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Abstract This article uses administrative tax data to estimate top wealth in the United States. We assemble new data that link people to their sources of capital income and develop new methods to estimate the degree of return heterogeneity within asset classes. Disaggregated fixed-income data reveal that rich individuals earn much more of their interest income in higher-yielding forms and have much greater exposure to credit risk. Consequently, in recent years, the interest rate on fixed income at the top is approximately 3.5 times higher than the average. We value the population of U.S. firms using firm-level characteristics and apportion this wealth using firm-owner links. We combine this new data on fixed income and pass-through business returns with refined estimates of C-corporation equity, housing, and pension wealth to deliver new capitalized wealth estimates that build upon the methods of Saez and Zucman (2016a). From 1989 to 2016, the top 1%, 0.1%, and 0.01% wealth shares increased by 6.6, 4.6, and 2.9 percentage points, respectively, to 33.7%, 15.7%, and 7.1%. Overall, although we estimate a large degree of return heterogeneity, accounting for this heterogeneity does not change the fundamental story for top wealth shares and their growth—wealth inequality is high and has risen substantially over recent decades.
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Capitalists in the Twenty-First Century*
Abstract How important is human capital at the top of the U.S. income distribution? A primary source of top income is private “pass-through” business profit, which can include entrepreneurial labor income for tax reasons. This article asks whether top pass-through profit mostly reflects human capital, defined as all inalienable factors embodied in business owners, rather than financial capital. Tax data linking 11 million firms to their owners show that top pass-through profit accrues to working-age owners of closely held mid-market firms in skill-intensive industries. Pass-through profit falls by three-quarters after owner retirement or premature death. Classifying three-quarters of pass-through profit as human capital income, we find that the typical top earner derives most of her income from human capital, not financial capital. Growth in pass-through profit is explained by both rising productivity and a rising share of value added accruing to owners.
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- Award ID(s):
- 1752431
- PAR ID:
- 10133723
- Date Published:
- Journal Name:
- The Quarterly Journal of Economics
- Volume:
- 134
- Issue:
- 4
- ISSN:
- 0033-5533
- Page Range / eLocation ID:
- 1675 to 1745
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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- Free Publicly Accessible Full Text
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Accepted Manuscript1.0
- Journal Article:
- https://doi.org/10.1093/qje/qjz020
