Who Are the 1%? Understanding Wealth Distribution

In the United States, the top 1% have caught a lot of attention lately. But who are they, and how did they get so rich? Are they just the hardest workers, the most innovative entrepreneurs, or is there something more complex behind this growing wealth gap?

The top 1% now have a record wealth of $44.6 trillion¹. Their wealth jumped by $2 trillion in the last quarter¹. This increase came mainly from stocks, as their corporate equities and mutual fund shares hit $19.7 trillion¹. Since 2020, their wealth has grown by nearly $15 trillion, a 49% jump¹. At the same time, the middle class has also seen their wealth go up by 50%¹.

Key Takeaways

The top 1% of Americans have seen their share of total income rise significantly since the 1970s, from 8% to 17% by 2010.
The top 0.01% have seen their wealth quadruple, now holding 11% of total U.S. wealth.
Stocks and business income have been the primary drivers of wealth growth for the top earners.
Inherited wealth plays a significant role in the concentration of wealth at the top.
Wealth inequality has become a major economic and political issue, with debates over tax policies and wealth redistribution.

Who are the 1%

To be in the top 1% of earners in the U.S., a household needs an income of at least $386,000. This is more than 7 times the average household income of $54,000². The top 0.1% earn at least $1.5 million yearly, and the top 0.01% make $7 million or more². To be in the top 1% by wealth, you need a net worth of $13.7 million. The top 0.01% have at least $111 million².

The Top 0.01%: Exploring the Wealthiest Segment

The top 0.01% are leading the increase in income and wealth inequality in the U.S².. This group’s share of total income jumped from 2.5% in 1995 to 5% in 2015. Their wealth share also quadrupled to 11% since 1978². This elite group includes entrepreneurs, executives, celebrities, and those who inherited wealth, showing its diverse nature².

The top 0.01%’s wealth and income growth has widened the wealth gap in the U.S. The average household’s wealth has grown slowly, but the top 1%’s wealth has surged. They now hold about 225 times the wealth of the average household, up from 125 times in 1962².

Metric	Top 1%	Top 0.01%
Minimum Income Threshold	$407,500 per individual³	$7 million or more per year²
Minimum Net Worth Threshold	$13.7 million²	$111 million or more²
Share of Total Income	Over 22%²	5% in 2015²
Share of Total Wealth	32% in 2018²	11% in 2018²

“The top 0.01% are driving much of the growth in income and wealth inequality in the United States.”

The Widening Wealth Gap

The wealth disparity in the U.S. has grown over decades. The concentration of wealth at the top has become more obvious⁴. Now, the top 1% of Americans hold 22% of the total income, up from 15% in 1995⁴. The top 0.1% and 0.01% have seen their wealth shares more than triple in that time⁴.

Economists say the drivers of inequality include business income and asset ownership among the rich⁴. The profits of successful companies have grown faster than the economy. This lets the top earners, who own or manage these businesses, get richer⁵. The richest 1% and 0.1% also own most of the stocks and assets, so they gain the most from rising asset values⁴.

Growth of Income and Wealth Inequality

The data shows a clear increase in wealth disparity in the U.S⁴⁵⁶.. By 2030, the richest 1% will have two-thirds of all global wealth⁴. The wealth of America’s billionaires has jumped 88% in four years to $5.529 trillion⁵. The net worth of the richest on the Forbes 400 list in 2023 was 38 times bigger than in 1982⁵.

Factors Contributing to the Disparity

The drivers of inequality include many factors, like business income and asset ownership⁴⁵⁶. The wealth gap has grown due to free market policies, union decline, and welfare cuts from neoliberal policies⁴.

The data shows a worrying trend of growing wealth disparity in the U.S⁴⁵⁶.. The top earners and ultra-wealthy are getting a bigger share of the wealth⁴⁵⁶. It’s important to understand the drivers of inequality to tackle this issue.

Sources of Income for the Top Earners

Recent studies show a big change in how the richest people in the U.S. make their money⁷. In 2021, the top 1% earned an average of $819,324, which is 9.4% more than the year before⁷. To be among the top 0.1%, you needed to make $3,312,693, a jump of 18.5% from 2020⁷. But, the income for the bottom 90% fell by 0.2%, with an average of $36,571⁷.

