A key point in Thomas Piketty’s new book Capital in the Twenty-First Century is that strong forces in the economy could, if unchecked, lead to an ever greater concentration of wealth and the incomes that flow from wealth. The fact that income from wealth (capital gains, interest, dividends and so on) goes disproportionately to those with the highest incomes means that rising income from wealth leads to greater income inequality. One reflection of this process in the United States is that the share of income from wealth going to the top 1 percent has greatly increased in the last few decades, rising from 33.5 percent of all income from wealth in 1979 to 54 percent in 2010.
The figure below shows the share of income derived from owning wealth in the U.S. economy between 1979 and 2010, using data from the Congressional Budget Office (CBO). It adds up rents, dividends, interest payments, capital gains, and business income and calculates what share of this income derived from owning wealth—often short-handed as “capital income”—is claimed by the top 1 percent of households, the bottom 90 percent of households, and the 9 percent of households in between these groups (households between the 91st and 99th percentiles).
In 1979, each of these groups actually claimed roughly similar shares of total capital income: the top 1 percent claimed 33.5 percent, the bottom 90 percent claimed 36.2 percent, and 30.3 percent was claimed by households between the 90th and 99th percentile of the income distribution. By 2010, the top 1 percent’s share had increased enormously, while shares for both other groups fell. In the last year of the data, the top 1 percent claimed 54.0 percent of capital income, the bottom 90 percent claimed 22.9 percent and the intervening group claimed 23.0 percent.
This evidence indicates that Piketty’s worries are justified by historical data, as the top 1 percent has substantially increased the share of overall capital income that they claim. Further, if the trend continues, the top 1 percent will continue to raise its income share as capital income grows in importance and their share of capital income continues to rise.
Increasing share of income from wealth claimed by top 1 percent: Concentration of capital incomes, by income group, 1979–2010
| Bottom 90 percent | 90–99th percentile | Top 1 percent | |
|---|---|---|---|
| 1979 | 36.183% | 30.272% | 33.545% |
| 1980 | 37.921% | 30.347% | 31.732% |
| 1981 | 38.156% | 30.816% | 31.029% |
| 1982 | 38.859% | 27.887% | 33.254% |
| 1983 | 38.231% | 27.717% | 34.051% |
| 1984 | 39.526% | 26.848% | 33.626% |
| 1985 | 32.727% | 26.975% | 40.297% |
| 1986 | 28.078% | 24.899% | 47.023% |
| 1987 | 38.315% | 28.073% | 33.612% |
| 1988 | 35.294% | 26.657% | 38.050% |
| 1989 | 33.086% | 27.368% | 39.547% |
| 1990 | 33.839% | 27.740% | 38.421% |
| 1991 | 36.229% | 28.265% | 35.506% |
| 1992 | 33.389% | 27.988% | 38.623% |
| 1993 | 33.767% | 28.081% | 38.152% |
| 1994 | 33.319% | 27.091% | 39.590% |
| 1995 | 31.831% | 27.899% | 40.270% |
| 1996 | 27.348% | 27.453% | 45.199% |
| 1997 | 29.978% | 27.052% | 42.969% |
| 1998 | 28.251% | 26.539% | 45.210% |
| 1999 | 24.298% | 26.607% | 49.096% |
| 2000 | 24.292% | 25.791% | 49.917% |
| 2001 | 26.476% | 25.755% | 47.770% |
| 2002 | 26.433% | 26.174% | 47.392% |
| 2003 | 25.220% | 25.314% | 49.466% |
| 2004 | 24.123% | 24.425% | 51.452% |
| 2005 | 21.667% | 24.447% | 53.886% |
| 2006 | 21.617% | 24.474% | 53.909% |
| 2007 | 16.985% | 24.329% | 58.686% |
| 2008 | 20.707% | 24.379% | 54.914% |
| 2009 | 22.903% | 25.185% | 51.911% |
| 2010 | 22.911% | 23.047% | 54.042% |
Source: EPI analysis of Congressional Budget Office data.
