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Wealth Distribution

One of the key indicators of the financial health of individual Americans is the distribution of wealth (i.e.: who owns what share of the personal wealth pie). Back in the 1970s, before we had 100 million computers and readily available software to do the calculations effortlessly, the government had no problem presenting a wealth of detailed statistics. These included reports about the income distributions over thirteen levels, yearly family personal income by quintiles and top 5 percent, percent share of personal income received by the top 1 percent and the 5 percent of population, and portion of personal wealth share of top 1 percent and top ½ percent of wealthholders. This information was published by the US Department of Commerce in its annual publication, Statistical Abstract of the United States. Evidently, some in government decided that to have such information readily available to an increasingly sophisticated electorate was not in the best interest of . . . well, we’ll just have to see who has benefited from the complacency of the American electorate. For whatever reason, the consistency and detail of information on wealth and income dropped off dramatically after 1976. Table 15 speaks volumes about what is not readily available. As you can see, 1976 is the last year that clear information on the total wealth and proportion of total wealth held by the top 1 percent and top ½ percent of Americans is available. The other wealth share figures were extracted from the data in the article "Personal Wealth, 1992-1995," by Barry W. Johnson. The tone of Johnson’s article made it clear that the government still keeps careful figures on such data. They simply choose not to share these figures with the American people in readily available sources like the Statistical Abstract of the United States.

In his report Johnson acknowledges, "Some estimates indicate that the share of wealth held by the top 1 percent of the population increased during the 1980’s, making the distribution of wealth in the United States more unequal than in much of Europe . . . An increase in the inequality of wealth in the United States raises important concerns for policy planners and tax experts."16 (emphasis added) Rather than explore the twenty year trend of wealth migration, Johnson limited his analysis of wealth held by the top 1 percent and top ½ percent to the figures available for 1989 and 1992, plus preliminary figures for 1995. Within this narrow time period by using the preliminary 1995 figures, Johnson was able to predict a slight drop in the net worth of these top wealthholders from their 1992 highs. Based upon the slim decline, Johnson assured us that, “ . . . the rich did not get "richer" at the expense of those on the lower rungs of the wealth distribution."17  Thank goodness we can all now breathe easier.

Based upon other sources, it is obvious that the preliminary 1995 figures probably were overly optimistic. Yet in the several years since the report was generated, no update to the Johnson report has been presented. Even if by some miracle there was actually a slight decline from 1992 to 1995, that doesn’t address the most disturbing fact. Using those preliminary figures, between 1976 and 1995 the richest 1 percent of the population increased their share of wealth by at least an additional 12%. The remaining 99 percent of us have less to divide among ourselves. Most of that 12% gain actually went to the top ½ percent. This is an ominous sign for the health of our democracy.

In lieu of putting out the concise percentile information for wealth distribution that the government used to publish in the Statistical Abstract, they now occasionally publish net worth information on what they call ‘Top Wealthholders’ which comprise approximately the top 3 percent of the population. Whether intended for the purpose or not, this method of reporting better hides the migration of wealth than earlier reports showing the top 1 percent and top ½ percent wealth shares. To add to the confusion, they always cast the top wealthholder data in current dollars stratified across only six or seven categories. This makes it nearly impossible to compare the data over a number of years. Table 16 is as close as I could come with the published data. 1982, 1986, and 1989 were extracted from the Statistical Abstract. The government hadn’t even bothered to publish the 1992 and 1995 data in the Statistical Abstract. Even using these primitive tables we can see that the net worth of these top wealthholders has more than doubled during the period from 1982 to 1995. In order to get a closer approximation of the top 1 percent from the top wealthholders data, I extracted the group with a net worth of over $5 million dollars (Table 17) and the group with a net worth between $1,000,000 and $4,999,999 (Table 18). The $5 million and over group have seen its assets increase by more than a trillion dollars in the period from 1982 to 1995. The fact that the per person increase was greater during the 1982-1995 period than the 1982-1992 period, increases my suspicion that the rate of wealth migration to the top 1 percent is even greater than Johnson’s optimistic report would have us believe. If the 1992 figures are any indication, the migration of wealth to the top ½ percent from 1976-1992 exceeded 22%. If we analyze these figures carefully we see that the second ½ percent of the wealthholders only saw a 2% increase in their share of the wealth pie. Granted that means they fared better than the rest of us, but we see that the person who, with frugality and perseverance, is able to amass a one or two million-dollar estate during the course of his lifetime is not the problem. Statistical demarcations such as top wealthholders, top 5 percent, and top quintile are simply acting as a beard to hide the accelerating migration of wealth to the top ½ percent. Table 17 and 18 help confirm this. During that period the percentage of the total assets of the top wealthholder group, which were owned by the $5 million plus club, increased 287.7%. Even more alarming is the fact that while the share of the total assets of the richest 1 percent rose 12%, the portion of those assets held by the richest 0.1 percent (those with a net worth over $5,000,000 increased by 85%. During the same period, the average wealth for all members of the over $1,000,000 but less than $5,000,000 group actually dropped slightly while the share of the top 0.1 percent increased over 30%.

