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

77 Pages Posted: 20 Oct 2021

See all articles by Matthew Smith

Matthew Smith

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

Owen Zidar

Princeton University

Eric Zwick

University of Chicago - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: October 18, 2021

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.

JEL Classification: D31,E01,E21,H2

Suggested Citation

Smith, Matthew and Zidar, Owen and Zwick, Eric, Top Wealth in America: New Estimates and Implications for Taxing the Rich (October 18, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2021-119, Available at SSRN: https://ssrn.com/abstract=3945830 or http://dx.doi.org/10.2139/ssrn.3945830

Matthew Smith

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

Owen Zidar

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Eric Zwick (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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