Wealth and Want
... because democracy alone is not enough to produce widely shared prosperity.
Home Essential Documents Themes All Documents Authors Glossary Links Contact Us

 

The Wealth Questions

This is a work-in-progress. Check back for updates!

Some questions whose answers this data might help illuminate:

  1. Is increasing homeownership the answer to the wealth problem?
  2. Is privatizing Social Security the answer to the wealth problem?
  3. How important are Social Security wealth and Pension Wealth to the largest part of American society?
  4. Should we eliminate the Estate Tax? How widespread would the benefits of that be?
  5. Who benefits when we reduce the taxes on capital gains and dividends?
  6. Should we give corporations special privileges? To whose benefit do they accrue?
  7. Does wealth trickle down? Under what conditions?
  8. How many people lack sufficient savings and resources to meet their most simply defined needs for a few months?
  9. Do the new bankruptcy laws produce effects we find desirable? Who benefits? Who loses?
  10. Is this class warfare?
  11. Are most of us on track to being able to retire at age 60? Age 65? Age 70? Age 75? Ever?
  12. How would you characterize the purpose of our economy based on the data? What are we succeeding at? What are we failing at?
  13. Who benefited when middle class people started buying stock and related instruments?
  14. Maybe we should just pretend that the top 1% (or 2%, or 3%) don't matter, and go on our merry way? Maybe they live in a different world that doesn't affect the rest of us?
  15. How shall we define the Middle Class? Think about this with respect to how our wealth is held, as well as with respect to income distribution.
  16. Who benefits as corporations and other employers switch from Defined Benefit pension plans to Defined Contribution plans such as 401(k) plans?
  17. What year will the triennial analysis of the Survey of Consumer Finance be titled "Up a Creek without a Paddle?" (The most recent two are A Rolling Tide: Changes in the Distribution of Wealth in the U.S., 1989-2001 (2003) and Currents and Undercurrents: Changes in the Distribution of Wealth, 1989-2004 (2006). )
  18. What year will some member of Congress suggest doing away with the Survey of Consumer Finance because the data it reports is too discomforting to the interests of his or her largest campaign contributors?
  19. What can the wealth distribution data tell us about how decision-making is done in this country?
  20. Are some kinds of wealth different from others? How might it be appropriate to make distinctions among various kinds of wealth?

 

Is increasing homeownership the answer to the wealth problem?

Not to the extent that its boosters might suggest. Yes, the data generally show that on average, people who own their homes have far more wealth than those who do not, both in home equity and in other kinds of wealth. (See Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances, particularly Table 3 , Table 5, Table 6 (stock ownership), and Table 8.)

However, viewed in detail, the data also show that the average net housing equity of holders in the bottom half of the wealth distribution are extremely low, and that increasing homeownership from, say, 69% to 70% by increasing homeownership among people in that quantile would itself provide very few benefits to them. See Wealth Tables 50-40-5-4-1, especially tables 5 and 7, line 44, column 8 and the comments in the guided tour.

If in order to become homeowners, people must take on huge amounts of debt, particularly adjustable-rate mortgages, promoting homeownership alone is not the answer but a diversion and an disservice to those we seek to help: our working poor and our young people. You'll need to read further to see why promoting homeownership is a bandaid, not a remedy.

Is privatizing Social Security the answer to the wealth problem?

For a sense of how important Social Security wealth is to the vast majority of us, see Wealth Fractiles. For detail on holdings of stocks, mutual funds and retirement assets, see Wealth Tables 50-40-5-4-1 and the guided tour.

How important is Social Security wealth and Pension Wealth to the largest part of American society?

For a sense of how important Social Security and Pension Wealth is to the vast majority of us, see Wealth Fractiles. This data is not particularly current, but may surprise you. See also the study from which the tables are created: Pensions, Social Security, and the Distribution of Wealth

To place it in context, look at the newer wealth data in the Wealth Tables 90-9-1 and 50-40-5-4-1, particularly line 10, Retirement Assets, in each table, and at Currents and Undercurrents: Changes in the Distribution of Wealth, 1989–2004 from which they were created.

Also, The Unraveling of the American Pension System, 1983-2001, which looks at pension wealth holdings among people age 47-64.

 

Should we eliminate the Estate Tax? How widespread would the benefits of that be?

The Estate Tax is in the process of being phased out. Currently, only estates over $2 million that aren't left to a spouse are taxed at all. For 2006, this is estimated to be 0.27% of estates, or 1 out of every 370 deaths. The exempt amount will continue to rise through 2010 (to $3.5 million). But in 2011, the EGTRA law of 2001 will "sunset," and return the exemption to $1 million.

The question is, what should the exemption level be? The wealthiest among us are campaigning to get rid of the tax completely, and they have spent, as the title of a recent study puts it, "millions to save billions" (see below) to convince the public, and our elected representatives, that family farms and small businesses will have to be divested to pay the estate tax. Are they right? You can see a lot of the data on this website, and make your own judgments.