Most of the increase in top incomes comes from business, not wages or investments⁷. The top earners are often business owners who make much more than other companies⁷. This shows how important being an entrepreneur is for the wealthy.

The top 1% saw their wages jump by 206.3% from 1979 to 2021⁷. The top 0.1% saw an even bigger increase of 465.1%⁷. But the bottom 90% only saw a 28.7% increase in wages during this time⁷. The top groups saw their wages drop the most during the 2007-2009 crisis, but then grew by 9% and 13.4% from 2007 to 2020⁷.

The wealth gap is getting wider, with the top 1% holding 26.3% of the wealth as of Q1 2023⁷. The top 1% now earn 14.6% of all wages, up from 7.3% in 1979⁷. The bottom 90% got 58.6% of wages in 2021, down from 69.8% in 1979⁷.

Entrepreneurship and private business are key to the income of the top earners in the U.S⁷. As the wealth gap grows, understanding where the top earners get their money is crucial for policymakers and the public⁷.

For more details⁸, the top 1% in the U.S. need a net worth of about $11.1 million⁸. They must earn at least $597,815 a year to be in this group⁸. In contrast, the median household income in the U.S. was just over $67,500 in 2020⁸. The top 1% earn almost nine times the median income⁸.

Income and wealth vary a lot by region⁸. In Alabama, the top 1% earn about $430,000 a year, while in Connecticut it’s closer to $900,000⁸. The net worth needed to be in the top 1% ranges from $766,205 in Mississippi to $3,603,629 in Connecticut⁸.

These insights show how the income and wealth of the top earners in the U.S. affect the wealth gap⁷⁸. They highlight the importance of entrepreneurship and private business in the economy⁷⁸.

The Role of Business Income

The top 1% in the U.S. are earning more because of business income⁹. Small and medium-sized companies, often set up as S corporations or LLCs, pay their top managers a lot⁹.

Importance of Entrepreneurship and Small Businesses

When a successful small business owner dies too soon, the company’s profits drop a lot⁹. This shows how important these entrepreneurs are for making big profits¹⁰. Most people in the top income groups are under 60, showing how crucial entrepreneurship is for building wealth¹⁰.

Most income in the top 0.1% comes from work, not investments¹⁰. But in the top 0.1%, business income is more important than wages or investments¹⁰.

Business income has been key to the income growth of the top 1% since the late 1990s⁹. The top 0.1% firms are especially interesting, as their owners take a big share of what their workers add to the company¹⁰.

Entrepreneurship and small business ownership are key to building wealth⁹¹⁰. As top earners make more money from business, it’s vital to understand how private profits and skills affect wealth⁹¹⁰.

Tax Form	Entity Type	Description
Schedule C (Form 1040)	Sole Proprietorship	Sole proprietors report income and expenses of their business¹¹.
Form 1065	Partnership	Partnerships report income and expenses, and partners receive a Schedule K-1 indicating their distributive share¹¹.
Form 1120	Corporation	Corporations report income and expenses on their corporate tax return¹¹.
Form 1120-S	S Corporation	S corporations pass most income and expenses through to shareholders on Schedule K-1¹¹.
N/A	Limited Liability Company (LLC)	LLCs can be treated as corporations, partnerships, or disregarded entities for federal tax purposes¹¹.

The increase in entrepreneurial income shows how important private company profits are in making the wealth gap bigger⁹¹⁰. It’s key for policymakers and researchers to understand these tax structures and business models to tackle the wealth gap¹¹.

Wealth Concentration at the Top

The data shows a clear picture of wealth at the top. The richest 1.1% of adults own 45.8% of the world’s wealth as of 2020¹². The top 1% and 10% hold 40% and 85% of global assets, respectively, since 2000¹².

The bottom half of adults own just 1% of global wealth in 2000¹². Wealth at the top has grown, with the richest 0.6% holding 39.3% of wealth in 2012¹². The next 4.4% held 32.3%, and the bottom 95% just 28.4%¹².

Net Worth Distribution across Percentiles

The Gini index shows a worrying wealth gap, at 0.893 in 2012¹². It’s higher than income inequality, which was 0.38 in 2009¹². The 10 richest own more than the bottom 3.1 billion people, half the world’s population¹².

