A recent Wall Street Journal article ran with the sub header: “The richest of the rich in America control record slice of nation’s wealth.” The author cites the work of UC Berkley economist Gabriel Zucman, who is widely published on this topic along with his collaborators Thomas Piketty and Emmanuel Saez. According to their published work, the top 1 percent of households control over 40 percent of all wealth in the United States. This figure is often cited in discussions about tax policy, redistribution, and inequality—but it is deeply misleading.
The problem lies in the methodology. The Piketty-Saez-Zucman (PSZ) approach capitalizes income reported on tax returns to infer wealth. But tax returns are an incomplete and unevenly distributed source of data. Not all forms of wealth generate taxable income, and when they do, returns can vary widely even for assets of similar value. Some investments are deliberately structured to minimize taxable income, while others produce returns that are difficult to attribute accurately to underlying wealth. These mismatches lead to serious distortions in the resulting estimates.
The Federal Reserve’s Distributional Financial Accounts (DFA) data, which draw from a broad base of administrative and survey data, consistently estimate the top 1 percent’s wealth share at around 30 percent over the past decade—significantly lower than the PSZ estimates.
Existing research further challenges the narrative of extreme concentration. One NBER paper published in 2021 improves on the PSZ approach by incorporating more accurate estimates of fixed income investments, pass-through business wealth, corporate equity, housing, and pensions. The resulting estimate for the top 1 percent’s share of total wealth hovers around 31 percent, or about 10 percentage points below the Zucman estimate.
Importantly, these estimates do not include Social Security wealth, which constitutes a large portion of lifetime savings for most households. While private accounts, pensions, and home equity are routinely included in wealth estimates, the present value of Social Security benefits is often ignored. Yet its omission paints an artificially bleak picture of wealth inequality. When included, as in the Congressional Budget Office’s (CBO) 2024 report, the wealth share of the top 1 percent drops substantially.
According to the CBO, when Social Security wealth is factored in, the share of wealth held by the top 1 percent increased only modestly—from 23 percent in 1989 to 27 percent in 2022. A recent study published in the Journal of Finance offers a similar finding: In 2019, the top 1 percent held just under 24 percent of total wealth, up from 22 percent in 1989. Again, these figures stand in stark contrast to the headline-grabbing figures pushed by PSZ.
Moreover, revisions of income concentration estimates by economists Vincent Geloso, Phillip Magness, and their coauthors correct serious errors in the original PS data. The authors include misclassifications, improper assumptions about returns, and failure to account for structural economic changes since the 1980s. These corrections further reduce the apparent rise in wealth concentration over recent decades.
All said and done, if policy is to be grounded in facts rather than feelings, then it must be based on sound data. The PSZ estimates, though widely cited, exaggerate the concentration of wealth in America by relying on flawed methods and incomplete data. A better understanding comes from more robust, inclusive estimates that account for all major forms of wealth and correct for the biases baked into tax-based inferences.
The idea that the rich are running away with the economy makes for good headlines. But good headlines do not always make for good policy.