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Wealth Inequality in the UnitedStates since 1913
Emmanuel Saez (UC Berkeley)Gabriel Zucman (LSE)
October 2014
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Introduction
US Income inequality has increased sharply since the 1970s
Mixed existing evidence on wealth inequality changes
⇒ Is inequality increase driven solely by labor income?
We capitalize income tax return data to estimate new annualseries of US wealth concentration since 1913
Key result: Wealth inequality has surged but phenomenon isconcentrated mostly within the top .1% (=wealth above $20m)
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U-Shaped Wealth Concentration
0%
5%
10%
15%
20%
25%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
% o
f tot
al h
ouse
hold
wea
lth
Top 0.1% wealth share in the United States, 1913-2012
This figure depicts the share of total household wealth held by the 0.1% richest families, as estimated by capitalizing income tax returns. In 2012, the top 0.1% includes about 160,000 families with net wealth above $20.6 million. Source: Appendix Table B1.
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Surge in top wealth shares concentratedin top 0.1%
0%
2%
4%
6%
8%
10%
12%
14%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
% o
f tot
al h
ouse
hold
wea
lth
Top wealth shares: decomposing the top 1%
Top 0.01%
Top 0.1%-0.01%
Top 0.5%-0.1%
Top 1%-0.5%
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Outline of the talk
I.The capitalization method
II. The distribution of wealth
III. Robustness and comparison with existing estimates
IV. Decomposing wealth accumulation: income and saving rates
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I- The capitalization method
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To obtain wealth, we divide capitalincome by the rate of return
How the capitalization technique works:
Start from each capital income component reported on individualtax returns
Compute aggregate rate of return for each asset class (usingFlow of Funds and aggregate tax data)
Multiply each individual capital income component by 1/rate ofreturn of corresponding asset class
Simple idea, but lot of care needed in reconciling tax with Flowof Funds data
Key assumption: uniform return within asset class
⇒ Need detailed income components to obtain reliable results
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Aggregate income and wealth
Aggregate wealth
W = Total assets minus liabilities of households at market value
Excludes durables, unfunded DB pensions, non-profits
Source: Flow of Funds since 1945, Goldsmith, Wolff (1989),Kopczuk and Saez (2004) before
Aggregate income
NIPA since 1929, Kuznets (1941) and King (1930) before 1929
returns
Family unit
Top 1% = Top 1% of all family units [as in Piketty and Saez]
defs
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A U-shaped wealth-income ratio
0%
100%
200%
300%
400%
500%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
% o
f nat
iona
l inc
ome
The composition of household wealth in the U.S., 1913-2013
Housing (net of mortgages)
Sole proprietorships & partnerships
Currency, deposits and bonds Equities
Pensions
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Distributional data: income tax returns
Consistent, annual, high quality data since 1913:
Composition tabulations by size of income 1913-
IRS micro-files with oversampling of the top 1962-
Various additional IRS published stats (estates, IRAs, trusts,foundations)
Detailed income categories:
Dividends, interest (+ tax exempt since 1987), rents,unincorporated business profits (S corporations, partnerships,sole prop.), royalties, realized capital gains, etc.
A lot of income “flows to” individual income tax returns
Mutual funds, S corporations, partnerships, holding companies,trusts, etc.
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Concentration of reported capital incomehas increased dramatically
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
% o
f tax
able
cap
ital i
ncom
e
The top 0.1% taxable capital income share
Including capital gains
Excluding capital gains
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How we deal with non-taxablecomponents
Owner-occupied housing
Home values set proportional to property tax paid
Home mortgages set proportional to mortgage interest paid
We assume (based on SCF) that itemizers have 75% of homewealth and 80% of home mortgages
Pensions
Pension wealth set proportional to pension distributions andwages above 50th percentile
Consistent with SCF and with direct information on IRA wealthfrom IRS (IRAs ≈ 30% of pension wealth)
⇓Only matters for top 10% but irrelevant for top 1% and
above, because pensions and housing very small there
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How we deal with avoidance and evasion
Tax avoidance:
Systematic reconciliation exercise with national accounts toidentify potential gaps in tax data kinc
E.g., trust income → imputations on the basis of distributions(Retained trust income ≈ 2% of household capital income)
trusts charitable
Tax evasion:
Third-party reporting means all dividends and interest earnedthrough domestic banks are reported
Offshore wealth: If anything increases the trend in rising wealthtop wealth shares by about 2 points offshore
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Is the return constant within asset class?