Wealth at the top is growing, making a big gap with the rest¹³. The top 1% got nearly two-thirds of new wealth since 2020, while the bottom 99% got less¹³. Billionaires have seen their fortunes grow by $2.7 billion daily, adding $26 trillion since 2020, making up 63% of new wealth¹³.

Criticisms and Proposed Policies

The growing wealth and income at the top has sparked a lot of debate. Some politicians suggest raising taxes on the wealthy to fix these issues. They propose a wealth tax on ultra-millionaires and higher estate taxes to stop dynastic wealth. But, these ideas face challenges as the wealthy often have a big say in making laws¹⁴.

Recent polls show most Americans think the rich don’t pay enough in taxes¹⁴. More than half believe the government should use taxes to spread wealth more evenly¹⁴. This shows a growing worry about the huge income and wealth at the top¹⁵.

Some say the current tax policy is biased towards the wealthy. It gives special treatment to capital gains and stock rewards¹⁴. In 2016, the government missed out on over $100 billion in taxes because of these loopholes¹⁴¹⁵.

Despite some political responses, the wealthy’s influence often blocks more fair tax policy changes¹⁴. Yet, the growing awareness of wealth inequality might change politics in the future.

wealth tax

Historical Perspectives on Wealth Inequality

Wealth inequality in the U.S. has changed a lot over the past two centuries. In the late 18th century, the top 1% only had 8.5% of total income¹⁶. But by 1860, they took almost one-third of property incomes¹⁶. This big jump in inequality was due to the financial sector’s growth and more competition for land in cities, helping the rich get richer.

The Great Compression: Mid-20th Century Inequality Trends

However, the mid-20th century saw a big drop in wealth inequality in the U.S. This period, known as the “Great Compression,” reduced the top 10% share of national income from 45-50% to 30-35% by 1948¹⁶. The Great Depression and World War II, along with the New Deal’s social programs, caused this change.

In 1944, the top tax rate was 94% on incomes over $200,000¹⁶. From 1942 to 1952, the top 1% income share fell to 10% of total income¹⁶. Labor unions also saw a decline, from about 10% at the start of the 20th century to 11.3% in 2011¹⁶.

After the mid-20th century, wealth inequality in the U.S. started to grow again. By 2021, the top 1% had about 32% of total income¹⁶. The top tax rate has changed from 28% to 39.6% in the last 30 years¹⁶.

The U.S. has always been one of the most unequal countries. But some countries like Slovenia and the Czech Republic have much more equality¹⁶.

“The top 1% possessed approximately 15% of total income between 1930 and 1941, and reached about 32% of total income by the end of 2021.”¹⁶

The Impact of Inherited Wealth

Researchers have found that intergenerational wealth transfer is key to keeping wealth inequality high in the U.S¹⁷. More than 60% of the Forbes 400 richest Americans had a big head start thanks to family wealth. This shows how hard it is to move up the social ladder¹⁸. Wealthy families can keep and grow their riches over generations, making the gap between rich and poor even bigger¹⁷.

In the U.S., about 1 in 5 households got an inheritance in 2022. This number jumps to 2 out of 5 for people in their 70s¹⁹. Most inheritances come from parents, with grandparents and aunts and uncles being less common sources¹⁹. The average inheritance was $58,000, but it was much higher for those who got something, averaging $266,000, and even more for those in their 70s at $344,000¹⁹.

Inheritance makes up over 60% of wealth inequality in the U.S., making it a key indicator of social status¹⁹. The U.S. tax system lets heirs avoid paying taxes on inherited assets, helping to keep wealth in a few hands¹⁹. Closing this loophole could bring in up to $204 billion over the next decade, changing inheritance and the economy¹⁹.

It’s expected that in 20 to 30 years, $5.2 trillion will move from one generation to the next¹⁸. This dynastic wealth transfer could make the wealth gap even wider. We need policies that help everyone have a fair chance to succeed and break down barriers to economic opportunity.

