 30.5% 8.1%
Non-home real estate 35.5% 43.6% 20.9%
TOTAL investment assets 50.4% 37.5% 12.0%
  Housing, Liquid Assets, Pension Assets, and Debt
  Top 1 percent Next 9 percent Bottom 90 percent
Principal residence 9.2% 31.0% 59.8%
Deposits 28.1% 42.5% 29.5%
Life insurance 20.6% 34.1% 45.3%
Pension accounts 15.4% 50.2% 34.5%
TOTAL other assets 13.0% 37.8% 49.2%
Debt 5.9% 21.6% 72.5%
From Wolff (2012).

Figures on inheritance or "death taxes" tell the same story. According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. 91.9% receive nothing (Kotlikoff & Gokhale, 2000).

The rich avoid inheritance taxes - thanks to bankers. After Congress passed a reform in 1986 making it impossible for a "trust" to skip a generation before paying inheritance taxes, bankers convinced legislatures in many states to eliminate their "rules against perpetuities," which means that trust funds can exist in perpetuity, thereby allowing the trust funds to own new businesses, houses, and much else for descendants of rich people, and even to allow the beneficiaries to avoid payments to creditors.

Home Ownership & Wealth

For the vast majority of Americans, their homes are the most significant wealth they possess. Figure 3 comes from the Federal Reserve Board's Survey of Consumer Finances (via Wolff, 2012) and compares the median income, total wealth (net worth, which is marketable assets minus debt), and non-home wealth (which earlier we called financial wealth) of White, Black, and Hispanic households in the U.S.

Figure 3: Income and wealth by race in the U.S.
i
i
From Wolff (2012). All figures adjusted to 2010 US dollars.

Black and Latino households are worse off for income or net worth. In 2010, the average white household had almost 20 times as much total wealth as the average African-American household, and more than 70 times as much wealth as the average Latino household. If we exclude home equity from the calculations and consider only financial wealth, the ratios are more than 100:1.

71% of white families' wealth is their principal residence; for Blacks and Hispanics, the figures are close to 100%.

Things have gotten worse for all Americans. Comparing the 2006/2007 numbers to the 2009/2010. there is a huge loss in wealth -- both housing and financial -- for most families, making the gap between the rich and the rest of America even greater, and increasing the number of households with no marketable assets from 18.6% to 22.5% (Wolff, 2012).

Ignorance About America's Wealth Distribution

A remarkable study (Norton & Ariely, 2010) reveals that Americans have no idea that the wealth distribution is concentrated in so few hands. Of 5,522 respondents, most thought that the top 20% has about 60% of the wealth. In fact, the top 20% control about 85% of the wealth (go back to Table 2 for details).

Tthe amount of wealth held by the bottom 40% of the population is shocking! Most people in the survey guessed the figure to be between 8% and 10%, and two dozen academic economists got it wrong too, by guessing about 2% -- seven times too high.

Their vision of the "ideal" wealth distribution was an even bigger surprise than their shared misinformation on the actual wealth distribution. They said that the ideal wealth distribution would be one in which the top 20% owned between 30 and 40 percent of the privately held wealth, which is a far cry from the 85 percent that the top 20% actually own. They also said that the bottom 40% -- that's 120 million Americans -- should have between 25% and 30%, not the mere 8% to 10% they thought this group had.

Figure 4: The actual United States wealth distribution plotted against the estimated and ideal distributions.
i

Wealth History Of Top 1%

Numerous studies show that the wealth distribution has been concentrated throughout American history with the top 1% already owning 40-50% in large port cities like Boston, New York, and Charleston in the 1800s. By the late 1980s, the wealth distribution was almost as concentrated as it had been in 1929, when the top 1% had 44.2% of all wealth. It has continued to edge up since that time Table 4 and Figure 5 present the details from 1922 through 2010.

Table 4: Share of wealth held by the Bottom 99% and Top 1% in the United States, 1922-2010.
  Bottom 99 percent Top 1 percent
1922 63.3% 36.7%
1929 55.8% 44.2%
1933 66.7% 33.3%
1939 63.6% 36.4%
1945 70.2% 29.8%
1949 72.9% 27.1%
1953 68.8% 31.2%
1962 68.2% 31.8%
1965 65.6% 34.4%
1969 68.9% 31.1%
1972 70.9% 29.1%
1976 80.1% 19.9%
1979 79.5% 20.5%
1981 75.2% 24.8%
1983 69.1% 30.9%
1986 68.1% 31.9%
1989 64.3% 35.7%
1992 62.8% 37.2%
1995 61.5% 38.5%
1998 61.9% 38.1%
2001 66.6% 33.4%
2004 65.7% 34.3%
2007 65.4% 34.6%
2010 64.6% 35.4%
Sources: 1922-1989 data from Wolff (1996). 1992-2010 data from Wolff (2012).
Figure 5: Share of wealth held by the Bottom 99% and Top 1% in the United States, 1922-2010.
i

THE RICH GET RICHER

The wealth distribution became more concentrated between 1983 and 2004 during the Clinton and George HW Bush and George W Bush Presidency due to the tax cuts for the wealthy and the defeat of labor unions: Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%. A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the '80s, '90s, and early 2000s (Wolff, 2007).

WORLD WEALTH

A 2006 study by the World Institute for Development Economics Research using statistics for the year 2000 shows the wealth distribution for the world as a whole compared to the United States and other well-off countries. The top 10% of the world's adults control about 85% of global household wealth -- defined very broadly as all assets (not just financial assets), minus debts. That compares with a figure of 69.8% for the top 10% for the United States. The only industrialized democracy with a higher concentration of wealth in the top 10% than the United States is Switzerland at 71.3%.