Two potential issues:
Maybe the very rich have higher equity/bond returns (e.g.,better at spotting good investment opportunities) → level bias
Maybe this differential has increased since the 1970s (e.g., due tofinancial globalization/innovation) → trend bias
⇓Two checks show that return within asset class is flat and has
remained flat
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Check 1: No evidence that the wealthyhave higher returns within asset class
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
up to $3.5m $3.5m-$5m $5m-$10m $10m-$20m $20m+ Total net wealth at death
Returns by asset and wealth class, 2007 (matched tabulated estates and income tax data)
Dividends + capital gains
Dividends yield
Interest yield
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The very rich did collect a lot ofdividends in the 1970s
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
P90-95 P95-99 P99-99.5 P99.5-99.9 P99.9-99.99 P99.99-100 Fractiles of the distribution of net wealth at death
Dividend yield by wealth class in 1976 (matched micro estate and income tax data)
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Check 2: The capitalization methodworks for SCF and foundations
Capitalization method can be checked with joint income andwealth micro-data:
1) SCF Data: provides individual micro-data for both wealth and(tax return) income component by component since 1989
2) Foundation Data: publicly available IRS micro-data withinformation on both market value wealth and income returns
We apply same rates of returns & capitalization technique as forindividual tax returns
⇓By capitalizing income we are able to reproduce the correct
wealth distribution
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Capitalization method works for the SCF
0%
20%
40%
60%
80%
100%
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
% o
f hou
seho
ld w
ealth
exc
ludi
ng p
ensi
ons
and
owne
r-oc
cupi
ed h
ousi
ng
Top household wealth shares: reported SCF wealth vs. capitalized SCF incomes
Top 0.1%
Top 1%
Top 10%
Wealth
Capitalized income
The figure compares direct SCF wealth shares to wealth shares estimated by capitalizing SCF income. Wealth excludes pensions and owner-occupied net housing. Source: Appendix Table C1.
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Capitalization works for foundations
20%
30%
40%
50%
60%
70%
80%
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
% o
f fou
ndat
ion
net w
ealth
Top foundations wealth shares: reported wealth vs. capitalized income
Capitalized income
Wealth
Top 0.1%
Top 1%
The figure compares top foundation wealth shares obtained by using balance sheet wealth data as reported to the IRS and obained by capitalizing IRS-reported income. Source: Appendix Tables C11 and C13.
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II- The US Wealth Distribution,1913-2012
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Wealth in 2012 is very concentrated
Wealth group Number of families Wealth threshold Average wealth Wealth share
A. Top Wealth Groups
Full Population 160,700,000 $343,000 100%
Top 10% 16,070,000 $660,000 $2,560,000 77.2%
Top 1% 1,607,000 $3,960,000 $13,840,000 41.8%
Top 0.1% 160,700 $20,600,000 $72,800,000 22.0%
Top .01% 16,070 $111,000,000 $371,000,000 11.2%
B. Intermediate Wealth Groups
Bottom 90% 144,600,000 $84,000 22.8%
Top 10-1% 14,463,000 $660,000 $1,310,000 35.4%
Top 1-0.1% 1,446,300 $3,960,000 $7,290,000 19.8%
Top 0.1-0.01% 144,600 $20,600,000 $39,700,000 10.8%
Top .01% 16,070 $111,000,000 $371,000,000 11.2%
Table 1: Thresholds and average wealth in top wealth groups, 2012
Notes: This table reports on the distribution of household in the United States in 2012 as obtained by capitalizing income tax returns. The unit is the family (either a single person aged 20 or above or a married couple, in both cases with children dependents if any). Fractiles are defined relative to the total number of families in the population. Source: Appendix Table B1.