“68% of UBS billionaire clients aim to expand on what their predecessors accomplished, while 60% desire future generations to benefit from the accumulated wealth.”¹⁸

The transfer of wealth across generations has a significant impact on the persistence of wealth inequality in the U.S.
Inheritances are a primary source of wealth for the wealthiest individuals, with the average inheritance reaching $344,000 for those in their 70s.
Inheritance accounts for over 60% of wealth inequality in the United States, and the tax system’s provisions contribute to the preservation of this inequality.
The projected $5.2 trillion in wealth transfer over the next 20-30 years has the potential to further exacerbate the wealth gap, underscoring the need for policies that promote social mobility.

The data and insights here show how big a role intergenerational wealth transfer plays in the U.S. wealth picture. As we work on fixing the growing dynastic wealth and inequality, understanding inheritance and its effects on social mobility is key. This knowledge will help us find the right solutions.

Regional and Geographic Differences

Wealth inequality in the U.S. shows big differences across regions and places²⁰. More than one in four dollars of wealth is held by households with over $30 million²⁰. This wealth is expected to hit $26 trillion in 2022, with $4.5 trillion in the hands of billionaires²⁰. These gaps likely come from varying economic chances, industry types, and local factors.

Some areas and states have more extreme wealth²⁰. New York alone has over 1 in 5 of the wealth over $30 million per household²⁰. States like California, Connecticut, Florida, and Massachusetts also have a lot of ultra-high-net-worth individuals²⁰. The Northeast has more extreme wealth than other areas²⁰. But, the Midwest and South have less wealth inequality.

Racial inequalities add to these regional wealth gaps²⁰. White, non-Hispanic families own 86 percent of U.S. wealth, while Black families own just 3 percent²⁰. White families hold 92 percent of wealth over $30 million²⁰. Within states, some areas have more extreme wealth than others²⁰.

Many factors cause these wealth differences across the country²¹. Studies show that personality traits like Openness and Agreeableness vary by region and affect the economy, social connections, and health²¹. Health care use and spending also vary by area, linked to income and poverty levels²².

Knowing about wealth inequality by region is key for making policies to fix economic gaps across the U.S²⁰.. A 2 percent tax on wealth over $30 million could bring in nearly $415 billion a year²⁰. A one-time tax on capital gains over $10 million could raise $529 billion to $3.9 trillion²⁰. By tackling these regional and geographic issues, policymakers can aim for a fairer and more inclusive economy.

The Billionaire Class

A small group of billionaires has seen their wealth soar in recent years²³. The Forbes list shows 2,781 billionaires worldwide in 2024, with a total wealth of over $14.2 trillion²³. In the U.S., Jeff Bezos is the richest, with a net worth of $207 billion in 2024²³. The fast growth of billionaire wealth, especially during the COVID-19 pandemic, has raised concerns about economic power and resources at the top.

Net Worth and Income of the Ultra-Rich

The super-rich have amassed incredible wealth²³. Over 20 years, the world’s billionaires’ net worth jumped by 545% to $14.2 trillion, more than the world’s GDP increase²³. The richest 1% now control more wealth than 6.9 billion people²⁴, and the top 2% own half the world’s wealth²⁴. This shows how wealth is concentrated among a few.

A new billionaire emerges every two days from 2017 to 2018²³. Today, there are 2,781 billionaires, with the U.S. having 813²³. The “$100 Billion Club” has 14 members, holding $2 trillion, or 14% of all billionaire wealth²³.

The wealth at the top has raised concerns about growing inequality and power concentration²⁴. The pandemic made extreme wealth and poverty rise together for the first time in 25 years²⁴. The poorest 40% saw income losses double those of the richest 20%²⁴.

“About 60% of all wealth in America today ends up being inherited.”²³

The billionaires’ wealth concentration is sparking debate. It questions the fairness of the economy and its impact on society.

Measuring and Tracking Wealth Inequality

Economists use many ways to study wealth inequality in the U.S. They look at tax records, household surveys, and wealth capitalization techniques. These methods sometimes give different results, causing debates about how much wealth is concentrated²⁵.

The Gini coefficient is a key measure of inequality. It ranges from 0 to 1, with higher values showing more inequality²⁶. There are two ways to calculate it: one by comparing incomes and another using the Lorenz curve²⁶.

The Gini coefficient focuses more on the middle of the income range than the top or bottom. This makes it a useful but not perfect tool for understanding wealth inequality²⁶. Still, all the data and methods show a big and growing gap between the rich and everyone else²⁵.

