The division of society between the richest 1% of the population and everyone else has become a common way of conceptualising inequality.
However, 1% is still a very large group. For instance, in the UK it comes to more than half a million people or over a quarter of a million households. According to Simon Lambert of This is Money, an income of at least £120,000 is required to make the cut. That’s a great deal of money for most people, but not an extraordinary level of wealth.
In a new paper, the economists Emmanuel Saez and Gabriel Zucman look at a rather more exclusive group — the richest 0.00001%. In America, this means “a group that includes 18 individuals with more than $50 billion in wealth in 2021.”
The key point is that this tiny handful of people don’t just own a vast amount of the country’s wealth — but a growing share of it:
In the early 1980s, the 0.00001% owned between 0.1 and 0.2% of America’s riches, but in the decades since their slice of the pie has “multiplied tenfold”.
What sort of taxes are the ultra-wealthy paying? In percentage terms, the answer is not as much as ordinary Americans. Saez and Zucman summarise the situation in the following chart:
Note that the blue area on the chart represents the effect of a hypothetical wealth tax.
The authors argue that previous attempts to levy wealth taxes in Europe haven’t been very successful because they’ve targeted the wrong people — i.e. the merely well-to-do rather than the very richest individuals.
But what is to stop these multi-billionaires from quitting America altogether if the taxman comes after them? Saez and Zucman note that possible reforms might include “a large… tax on wealth upon citizenship renunciation, dramatically reducing the scope for tax competition.”
On the other hand, the US government could just sit down with the richest individuals and negotiate on a case-by-case basis. Indeed, with a membership of just 18 people, the President could deal with 0.00001% himself.
After all, senior politicians are used to asking billionaires for money.