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Wealth inequality is making a comeback
Main long-run trends in the distribution of wealth:
Long run U-shaped evolution for the very rich(top 0.1%: >$20 million today)
Long run L-shaped evolution for the rich(top 1% to 0.1%: between $4 million and 20 million today)
Long-run ∩-shaped for the middle-class(top 50% to 90%: less than $650K today)
(Memo: Bottom 50% always owns ≈ 0 net wealth)
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Wealth has always been concentrated
60%
65%
70%
75%
80%
85%
90%
1917
1922
1927
1932
1937
1942
1947
1952
1957
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
% o
f tot
al h
ouse
hold
wea
lth
Top 10% wealth share in the United States, 1917-2012
The figure depicts the share of total household wealth owned by the top 10%, obained by capitalizing income tax returns versus in the Survey of Consumer Finances. The unit of analysis is the familly. Source: Appendix Tables B1 and C4.
Capitalized income
SCF
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Top 1% has gained more than top 10%
20%
25%
30%
35%
40%
45%
50%
55%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
% o
f tot
al h
ouse
hold
wea
lth
Top 10-1% and 1% wealth shares, 1913-2012
Top 1%
Top 10% to 1%
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Top 1% surge is due to the top 0.1%
0%
5%
10%
15%
20%
25%
30%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
% o
f tot
al h
ouse
hold
wea
lth
Top 1-0.1% and top 0.1% wealth shares, 1913-2012
Top 0.1%
Top 1% to 0.1%
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Top 0.01% share: × 4 in last 35 years
0%
2%
4%
6%
8%
10%
12%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
% o
f tot
al h
ouse
hold
wea
lth
Composition of the top 0.01% wealth share, 1913-2012
Other
Equities
Fixed income claims
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The rise and fall of middle-class wealth
0%
5%
10%
15%
20%
25%
30%
35%
40%
1917
1922
1927
1932
1937
1942
1947
1952
1957
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
% o
f tot
al h
ouse
hold
wea
lth
Composition of the bottom 90% wealth share
Pensions
Business assets
Housing (net of mortgages)
Equities & fixed claims (net of non-mortgage debt)
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Wealth is getting older, but at the verytop remains younger than in the ’60s-’70s
0%
10%
20%
30%
40%
50%
60%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
% o
f eac
h gr
oup'
s to
tal w
ealth
Share of wealth held by elderly households (65+)
Top 0.1%
Total population
Bottom 90%
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Share of income and labor income of topwealth holders has grown a lot
0%
1%
2%
3%
4%
5%
6%
7%
8%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
% o
f tot
al p
re-ta
x in
com
e
Share of income earned by top 0.1% wealth-holders
National income
Labor income
This figure shows the share of total pre-tax national income and pre-tax labor income earned by top 0.1% wealth-holders. Labor income includes employee compensation and the labor component of business income. Source: Appendix Tables B25 and B28.
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III- Robustness and comparisonwith existing estimates
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Findings are robust to differentmethodological choices
Robustness checks:
Different treatment of capital gains
Capitalizing dividends only (Bill Gates world)
Capitalizing dividends plus capital gains (Warren Buffet world)
Capitalizing dividends plus capital gains for shares but notranking (the best of both worlds)
Allowing for bond yield rising with wealth
Different imputations for pension wealth
⇓All show wealth inequalities rising fast at the very top, but
not below the top 0.1%
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Results robust to alternative treatment ofpensions, capital gains, bond returns
5%
10%
15%
20%
25%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Figure B27: Top 0.1% wealth share, all methods
Top 0.1% Baseline
Top 0.1% KG capitalized
Top 0.1% KG not capitalized
Top 0.1% pensions proportional to pension distributions
Top 0.1% higher bond return for the rich
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Link with previous studies usingalternative data
Forbes 400 rich list: large increase in wealth concentration
Surveys: SCF shows increase in top 10% but less in top 1%
SCF excludes Forbes 400 and under-estimates capital incomeconcentration increases since 1989
Estate tax multiplier: No increase in top 1% wealth sharesince 1980s (Kopczuk-Saez 2004, SOI studies)
Estate tax multiplier method fails to take into account wideningmortality differential by wealth class
⇓Our capitalization analysis can help SCF weights and estate
multiplier weights
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Our estimate for top 0.01% is consistentwith Forbes rankings
0%
2%
4%
6%
8%
10%
12%
14%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Top
.01%
sha
re (%
of t
otal
hou
seho
ld w
ealth
)
Top
0.00
025%
sha
re (%
of t
otal
hou
seho
ld w
ealth
)
Forbes 400 (top .00025%) and top .01% Wealth Shares
The figure depicts the top .00025% wealth share as estimated from the Forbes 400 list on the left axis. For comparison, the figure reports our top 0.01% wealth share obtained by capitalizing income tax returns (on the right axis). Source: Appendix Table C3.