The Wealth 90-9-1 tables, and the guided tour, show how concentrated wealth is in the top 1% of our society.

You may also want to look at the wealth fractile data, which provides some support for the idea that the appropriate horizon is somewhere in the Top 1%.

If you think it worth considering whether we should expand the estate tax to a somewhat wider segment of our society, you might look at the "Next 4%" group in the Wealth 50-40-5-4-1 tables. A case could be made that some share or kinds of the "Next 4%" wealth should be taxed at some point. (More about that elsewhere on the site!)

If you are interested in the lobbying that has been going on to abolish the estate tax, read Spending Millions to Save Billions: The Campaign of the Super Wealthy to Kill the Estate Tax, (April, 2006), and Chapter 6 of David Cay Johnston's book Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit The Super Rich -- and Cheat Everybody Else.

Does the estate tax represent double taxation? No. Quite the contrary. It represents the only opportunity to collect for the commons a share of several kinds of gains which are quite concentrated in the wealthiest portion of our population: stocks, privately held companies and land value. Upon one's death, the taxable basis for one's assets is "stepped up" to its value at the time of one's death; all the accrued appreciation on one's land or one's business holdings is free of tax — except for the folks who fall into that top 0.27%.

For more data on the size of unrealized capital gains, see Table 9 of Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances; mean holdings of unrealized capital gains in 2004 were over $900,000 in the top decile.

Why should they be treated differently? Well, their holdings are generally our best. Their land is in the choicest places, with the highest value: the central business district of our most vital cities, the choice waterfront locations. For more about this, see these themes: capital gains, land different from capital, and two articles: Real Estate and the Capital Gains Debate and The Lies of the Land: How and Why Land Gets Undervalued. Buildings depreciate, but land appreciates, and that value is vital to all of us. We are all highly dependent on our urban land, and its misuse and underuse promotes sprawl, joblessness, long commutes and housing unaffordability, and all the social and economic ills that flow from them.

But the estate tax is not the best solution. As long as we have our existing system of taxes, and the awesomely skewed distribution of wealth that results from it, we do need the estate tax to collect back for the commons a tiny fraction of the unearned increment. (A much better answer would be to continuously collect it; this would get rid of the perverse incentives we now deal with. The way to do this is through concentrating our taxation on land value.)

Who benefits when we reduce the taxes on capital gains and dividends?

Stock ownership has now reached roughly 50% of American households, and when the legislation was put forward a few years ago to reduce the taxes on dividends and capital gains, it was said that this legislation would benefit the middle class.

For more information about the how many of us own stock, you might take a look at these data:

1. Table 6: of Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances

This shows that 48.6% of us owned stock (2004), directly or indirectly. Some hold publicly-traded stock directly, some through mutual funds, some through retirement assets, others through managed assets. (See the SCF definitions for details.)

But having said that 48.6% of households own stock (directly and indirectly), the percentage who own them outside retirement accounts is much smaller: 20.7% hold STOCKS, and 15.0% have Mutual Funds. Median holdings are $15,000 and $40,400 respectively, and mean holdings are $547,000 and $184,000 respectively (Table 5). [See also: Medians, Means and Wobegon]

2. The Top 1% have 36.8% of the equity holdings, the Next 9% have 42.0% and the other 90% have 21.2%. (Table W90-3.) Table W50-3 reveals that the Bottom 50% have 1.2% of the EQUITY and the next 40% have 20.0%.

3. The 50-40-5-4-1 and 90-9-1 tables provide a sense of the relative holdings of equity: Average holdings among those in the top percentile are about 20 times those of holders in the bottom 90% (Table W90-7, line 28, columns 6 and 8).

But an equally important source of "capital" gains is the ownership of land, with or without buildings on it. This may fall into a number of categories in the 90-9-1 and 50-40-5-4-1 tables: ORESRE, NNRESRE and BUS, as well as HOUSES, all have land as a significant share of the value.

The Congressional Budget Office published a study at year-end 2005 which provided some data on capital income — that is, income from interest, dividends, rents and and capital gains — has become more concentrated over time. In 1980, the top 1% of income recipients (note that this is not the same as the top 1% of wealthholders!) received 35.6% of capital income. By 1990, this figure was 39.7%, by 2000 49.1% and in 2003 57.5%. See http://www.cbpp.org/1-29-06tax2.htm and http://www.cbo.gov/ftpdocs/70xx/doc7000/12-29-FedTaxRates.pdf. The top 10% of the income recipients received 79.4% of the capital income.

A table at http://www.ctj.org/pdf/cg0306.pdf shows that 69.9% of taxable long-term capital gains in 2005 went to the top 1% of the income spectrum!

Should we give corporations special privileges? To whose benefit do they accrue?

