A New Portrait of the World’s Wealth — and Wealthiest

Other analysts outside the Fed orbit have crunched the new Survey of Consumer Finances raw data to paint a plainer picture of how much wider the wealth gap in the United States has grown since the Federal Reserve began publishing Survey of Consumer Finance reports over three decades ago.

Over those decades, a DQYDJ analysis points out, the inflation-adjusted net worth of the typical American household has gone from $108,501 in 1989 to $192,084 in 2022.

The net worth of the nation’s richest 1 percent over that same span? That wealth has gone, again after adjusting for inflation, from $5,351,332 in 1989 to $13,666,778 some 33 years later.

Another analysis, from Matt Bruenig at the People’s Policy Project, has used the new Fed data to calculate the share of America’s wealth held by each decile — each 10 percent — of the nation’s households.

“Overall,” Bruenig concludes, America’s “wealth inequality remains quite high,” with the top 10 percent of households owning a whopping 73 percent of the nation’s wealth and the bottom half of U.S. households holding “just 2 percent of the nation’s wealth.”

The Fed data, analyses like Bruenig’s show, can help us gain a much-needed sense of just how unequal the United States has become. But the Fed’s Survey of Consumer Finances can only take us so far. The Survey’s data shine no spotlight on the richest of our rich and cover only pre-tax income.

For how the super rich make out after taxes, we have to look elsewhere — and we now have an exceedingly revealing place to look. The EU Tax Observatory, a research effort begun in 2021 with backing from the European Union and a variety of academic institutions, has just released a blockbuster new study entitled Global Tax Evasion Report 2024, “an unprecedented international research collaboration building on the work of more than 100 researchers globally.”

Our world’s richest, this new study details, now enjoy “effective tax rates” that annually cost them no more than a mere 0.5 percent of their personal wealth.

Over the last decade, the EU Tax Observatory study notes, a number of individual governments have agreed on major initiatives to counter international tax evasion. Since 2017, for instance, banks have been “automatically” exchanging information helpful in identifying tax evaders. And over 140 nations agreed in 2021 to set an annual 15 percent “global minimum tax” on multinational corporations.

But assorted loopholes and “carve-outs” have undermined these two reforms. Multinationals last year shifted some $1 trillion of their treasure into tax havens, the equivalent of more than a third of the profits multinationals booked in 2022 outside their headquarters country. And many offshore financial institutions, the new EU Tax Observatory report adds, are dragging their feet on deposit disclosure.

Even so, new exchanges of banking data have offshore tax evasion down by a factor of three, and only 25 percent of financial wealth held “offshore” is currently evading taxes. And the fledgling corporate minimum tax put in place two years ago has generated considerable useful data of its own.

How can the nations of the world go beyond these two initial reform efforts? The Global Tax Evasion Report 2024 identifies a half-dozen specific steps the global community can take “to reconcile globalization with tax justice.”

Three of these recommendations highlight common-sense proposals that ought to be able to gain broad international support. One recommendation, for instance, calls for “the creation of a Global Asset Registry to better fight tax evasion.”

The other three recommendations on the EU Tax Observatory’s reform agenda seem certain to face some serious political pushback — from the fans of grand fortune.

One of these three bold proposals calls for new mechanisms that would enable the taxing of wealthy people “who have been long-term residents in a country and choose to move to a low-tax country.” Another would “reform the international agreement on minimum corporate taxation to implement a rate of 25 percent and remove the loopholes in it.”

The boldest proposal of all: a call for a new “global minimum tax” on the world’s billionaires equal to 2 percent of their net worth.

Moving forward on proposals like these, the EU Tax Observatory report stresses, wouldn’t immediately require thumbs-up from large numbers of nations. Unilateral action by small groups of nations “can pave the way” eventually for more “nearly global agreements.”

The reforms the EU Tax Observatory is advancing, the Nobel Prize-winning economist Joseph Stiglitz adds in his introduction to the Global Tax Evasion Report 2024, “may seem impossible to attain, but so was undermining bank secrecy and introducing a minimum tax on corporations just a few years ago.”

And if the world doesn’t continue moving boldly forward on confronting corporate and billionaire tax evasion, what then? Failure on that front, Stiglitz argues, would mean more than inadequate revenue for confronting global inequalities, pandemics, and climate change.

“If citizens don’t believe that everyone is paying their fair share of taxes — and especially if they see the rich and rich corporations not paying their fair share — then they will begin to reject taxation,” Stiglitz projects. “Why should they hand over their hard-earned money when the wealthy don’t?”

In effect, Stiglitz concludes, the “glaring tax disparity” that our richest now enjoy “undermines the proper functioning of our democracy.”

We either fix that disparity or suffer the catastrophic consequences.