The distribution of wealth in the United States and implications for a net worth tax
Wealth inequality in the United States is high and has increased sharply in recent decades. Taxes on wealth are a natural policy instrument to address wealth inequality and could raise substantial revenue while shoring up structural weaknesses in the current income tax system. A net worth tax is an annual tax imposed on an individual or family's wealth, or net worth. Wealth is distributed in a highly unequal fashion, with the wealthiest 1 percent of families in the United States holding about 40 percent of all wealth and the bottom 90 percent of families holding less than one-quarter of all wealth. The high level of wealth inequality in the United States also is reflected in the substantial difference between median wealth ($97,000) and mean wealth ($690,000). As a result, 84 percent of families have wealth below the mean. The highly skewed distribution of wealth is one of the primary reasons the burden of a net worth tax would be highly progressive. Net worth taxes typically apply only to the relatively wealthy or extremely wealthy and exempt the rest of the population. The patterns of wealth inequality among the entire population shown above are mirrored among the wealthy. Families with $1 million of wealth or more are older, more likely to be white, and more likely to have a 4-year college degree than the population as a whole. Low-wealth and high-wealth families differ in terms of the assets and liabilities they hold. Cars and other vehicles account for the overwhelming majority of wealth for low-wealth families. Middle-wealth families hold much more of their wealth in home equity, with more modest contributions from retirement accounts, bank accounts, and cars. Very high-wealth families hold much more of their wealth in business equity and financial assets outside retirement accounts.
https://equitablegrowth.org/the-distribution-of-wealth-in-the-united-states-and-implications-for-a-net-worth-tax/
2 comments:
It's always interesting to see the ways in which solutions to the income disparity in the US are approached. Depending on how the middle class is defined (and more specifically, where the lower, true middle, and upper middle class boundaries are drawn), the wealth tax would certainly pose interesting moral questions, given the pre-existing lack of retirement/ general savings that plagues the US. With regards to the high-wealth individuals, I'm also curious to know both the theoretical and applied effects between this proposed wealth tax versus the usual suggestion of a capital gains tax rate increase/overhaul.
While I'd agree with Yongzhao that the 1% percent are skewed in the distribution to be White and that they are likely to be highly educated, I'd wonder how much would end up with a wealth tax would be effective. The wealthiest Americans may react in such a way to form trusts or other legal entities to hide their wealth or may move to other countries. With regards to Madison's comment I'd agree that "the middle class" is often a vaguely defined term. I think that while both capital gains and the wealth tax is a tax on savings, and as such in growth, the wealth tax would be even more destructive as it would encourage those with substantial savings to engage in consumer spending which would give the economy a one time boost but it would be unlikely that in the long run it would be good for the economy.
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