Top 0.00025%, Forbes magazine (left-hand scale)
Top 0.01%, capitalized income (right-hand scale)
![Page 35: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/35.jpg)
Estate tax returns fail to capture risingtop wealth shares
0%
5%
10%
15%
20%
25%
1917
1922
1927
1932
1937
1942
1947
1952
1957
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
% o
f tot
al h
ouse
hold
wea
lth
Top 0.1% wealth share: comparison of estimates
The figure depicts the top 0.1% wealth share obained by capitalizing income, by using the Survey of Consumer Finances (SCF baseline and adjusted), and by using estate tax data (Kopczuk and Saez, 2004). Source: Appendix C4 and C4b.
Capitalized income
SCF baseline
Estate multiplier
SCF adjusted
![Page 36: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/36.jpg)
SCF does not fully capture rising topcapital income share
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
% ta
xabl
e ca
pita
l inc
ome
Top 0.1% Capital Income Share in the SCF and Tax Data
The figure compares the top 0.1% capital income shares estimated with the SCF data vs. the income tax data. Capital income includes realized capital gains, dividends, interest, net rents, and business profits. Source: Appendix Table C2.
SCF
Tax data
![Page 37: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/37.jpg)
Estate multiplier issue: mortality gradientby wealth within top 10%
0%
20%
40%
60%
80%
100%
30-49 50-64 65-79 80+ Mor
talit
y (r
elat
ive
to fu
ll po
pula
tion)
Age groups
Relative Mortality by Age and Wealth Group, Men, 1999-2008
top 10%
top 5%
top 1%
Kopczuk-Saez
The figure depicts the relative mortality rate by age and wealth group for men in 1999-2008. E.g., male top 1% wealth holders aged 30-49 mortality rate is 40% of males aged 30-49 population wide. Kopczuk-Saez is based on the mortality of white college goers relative to population in the 1980s. The graph shows that mortality decreases with wealth (even within the top 10%) and that the wealth mortality advantage decreases with age. Source: Appendix Table C7.
![Page 38: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/38.jpg)
Estate multiplier issue: mortality gradientby wealth widens over time
40%
60%
80%
100%
1979-‐1984 1984-‐1988 1989-‐1993 1994-‐1998 1999-‐2003 2004-‐2008 Mor
talit
y (r
elat
ive
to fu
ll po
pula
tion)
Evolu&on of Mortality Advantage, Men, Aged 65-‐79
top 10%
top 5%
top 1%
Kopczuk-Saez
The figure depicts the relative mortality rate for men aged 65-79 by wealth group and period. E.g., male top 1% wealth holders aged 65-79 mortality rate is 90% of males aged 65-79 population wide in 1979-1984. Kopczuk-Saez is based on the mortality of white college goers relative to population in the 1980s. The graph shows that the wealth mortality advantage increases overtime and more so for the top 1% wealthiest. Source: Appendix Figure C7.
![Page 39: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/39.jpg)
IV- Decomposing Wealth Accumulation:Saving Rates and Income Shares of TopWealth Holders
![Page 40: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/40.jpg)
Top 1% vs. bottom 90% wealth growth
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000 19
46
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
2010
Bot
tom
90%
real
ave
rage
wea
lth
Top
1% re
al a
vera
ge w
elat
h
Real average wealth of bottom 90% and top 1% families
Top 1% (left y-axis)
Bottom 90% (right y-axis)
Real values are obtained by using the GDP deflator, 2010 dollars. Source: Appendix Tables B3.