Data Sources and Methodologies

Economists use many data sources and methods to study wealth inequality. These include:

Tax records, which give detailed info on income and assets
Household surveys, like the Survey of Consumer Finances, which ask about wealth and income
Wealth capitalization techniques, which estimate wealth from asset ownership and returns

These methods sometimes give different results, but they all show more wealth at the top²⁵. It’s important to understand their limits to make good policy decisions about wealth inequality.

Measurement Technique	Advantages	Limitations
Tax Records	Give detailed info on income and assets	May miss wealth not reported in taxes
Household Surveys	Get self-reported wealth and income data	People might not report their wealth accurately
Wealth Capitalization	Estimate wealth from asset ownership and returns	Needs assumptions about asset values and ownership

By combining these data sources and methods, economists aim to give a full and detailed view of wealth inequality in the U.S. This helps inform policy discussions and debates²⁵²⁶.

Demographic Factors and Wealth Distribution

Wealth inequality in the U.S. is deeply tied to demographic differences. Studies show big wealth gaps between white and non-white households, and between men and women²⁷. Older Americans usually have more wealth than younger people, thanks to building assets over their lives²⁷. These differences highlight the social and historical reasons behind the wealth gap.

The racial wealth gap is very clear. In 2022, white families had an average wealth of $1.4 million. This was much more than the average wealth of Black families ($211,596) and Hispanic families ($227,544)²⁷. Asian families had an average wealth of $1.8 million, almost twice that of white families²⁷. Things like unfair job markets, differences in owning homes, and saving for retirement have made these racial wealth differences last²⁷²⁸.

There are also big wealth differences between men and women. Wealth inequality between the two genders comes from things like the pay gap, career breaks, and lower earnings for women²⁸. These issues add up, making big differences in net worth and financial security between men and women.

How wealth passes down from one generation to the next also affects wealth inequality. Older Americans, who have had more time to save, have much more wealth than younger people²⁷. This gap has gotten bigger over the years, making the wealth spread more uneven across different ages.

To fix these big issues of race, gender, and age in wealth inequality, we need to work together. This is key for those making policies and for anyone wanting a fairer economy²⁷²⁸.

Taxation and Policy Implications

The growing wealth at the top has led to calls for policy changes. These changes aim to tackle the growing inequality. Advocates suggest higher taxes on the rich and changes to estate tax laws could help. This could spread wealth and stop large fortunes from passing down through families²⁹. But, raising taxes on the wealthy is hard because they have a lot of power. Policymakers are struggling to find good solutions to the wealth gap.

Tax Rates and Wealth Transfer Policies

Changing tax rates, especially for the highest earners, is a key policy option²⁹. In the U.S., the top 1% of earners now make over 20% of the income, up from less than 10% in the 1970s²⁹. Top tax rates for the wealthy have dropped a lot, by 40 percentage points in some countries like the U.S. and U.K²⁹..

Research says going back to higher tax rates could boost government income²⁹. If the U.S. raised taxes on the top 1% from 22.5% to 45%, it could gain 2.7% of GDP each year²⁹. But, the effect of higher taxes on the economy is still up for debate. Some studies say lower top tax rates can help the economy grow³⁰.

Changing estate tax laws is another way to tackle wealth concentration. Estate taxes could stop large fortunes from being passed down easily²⁹. Policymakers need to weigh these options and public views to find good ways to deal with wealth inequality.

Policy Intervention	Potential Impact
Increasing top marginal tax rates	Could increase tax revenue by 2.7% of GDP per year if top 1% rate doubled from 22.5% to 45%²⁹
Reforming estate tax laws	Could disrupt the intergenerational transfer of dynastic wealth²⁹

“The top tax rate could potentially be set as high as 83% based on analyses, contrary to the prevalent reduction in top tax rates observed post-1970s.”²⁹

Conclusion

The rise of the 1% and the focus of wealth at the top has become a big issue today³¹. This trend affects social mobility, economic chances, and political power. Understanding the 1% and what drives wealth inequality is key to a fairer future.

Changes in the tax system, better labor laws, and more public services are needed³¹. These steps can help fix the issues of economic mobility. This way, we can make society more just and prosperous for everyone³¹.