Table 5: Percentage of wealth held in 2000 by the Top 10% of the adult population in various Western countries
  wealth owned
by top 10%
Switzerland 71.3%
United States 69.8%
Denmark 65.0%
France 61.0%
Sweden 58.6%
UK 56.0%
Canada 53.0%
Norway 50.5%
Germany 44.4%
Finland 42.3%

Wealth and Power

What's the relationship between wealth and power? Wealth refers to the value of everything people own, minus what they owe. Power is the ability to reach goals. (Russell, 1938; Wrong, 1995).

Wealth is a "resource" that is useful in exercising power. Think of donations to political parties, payments to lobbyists, and grants to experts who are employed to think up new policies beneficial to the wealthy. Wealth can hire public relations firms or donate money for universities and desired wealth producing studies.

Wealth, such as stock ownership, can be used to control corporations, which have a major impact on how the society functions. Tables 6a and 6b show what the distribution of stock ownership looks like. Note how the top one percent's share of stock equity increased (and the bottom 80 percent's share decreased) between 2001 and 2010 during the Obama Presidency.

Table 6a: Concentration of stock ownership in the United States, 2001-2010
  Percent of all stock owned:
Wealth class 2001 2004 2007 2010
Top 1% 33.5% 36.7% 38.3% 35.0%
Next 19% 55.8% 53.9% 52.8% 56.6%
Bottom 80% 10.7% 9.4% 8.9% 8.4%
Table 6b: Amount of stock owned by various wealth classes in the U.S., 2010
  Percent of households owning stocks worth:
Wealth class $0 (no stocks) $1-$9,999 $10,000 or more
Top 1% 5.1% 0.6% 94.3%
95-99% 6.9% 4.0% 89.1%
90-95% 11.8% 4.8% 83.4%
80-90% 21.0% 8.5% 70.5%
60-80% 41.3% 15.6% 44.1%
40-60% 55.4% 19.9% 24.7%
20-40% 76.1% 17.4% 6.5%
Bottom 20% 79.2% 17.3% 4.5%
TOTAL 53.1% 17.5% 31.6%
Both tables' data derived from Wolff (2007, 2010, & 2012). 

POWER PYRAMID

Wealth can lead to power and power to wealth. Those who control a government can use their position to feather their own nests, whether that means a favorable land deal for relatives at the local level or a huge federal government contract for a new corporation run by friends who will hire you when you leave government. If we take a larger historical sweep and look cross-nationally, we are well aware that the leaders of conquering armies often grab enormous wealth, and that some religious leaders use their positions to acquire wealth.

Since the top 20% have 84% of the wealth (and recall that 10% have 85% to 90% of the stocks, bonds, trust funds, and business equity), that means that the United States is a power pyramid. It's almost impossible for the bottom 80% -- maybe even the bottom 90% -- to get organized and exercise much power.

The top 1% of income earners received 17.2% of all income in 2009. That's up from 12.8% for the top 1% in 1982 and it parallels what is happening with the wealth distribution. The power of the corporate community and the upper class have been increasing in recent decades under Clinton, Bush and Obama.

Table 7: Distribution of income in the United States, 1982-2006
  Income
  Top 1 percent Next 19 percent Bottom 80 percent
1982 12.8% 39.1% 48.1%
1988 16.6% 38.9% 44.5%
1991 15.7% 40.7% 43.7%
1994 14.4% 40.8% 44.9%
1997 16.6% 39.6% 43.8%
2000 20.0% 38.7% 41.4%
2003 17.0% 40.8% 42.2%
2006 21.3% 40.1% 38.6%
2009 17.2% 41.9% 40.9%
From Wolff (2012).

THE RICH DON'T PAY TAXES

As of 2007, income inequality in the United States was at an all-time high for the past 95 years, with the top 0.01% -- that's one-hundredth of one percent -- receiving 6% of all U.S. wages, which is double what it was for that tiny slice in 2000. The top 10% received 49.7%, the highest since 1917 (Saez, 2009).

The rate of increase is even higher for the very richest of the rich: the top 400 income earners in the United States. According to another analysis by Johnston (2010a), the average income of the top 400 tripled during the Clinton Administration and doubled during the first seven years of the Bush Administration. So by 2007, the top 400 averaged $344.8 million per person, up 31% from an average of $263.3 million just one year earlier.

How are these huge gains possible for the top 400? It's due to cuts in the tax rates on capital gains and dividends, which were down to a mere 15% in 2007 thanks to the tax cuts proposed by the Bush Administration and passed by Congress in 2003.

Since almost 75% of the income for the top 400 comes from capital gains and dividends, it's not hard to see why tax cuts on income sources available to only a tiny percent of Americans mattered greatly for the high-earning few. Overall, the effective tax rate on high incomes fell by 7% during the Clinton presidency and 6% in the Bush era. Only the first $106,800 of a person's income is taxed for Social Security purposes as of 2010.

HIDING MONEY OFFSHORE

What matters in terms of a power analysis is what percentage of income people at different income levels pay to all levels of government (federal, state, and local) in taxes.

The details on those who earn millions of dollars each year are hard to come by, because they can stash a large part of their wealth in off-shore tax havens in the Caribbean and little countries in Europe, starting with Switzerland. And there are many loopholes and gimmicks they can use, as summarized in Free Lunch and Perfectly Legal books by Johnston who explains the ways in high earners hide their money and delay paying taxes, and then invest for a profit what would normally would be paid in taxes.

New Half Price Sale! Free Shipping! 9 Best Sellers for $99! Click HERE

If you like this site, visit our STORE and forward our link to friends.

http://www.helpfreetheearth.com

donate

Your smallest donation helps. Thank you!

Home