Average net worth of 1%

Many people think of being rich as having a nice house, a late-model car, and maybe a vacation home. But the kind of money the world’s richest 1% of households have undermines that idea. This segment of the population owns large portions of major corporations, multi-billion dollar investment funds, islands in the Caribbean, and even rocket ships that could carry them into space.

The average net worth of the top 1%, also known as the richest 1% of households in the world population, has exploded over the past two decades. It now exceeds the net worth of the average citizen more than ever before. Here are some of the basics of how the 1% live.

Basic Takeaways

  • The minimum net worth of the top 1% is approximately $11.1 million.
  • A person would need to earn an average of $823,763 per year to join the top 1%.
  • The widening gaps in wealth and income stem from a number of factors, including the growing dominance of the wealthiest in public and private capital and tax breaks.

America’s Richest: A Demographic Breakdown

Before looking at the demographics of the top 1%, it’s important to understand how much this segment of the US population earns. According to the Economic Policy Institute, joining the top 1% club requires an average annual income of $823,763.

This is a far cry from the $40,085 annual income reported by the average American taxpayer (the bottom 90%). Those who want to be part of the top 0.01% will have to live in a household that makes an average of $2.9 million a year.

Although the media and politicians have largely portrayed this group as Wall Street fat cats, demographic analysis reveals a different picture. The richest 1% are spread across many industries and come from many backgrounds. They include health professionals, businessmen and executives, as well as those who inherited their wealth.

According to IRS data, the top 1% earned more than 20% of total adjusted gross income in the US and paid just under 40% of all federal income taxes. They also accounted for just under a third of all charitable giving.

The richest people in the world

The number of billionaires is counted Forbes’ The 35th annual list of the world’s richest people jumped to an unprecedented 2,755 in 2021—660 more than in 2020. In total, they are worth $13.1 trillion, up from $8 trillion on the previous year’s list.

Wealth-X, a “wealth intelligence” research and marketing firm that is part of Euromoney Institutional Investor Group PLC, estimates the US billionaire population at 927. The total wealth of US billionaires was $3.71 trillion. There were 410 billionaires in China.

The widening wealth gap

The Economic Policy Institute reports that the net worth of the top 1 percent of American households rose steadily throughout the second half of the 20th century and beyond.

In 1962, the richest 1% had a net worth equal to about 125 times that of the average American household. By 2009, their net worth was about 225 times the net worth of the average household.

Furthermore, the gap between the richest and the poorest more than doubled between 1982 and 2016.

172%

Percentage increase in wages received by the top 1% from 1980 to 2020, compared to 31% for those in the bottom 90%.

The minimum net worth of the top 1% of households is approximately $11.1 million. The top 10% have a net worth of about $1.2 million.

Meanwhile, the growth in wealth of middle-class Americans essentially stopped sometime in the early 21st century. Median income for middle-class Americans grew at an average rate of 1.2% per year from 1970 to the year 2000. From 2000 to 2018, the rate slowed to 0.3% per year.

The wealth of the top 1% continues to exceed the wealth of the entire middle class. In fact, the earners have more wealth than the middle and upper middle classes combined.

There are several reasons for the disparity, but one major factor is outsized stock ownership among the wealthiest Americans. The 1% own more than 50% of the shares in both private and public companies. Much of their wealth comes from rising stock prices.

This, of course, can leave them vulnerable to declines in stock prices. But they can become even richer if they take some of those stock gains and reinvest the money in investments aimed at wealthy investors, such as hedge funds and private equity.

Underlying causes of the wealth gap

Much of the growing inequality can be traced to the steady stream of tax breaks for income, gift and estate taxes. These can disproportionately benefit wealthy Americans. For example, the first $12.06 million of an inheritance is tax-free starting in 2022.

Although the middle class also benefited from the tax cut, it allowed the rich to keep much more of their assets and pass them on to their heirs.

As of May 9, 2022, the richest person in the world is Elon Musk, with a net worth of $268 billion.

In fact, there has been much discussion about how the Tax Cuts and Jobs Act (TCJA) of 2017 — passed by the Trump administration — has affected the wealthiest Americans.

The Trump White House has consistently defended the bill, saying it helped put money into the pockets of the middle class. Others disagreed.

In their book, The Triumph of Injustice (2019), economists Emmanuel Saez and Gabriel Zucman argue that the tax reform bill gave the wealthiest households an effective lower average tax rate than the rest of the US population.

Top 1% Review

There has been much criticism of the world’s super-rich, especially those living in the United States. They were accused of hoarding their wealth, lobbying for tax breaks and not contributing their fair share of taxes.

In response to the criticism, many politicians are calling for more taxes on the rich. Sen. Elizabeth Warren proposed a super-millionaires tax as part of her 2016 campaign to become the 2020 Democratic presidential nominee. Sen. Bernie Sanders, also a candidate, has pushed for an estate tax hike that would mean billionaire heirs they would pay more taxes.

Taxes aimed solely at the 1% have not gotten very far to date.

However, President Joe Biden managed to push through some measures seeking new sources of revenue from wealthy Americans in the 2022 Inflation Reduction Act. These include:

  • Additional funding for the Internal Revenue Service, to be used to pursue unpaid taxes from those earning $400,000 or more.
  • Minimum corporate tax of 15%.
  • A 1% tax surcharge on share buybacks to discourage excessive use of profits to reward shareholders and executives.

How much net worth does it take to be in the Top 1%?

The minimum amount of net worth to be in the top 1% is $11.1 million.

What is the net worth of the top 1% of Americans?

The total net worth of US billionaires is $3.71 trillion.

What percentage of the population has a net worth of $1 million?

About 10% of Americans have a net worth of $1.22 million or more.

The bottom line

Like the poor, the rich are always with us: Income inequality is inevitable in a capitalist society and a free enterprise economy. However, the fact that inequality appears to be increasing is a growing concern for many.

The uneven impact of the COVID-19 pandemic has shone a bright light on an issue that had been developing for years: in the US, the share of the country’s wealth held by the top 1% rose from 23% to nearly 32% between 1989 and 2018.

Even billionaires like Warren Buffett have expressed surprise that they often pay less in taxes than their employees. Whether the 1% should be left alone or whether their wealth should be shared in some way will no doubt be an ongoing debate.

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