![Page 41: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/41.jpg)
Wealth distribution Dynamics
Individual i wealth accumulation can always be written:
W it+1 = (1 + qi
t) · (W it + s it · Y i
t )
where W it is wealth, Y i
t is income, s it is net savings rate, 1 + qit is
pure price effect on assets in year t
We define synthetic savings rate spt for fractile p (e.g., top 1%):
W pt+1 = (1 + qp
t ) · (W pt + spt · Y p
t )
where 1 + qpt is price effect for fractile p based on W p
t composition
⇒ long-run steady state: shpW = shpY ·sp
s
where shpW is fractile p share of wealth, shpY is fractile p share ofincome, and sp/s is relative savings rate of fractile p
![Page 42: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/42.jpg)
Saving rates typically rise with wealth
-15% -10%
-5% 0% 5%
10% 15% 20% 25% 30% 35% 40% 45% 50% 55%
1917
-19
1920
-29
1930
-39
1940
-49
1950
-59
1960
-69
1970
-79
1980
-89
1990
-99
2000
-09
2010
-12
% o
f eac
h gr
oup'
s to
tal p
rimar
y in
com
e
Saving rates by wealth class (decennial averages)
Top 10 to 1%
Top 1%
Bottom 90%
![Page 43: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/43.jpg)
The bottom 90% massively dis-saved inthe decade preceding the crisis
-10%
-5%
0%
5%
10%
15%
1975 1980 1985 1990 1995 2000 2005 2010
% o
f bot
tom
90%
prim
ary
inco
me
Saving rate of the bottom 90%
![Page 44: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/44.jpg)
Bottom 90% wealth share decline due to(a) savings collapse, (b) income share fall
0%
10%
20%
30%
40%
50%
60%
70%
1917
1922
1927
1932
1937
1942
1947
1952
1957
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
Share of income and wealth of bottom 90% wealth holders
Income share
Observed wealth share
Since the 1980s the share of total household wealth owned by families in the bottom 90% of the wealth distribution has fallen proportionally more than the share of total pre-tax national income earned by these families. Source: Appendix Tables B1, B25 and B33c.
Simulated 1985-2012 wealth share (constant 3% saving rate and constant income share)
Simulated 1985-2012 wealth share (constant 3% saving rate)
![Page 45: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/45.jpg)
Real growth rate of wealth
per family
Real growth rate of
income per family
Private saving rate (personal
+ retained earnings)
Real rate of capital gains
Total pre-tax rate of return
gwf gyf s = S/Y q r + q
All 1.8% 0.5% 10% 0.9% 9.0%Bottom 90% -0.4% 0.0% 1% 0.2% 7.9%
Top 10% 2.3% 1.2% 23% 1.0% 9.2%Top 1% 3.6% 1.4% 28% 1.5% 10.5%
All 1.5% 2.0% 12% -0.6% 6.6%Bottom 90% 3.0% 2.3% 6% -0.2% 6.2%
Top 10% 1.0% 1.4% 24% -0.9% 6.8%Top 1% 0.3% 0.5% 24% -1.1% 7.2%
All 1.9% 1.3% 9% 0.9% 7.5%Bottom 90% 0.1% 0.7% 0% 1.3% 7.5%
Top 10% 2.7% 2.3% 22% 0.7% 7.5%Top 1% 3.9% 3.4% 36% 0.9% 7.9%
Table 2: Rates of growth, saving and return by wealth group
1917-1929
1929-1986
1986-2012
Notes: Nominal values are deflated by using the GDP deflator. Saving rates are expressed as a percentage of NIPA national income accruing to each group. Pre-tax rates of returns are gross of all taxes (including the fraction of product taxes that falls on capital).
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Effects of Savings and Income Inequality
Bottom 90%: Since mid-1980s, plummeting savings rate sp forbottom 90% relative to aggregate s [due to surge in debt]
⇒ Decline in bottom 90% wealth share, and expected to continue
Top 1%: Since mid-1970s, surge in income share held by topwealth holders and solid savings rate sp (relative to aggregate s)
⇒ Short-run: Large increase in top wealth shares, and expected tocontinue
⇒ Long-run: Self-made wealth could become inherited wealth andlead to the “patrimony society” of Piketty (2014)
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Policies to Reduce Wealth Inequality
Top 1%: Progressive taxation (income, wealth, inheritance) is aproven historical tool to reduce income/wealth concentration
Progressive income and wealth tax reduce income and savingsincentives at the top
Estate taxation can prevent self-made wealth from becominginherited wealth
Bottom 90%: Collapse in savings due to surge in debt [due topresent bias for consumption? stagnating incomes? financialde-regulation?]
⇒ Middle class income support + financial regulation
⇒ Need to encourage savings / discourage debt [= nudged savings +borrow against yourself?]
