Top Wealth in America: New Estimates and Implications for Taxing the Rich

Matthew Smith, Owen Zidar and Eric Zwick
Additional contact information
Matthew Smith: US Treasury Department
Eric Zwick: Chicago Booth and NBER

Working Papers from Princeton University. Economics Department.

Abstract: This paper uses administrative tax data to estimate top wealth in the United States. We assemble new data that links people to their sources of capital income and develop new methods to estimate the degree of return heterogeneity within asset classes. Disaggregated fixed income data reveal that rich individuals earn much more of their interest income in higher-yielding forms, and have much greater exposure to credit risk. Consequently, in recent years, the interest rate on fixed income at the top is approximately three times higher than the average. Using firm-level characteristics to value firms, we find that twenty percent of total pass-through business wealth accrues to those with losses. We combine this new data on fixed income and pass-through business returns with refined estimates of C-corporation equity, housing, and pension wealth to deliver new capitalized wealth estimates. Our approach, which builds on Saez and Zucman (2016) and Bricker, Henriques, and Hansen (2018), reduces bias because wealth and rates of return are correlated. From 1989 to 2016, the top 1%, 0.1%, and 0.01% wealth shares increased by 7.6, 5.1, and 3.0 percentage points, respectively, to 31.5%, 15.0%, and 7.0%. While these changes are less dramatic than some prior estimates, wealth is very concentrated: the top 1% holds nearly as much wealth as either the bottom 90% or the "P90-99" class. We discuss implications for income inequality measures, capital tax policy, and savings behavior.

Keywords: wealth; taxation (search for similar items in EconPapers)
JEL-codes: D31 H20 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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https://scholar.princeton.edu/sites/default/files/wealth_main_resubmitted.pdf

Related works:
Working Paper: Top Wealth in America: New Estimates and Implications for Taxing the Rich (2021)
Working Paper: Top Wealth in America: New Estimates and Implications for Taxing the Rich (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2021-7

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