.1% of America Now Controls 22% of Wealth: The Wealth Gap Has Killed the Middle Class

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http://www.alternet.org/economy/1-america-now-controls-22-wealth-wealth-gap-has-killed-middle-class

A new working paper by London School of Economics professors Emmanuel Saez and Gabriel Zucman sheds some very unflattering light on the American wealth gap, which has reached levels unseen since the Roaring ‘20s. The wealth gap has been overtaking the income gap as a popular cultural topic since Thomas Piketty’s splashy Capital in the 21st Century, and Saez and Zucman’s work fills in some crucial blanks to flesh out Piketty’s contentions. Saez and Zucman conclude that the top .1% of America now controls 22% of the aggregate wealth – an especially troubling figure when examined in the context of America’s stubbornly conservative political landscape.

Piketty – who has worked alongside Saez in the past – sealed his rock star status this year with his argument that the megarich hold an increasing share of capital in the Western world. To combat the potentially frightening fallout, Piketty controversially recommends a worldwide progressive tax on wealth instead of income. How exactly this might work has been the topic of much squabbling, nicely boiled down by James Galbraith in Dissent:

In any case, as Piketty admits, this proposal is “utopian.” To begin with, in a world where only a few countries accurately measure high incomes, it would require an entirely new tax base, a worldwide Domesday Book recording an annual measure of everyone’s personal net worth. That is beyond the abilities of even the NSA. And if the proposal is utopian, which is a synonym for futile, then why make it?

That’s where Saez and Zucman come in. Their paper ambitiously takes up the challenge of measuring a century of American wealth, the existing data on which is notably scarce. To do this, the duo had to synthesize information from a variety of sources. They explain their methodology in a post for the Washington Center for Equitable Growth:

We try to measure wealth in another way. We use comprehensive data on capital income—such as dividends, interest, rents, and business profits—that is reported on individual income tax returns since 1913. We then capitalize this income so that it matches the amount of wealth recorded in the Federal Reserve’s Flow of Funds, the national balance sheets that measure aggregate wealth of U.S. families. In this way we obtain annual estimates of U.S. wealth inequality stretching back a century.