![Page 48: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/48.jpg)
Conclusion
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A first step toward DINA
We are constructing new, consistent series on the distribution ofwealth W and income Y = YK + YL fully consistent with flow offunds and national accounts
Next step: construct a microfile with individual-level income(pre-tax and post-tax) and wealth consistent with macro flow offunds and national income accounts
= distributional national accounts (DINA), reconcilingmacro growth and inequality studies
![Page 50: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/50.jpg)
Need for better wealth and savings data
Using additional data would enable us to refine our estimates:
E.g., matched property and individual income tax data
Modest additional administrative data collection effort couldhave high value:
401(k) taccounts balance reporting (and not only IRAs)
Mortgage balances on forms 1098
Market value of portfolio securities on forms 1099
Purchases and sales of securities (to measure saving andconsumption)
⇒ Necessary to obtain fully accurate distributional nationalaccounts
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Supplementary Slides
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Wealth categories definition
Equities: corporate equities, including S corporation equities,and money market fund shares (treated as dividend-paying forincome tax purposes)
Fixed claims: currency, deposits, bonds, and otherinterest-paying assets, net of non-mortgage debts
Business assets: sole proprietorships, farms (land andequipment), partnerships, intellectual property products
Housing: owner- and tenant-occupied housing, net of mortgagedebt
Pensions: funded pension entitlements, life insurance reserves,IRAs. Excludes social security and unfunded defined benefitpensions
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Rates of returns on wealth around 7%No long-run price effects
0%
2%
4%
6%
8%
10%
12%
14%
191
3-19
192
0-29
193
0-39
194
0-49
195
0-59
196
0-69
197
0-79
198
0-89
199
0-99
200
0-09
201
0-13
Figure A8: Yield and total return on U.S. private wealth (decennial averages)
Total return = pure yield + asset price effect
Pure yield
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![Page 54: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/54.jpg)
What tax data miss
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
% o
f fac
tor-
pric
e na
tiona
l inc
ome
From reported to total capital income, 1920-2010
Didivends, interest, rents & profits reported on tax returns
Imputed rents
Retained earnings
Income paid to pensions & insurance
Non-filers & unreported sole
prop. profits
Corporate income tax
back
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Most trusts generate income taxable atthe individual level
0%
2%
4%
6%
8%
10%
12%
1952 1962 1972 1982 1992 2002 2012
% n
et h
ouse
hold
wea
lth
Wealth held in estates & trusts
Total estate & trust wealth
Estate & trust wealth that does not generate distributable income
back
![Page 56: Wealth Inequality in the United States since 1913gabriel-zucman.eu/files/SaezZucman2014Slides.pdf · Wealth Inequality in the United States since 1913 Emmanuel Saez (UC Berkeley)](https://reader033.vdocument.in/reader033/viewer/2022052708/5a71669f7f8b9aa2538cd9cf/html5/thumbnails/56.jpg)
Charitable giving follows top incomes ⇒Surge in top incomes is real
0%
5%
10%
15%
20%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% 1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
2010
Top 1%
income share
Mean charita
ble giving of top
1% incomes /
mean income
Charitable Giving of Top 1% Incomes, 1962-‐2012
Mean charitable giving of top 1% divided by mean income [leA y-‐axis]
Top 1% Income Share [right y-‐axis]
Source: The figure depicts average charitable giving of top 1% inomes (normalized by average income per family) on the left y-axis. For comparison, the figure reports the top 1% income share (on the right y-axis).
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Off-Shore Tax evasion, if anything, hasprobably increased since the 1970s
0%
2%
4%
6%
8%
10%
1940 1950 1960 1970 1980 1990 2000 2010
% o
f U
.S. e
quity
mar
ket c
apita
lizat
ion
U.S. equities held by tax haven firms and individuals
In 2012, 9% of the U.S. listed equity market capitalization was held by tax haven investors (hedge funds in the Caymans, banks in Switzerland, individuals in Monaco, etc.). Source: Zucman (2014) using US Treasury International Capital data.
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Total returns of foundations grow withwealth but realized returns do not
0%
1%
2%
3%
4%
5%
6%
7%
1m-10m ���10m-100m 100m-500m ���500m-5bn 5bn+
Figure C4: Return on foundation wealth, 1990-2010 average Returns including realized & unrealized gains
Realized return
Unrealized capital gains
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