The Rise of Income and Wealth Inequality in America

The Rise of Income and Wealth Inequality in America: Evidence from Distributional Macroeconomic Accounts

In this paper, Emmanuel Saez and Gabriel Zucman study inequality in America through the lens of distributional macroeconomic accounts -comprehensive distributions of the aggregate amount of income and wealth recorded in the official macroeconomic accounts of the United States. They use these distributional macroeconomic accounts to quantify the rise of income and wealth concentration since the late 1970s, the change in tax progressivity, and the direct redistributive effects of government intervention in the economy.

They confront their methods and findings with those of other studies, pinpoint the areas where more research is needed, and describe how additional data collection could improve inequality measurement.

Key-results: Rise of Income and Wealth Inequality in America

Two major results can be highlighted from this paper.

• First, between 1978 and 2018:

> the top 1% share of pre-tax income rose from 10% to about 19%.

> the top 0.1% share of wealth rose from 7% to about 18%.

• Second, in 2018, the top 400 wealthiest Americans paid a lower average tax rate than the macroeconomic tax rate of 29%. The rise of income and wealth in the US is due to the dramatic decline in the progressivity of the US tax system

> Click here to access to the US Income and Wealth Inequality Data

Figure: Top Wealth Shares in the United States

The figure shows the wealth shares’ evolution for the top 1% and top 10% since 1989:

• the top 10% wealthiest tax units owned 77-78 % of wealth in 2018, an increase of 10 points.
• the top 1% wealthiest tax units owned 38% of wealth in 2018, also an increase of 10 points.

Policy recommendations

In terms of inequalities’ measurement, pre-tax income, cash disposable income and post-tax national income can be used to better capture the evolution of inequalities. They allow for a decomposition of the macroeconomic growth, a comparison of inequality over time and across countries, the study of the income available for saving and private consumption and the estimation of the distributive effects of the government’s intervention in the economy. Therefore, the distribution of National Accounts (DINA) is the way forward to the improvement of inequalities measurement.

Contacts

Authors

• Emmanuel Saez (University of Berkeley; NBER; WIL): saez@econ.berkeley.edu
• Gabriel Zucman (University of Berkeley; NBER; WIL): zucman@berkeley.edu

Media inquiries

• Olivia Ronsain: olivia.ronsain@wid.world; +33 7 63 91 81 68

Acknowledgments

The authors thankfully acknowledge funding from the Center for Equitable Growth at UC Berkeley, the Sandler foundation, and the Stone foundation.