The debate on the 1% and how to fix it will keep going³¹. With a clear view of the complex issues, we can aim for an economy that benefits all, not just a few³¹.

FAQ

What is the 1% and how do they compare to the rest of the population?

To be in the top 1% in the U.S., a household needs an annual income of at least 6,000. This is over 7 times the median household income of ,000. The 0.1% earn more than

FAQ

What is the 1% and how do they compare to the rest of the population?

To be in the top 1% in the U.S., a household needs an annual income of at least $386,000. This is over 7 times the median household income of $54,000. The 0.1% earn more than $1.5 million a year, and the top 0.01% make at least $7 million.

The top 1% also have a minimum net worth of $13.7 million. The top 0.01% have at least $111 million in net worth.

Who are the top 0.01% and how have they fared in recent decades?

The top 0.01% are driving the growth in income and wealth inequality. Their share of total income rose from 2.5% in 1995 to 5% in 2015. Their share of total wealth quadrupled to 11% since 1978.

This group includes entrepreneurs, executives, celebrities, and those who inherited wealth. This shows the diversity within this elite group.

What are the key factors contributing to the growing wealth and income inequality in the United States?

Economists point to several factors for the growing wealth and income gaps. These include the concentration of business income and stock ownership among top earners. Inherited wealth also plays a big role.

The wealthiest 1% and 0.1% hold a big share of stocks and other assets. This lets them benefit most from rising asset values.

What is the role of business income in the rise of the 1%?

Research shows that business income has driven the rise in top incomes. The top 1% and 0.1% are often owner-managers of small and medium-sized companies. They make more profits than other businesses.

This shows the growing importance of entrepreneurship and private business ownership among the economic elite.

How concentrated is wealth at the top of the U.S. income distribution?

Data shows a stark concentration of wealth at the top. The top 1% of households held 42% of total wealth in 2012. This is up from less than 25% in 1978.

The top 0.1% and 0.01% have seen their wealth shares triple and quintuple over the same period. The bottom 50% of households hold just 2.6% of total wealth, showing vast disparities in asset ownership.

How have wealth inequality levels changed over time in the United States?

Wealth inequality in the U.S. was relatively low in the late 18th century. However, it grew significantly over the 19th century. By 1860, the top 1% collected almost one-third of property incomes.

In the mid-20th century, wealth inequality declined, a period known as the “Great Compression.” However, since the 1970s, wealth and income inequality have risen dramatically. The top 1% and 0.1% have seen their share of total income and wealth grow rapidly.

What role does inherited wealth play in the persistence of wealth inequality?

Researchers have found that inherited wealth is a key factor in the persistence of wealth inequality. Over 60% of the Forbes 400 wealthiest Americans grew up in substantial privilege. This shows the outsized influence of family wealth and the challenges to social mobility.

The ability to pass on assets across generations has allowed the wealthiest families to maintain and grow their fortunes. This contributes to the concentration of wealth at the top.

Are there regional and geographic differences in wealth inequality within the United States?

While wealth inequality is a national trend, there are regional and geographic differences in wealth distribution. Some research suggests that wealth is more concentrated in certain urban centers and coastal regions.

Other parts of the country have lower levels of wealth inequality. These disparities likely reflect differences in economic opportunities, industry composition, and other local factors that affect wealth accumulation.

How do researchers measure and track wealth inequality in the United States?

Economists use various data sources and methodologies to study and quantify wealth inequality. These include tax records, household surveys, and wealth capitalization techniques. Different approaches can sometimes yield divergent results, leading to ongoing debates about the precise extent and trends of wealth concentration.

However, the overall picture consistently shows a significant and growing gap between the wealthiest Americans and the rest of the population.

How do demographic factors such as race, gender, and age impact wealth distribution?

Wealth inequality in the U.S. is shaped by demographic factors like race, gender, and age. Studies show persistent wealth gaps between white and non-white households, as well as between men and women.

Older Americans tend to have significantly higher net worth than younger generations. This reflects the cumulative effect of asset-building over a lifetime. These demographic disparities in wealth ownership highlight the complex social and historical roots of the country’s unequal economic landscape.

.5 million a year, and the top 0.01% make at least million.

The top 1% also have a minimum net worth of .7 million. The top 0.01% have at least 1 million in net worth.