When we permit corporations to pollute the air, or water, or use up nonrenewable resources without paying the commons for the privilege, in effect, we are permitting the shareholders to privatize that which should be our common treasure. The benefits go to the shareholders. (see: pollution, externality, privatization, air-land-water, polluter pays, natural resources, natural opportunities.)

When we permit corporations to renege on pension liabilities, the beneficiary is those who own the stock, and those who have the highest paying jobs in the corporations, whose compensation is tied to profitability and stock prices. (See privilege)

A case could be made, perhaps, that since many of us who don't own stock directly are beneficiaries of pension funds which own stock and are enriched by these privileges, it is acceptable to pollute the air for "private" gain. But as long as there are people in the world, created equal, who don't have their fair share of the value of corporate shares, this is a false case. And as long as we anticipate that there will be future generations of humans, this is a false case.

Does wealth trickle down? Under what conditions?

Certainly looking at the trends in wealth distribution over recent years, it would be hard to make the case that wealth trickles down. To the extent that ownership of the kinds of resources that all of us depend on is concentrated in a relative few, those few are in a position to collect payment from the rest of us for their use. I refer here not to buildings, but to choice locations for buildings, and to other parts of the natural and social creation that are not subject to increases in supply following increases in demand. When we must pay large amounts of our income for a place to live, and when in order to secure a worthwhile site for a potential business, we must pay the current owner of that site exorbitant rents, we have little left to meet our other needs or to pay for things for which increased demand leads to increased supply.

Wealth seems to trickle to those who are permitted to pocket the economic value of our natural resources. (For more about this, see: land different from capital, land as common property, land includes, land excludes, rent, rent as provisioning for all, privatization, ownership, possession, all benefits, absentee ownership, landlord, air-land-water, spectrum, birthright, created equal, natural opportunities, first, new country, barriers to entry.)

How many people lack sufficient savings and resources to meet their most simply defined needs for a few months?

This is the flip side of the concentration-of-wealth issue. It is also one of the intersections of wealth and income, two focuses of this website. How much does one need to get by? Having determined that, how many people have sufficient assets to cover themselves for, say, 3 months?

The question of how much one needs to "get by" has been answered by a number of studies. Perhaps the most accessible of these are the Self-Sufficiency Standard Studies, which have been conducted in over 35 states in recent years. The answer, briefly, is "a lot more than the federal poverty line would suggest." How much more? Here is one part of that answer, for a family of four in

The second half of the question has also been explored in a couple of very useful studies about "asset poverty" by Edward Wolff, of New York University. They use the 2001 SCF, and make the (counterfactual) assumption that an individual or family can "get by" at the poverty level, that is, that (1) one can live at least somewhat acceptably, in any part of America, on spending equivalent to the Federal Poverty Guideline; and (2) that one can reduce one's necessary expenses down to that level rather quickly. The Self-Sufficiency Standard Studies make rather clear that the first assumption is a dubious one (though it should be noted that some tax expense, partially offset by tax credits, would disappear); most people's experience would suggest that the second assumption is also open to question. Having said that, Wolff's studies on asset poverty are useful. Check the pages on Asset Poverty for more detail on this.

Do the new bankruptcy laws produce effects we find desirable? Who benefits? Who loses?

Is this class warfare?

Are most of us on track to being able to retire at age 60? Age 65? Age 70? Age 75? Ever?

How would you characterize the purpose of our economy based on the data? What are we succeeding at? What are we failing at?

Who benefited when middle class people started buying stock and related instruments?

Maybe we should just pretend that the top 1% (or 2%, or 3%) don't matter, and go on our merry way? Maybe they live in a different world that doesn't affect the rest of us?

How shall we define the Middle Class? Think about this with respect to how our wealth is held, as well as with respect to income distribution.

Who benefits as corporations and other employers switch from Defined Benefit pension plans to Defined Contribution plans such as 401(k) plans?

What year will the triennial analysis of the Survey of Consumer Finance be titled "Up a Creek without a Paddle?" (The most recent two are A Rolling Tide: Changes in the Distribution of Wealth in the U.S., 1989-2001 (2003) and Currents and Undercurrents: Changes in the Distribution of Wealth, 1989-2004 (2006). )

What year will some member of Congress suggest doing away with the Survey of Consumer Finance because the data it reports is too discomforting to the interests of his or her largest campaign contributors?

What can the wealth distribution data tell us about how decision-making is done in this country?

Are some kinds of wealth different from others? How might it be appropriate to make distinctions among various kinds of wealth?

 

To share this page with a friend: right click, choose "send," and add your comments.

Red links have not been visited; .
Green links are pages you've seen
Home
Top of page
Essential Documents
Themes
to email this page to a friend: right click, choose "send"
   
Wealth and Want
www.wealthandwant.com
   
... because democracy alone hasn't yet led to a society in which all can prosper