Chad Stone is chief economist at the Center on Budget and Policy Priorities.
We learned earlier this year that incomes at the very top began to rebound in 2010 from the financial crisis and Great Recession and that, in that year, about a fifth of total before-tax income went to the top 1 percent. This week, the Federal Reserve released information for 2010 about the distribution of wealth (or "net worth") that reminds us that wealth is even more highly concentrated than income.
First, let's define our terms: A family's income is the flow of money coming in over the course of a year from earnings, dividends and interest, Social Security, etc. Its wealth is the stock of assets it has from inheritance and saving, minus its liabilities. Assets include savings, stocks, vehicles, homes, business and financial assets, and so on, while liabilities include credit card debt, mortgages, past-due bills, and so on.
The Fed's report is based on its triennial Survey of Consumer Finances, and provides literally a wealth of data on changes in U.S. family finances from 2007 to 2010. Researchers rely on other sources of data for assessing trends in income inequality, but the Fed's data on net worth are incomparable. We'll have to wait until researchers at the Fed and elsewhere have crunched the numbers further to get more detail on the concentration of income and wealth in these data, including the share of the top 1 percent, but the published numbers already point to how much more concentrated wealth is than income (as it has been since these data have been collected).
As the chart shows, 45 percent of before-tax income goes to the top 10 percent of families ranked by income. An astounding 75 percent of wealth goes to the top 10 percent of families ranked by wealth. If previous years' surveys are a guide, we'll discover once all the data are available, that, in each case, nearly half of the income received or wealth held by the top 10 percent in each distribution is received or held by the top 1 percent.
In these data, a family income of $142,300 or more in 2010 would have put you in the top 10 percent of income; a net worth of $952,500 would have put you in the top 10 percent of wealth. In each case, of course, the averages are much higher (almost $349,000 for income and $3.7 million for wealth). To put that in perspective, the median income in 2010 in these data was $45,800 (half of all families had more, half had less) while the median wealth was $77,300.
The rich took a hit in the financial crisis and Great Recession, with their net worth falling by 11 percent from 2007 to 2009, but that pales in comparison with a 24 percent drop in the net worth of the bottom 90 percent. It appears that the financial wealth that dominates the net worth of the top 10 percent fell less (or rebounded more in 2009-10) than the housing wealth that accounts for most of the typical family's net worth. Moreover, the net worth of the top 10 percent is nearly 10 percent higher than it was in 2001, while the net worth of the bottom 90 percent is 14 percent lower.
As policymakers contemplate policies to address the nation's fiscal challenges, it seems reasonable to ask whether talk of restoring tax rates to what they were in the 1990s is "class warfare" or simply asking the wealthiest among us to bear their fair share of the lift.