Why has nearly all gain gone to the richest few among us? The politicians have given the bulk of the tax cuts to these privileged few. While the richest in the top one percent income group averaged a 42% tax cut, the majority of Americans only got about a 3% in tax relief that same year. 1997 alone, this meant an average $637,000 savings for each one of the top group of 144,000 multimillionaires over what they would have paid under the 1976 rules. The staggering 92 billion dollars worth of tax cuts bestowed upon this privileged one-eighth of one percent was many times the amount everyone else received.

Back in 1976 the top one-third of one percent got nearly 4% of the personal income and paid over 11% of the nation’s tax bill. Despite this tax ‘burden’, the group was doing as well as their peers in democratic nations throughout the world. The spin-doctors of the superrich are quick to complain that by 1997 this group was paying over 24% of the tax bill. On the surface that 24% seems like a big increase over the 11% they were paying in 1976 until we consider the fact that they now get over 12% of all personal income. Their tax as a percentage of income has dropped significantly. No other income group has seen anywhere near that amount of tax decrease.

What can we as a society do about this accelerating concentration of wealth in the hands of 113,000 mega-rich within a society of approximately 267,000,000 people? There are many within the Guardians of the Privileged who want us to do nothing. They pretend that these 10,000-pound gorillas are just regular folks whose influence upon the legislative process and society in general is no more than that of Joe six-pack. There is one thing that is certain, even without special treatment the migration of wealth to the mega-rich will continue simply because it is very difficult for extreme wealth to be lost. Unless you try to corner the market in silver like the Hunt brothers did, or personally fund a presidential campaign like Steve Forbes did, wealth will continue to accumulate. Contrary to Barry Johnson’s hollow assurance, the rich are getting much richer at the expense of the middle class.

It certainly seems like the migration of wealth to those at the very top is accelerating. In a recent US News & World Report article titled, "The Rich Get Richer," author James Lardner states, "Between 1995 and 1998, a million more Americans entered the elite ranks of the millionaires’ club."18 According to an accompanying chart, the article shows that the number of Americans with a net worth of $1 million or more rose from 2.4 million in 1983 to 4.1 million in 1998. Let’s put these figures in perspective. Through 1995 the government defined the Top Wealthholders as anyone with a net worth of $600,000 and above. As you can see from the Table 16, in 1995 this represented the top 3 percent of the population — about 4,137,000 people.

The concept of the millionaire has become almost mythical in our culture. For decades being a millionaire has connoted "making it" financially. Being a millionaire in 1976 was far different from being a millionaire in 1998. Therese Crusiano illustrated in her article, "High-Income Tax Returns for 1996,"19 that it required $551,494 in 1996 to equal $200,000 back in 1976. Therefore, $1,000,000 in 1996 dollars was worth what $362,651 was back in 1976. Based upon that we can see that somebody who had $345,180 back in 1976 was better off than the millionaire of 1998. That still doesn’t lessen the fact that those in the 98-99 percent income bracket saw their wealth increase more than 50% in the period from 1995 to 1998. Yet, that type of dramatic wealth increase is chicken feed compared to the gains that have taken place within the ranks of the top 1 percent. From Table 17, we see that the mega-rich (those in the top 0.1 percent) numbered 113,000 in 1995. These privileged few managed to amass about 1.6 trillion dollars or over 7% of the total personal wealth in America. According to Forbes Magazine, a mere four years later, the richest 400 among them had a personal wealth of 1.124 trillion dollars all to themselves.20 

Figure 10 charts the Size Distribution of Wealth for each percentile within selected groups for the year 1995. At the same time that the wealth of the richest few is increasing at an alarming pace, Congress is attempting to destroy our nation’s only tool for controlling this massive migration of wealth -- the estate tax law. How much more quickly will the share of the mega-rich rise without the constraints of the estate tax law. How soon before they own everything?

  16 Barry W. Johnson, "Personal Wealth, 1992-1995: The Distribution and Composition of Personal Wealth in the United States," SOI Bulletin, 1997/1998 Winter, p.80. Available on the IRS website, www.irs.ustreas.gov/prod/tax_stats/soi/est_pw.html. Select file 95perwel.exe

17 ibid., p. 79.

18 James Lardner, "The Rich Get Richer: What happens to American society when the gap in wealth and income grows larger?", US News & World Report, February 21, 2000, p. 40.

 19 Therese Cruciano, High-Income Tax Returns for 1996, SOI Bulletin, Winter 1998/1999, p. 8, www.irs.ustreas.gov/prod/tax_stats/soi/soi_bul.html Download file 96hiinco.exe 3-11-99

           20 Forbes 400 Richest People in American, 1999,                           www.forbes.com/tool/toolbox/rich400asp/WorthIndex.asp?year=1999&value2= 1 2/25/00.

Copyright © 2000 by Stephen Rodnesky

      

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