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Wealth Inequality

Wealth Inequality

The concentration of capital income makes this proposal especially consequential.

While the top 1% has expanded its grip on wealth, the bottom 50% (1st to 50th wealth percentiles) has seen its share decline. The bottom 50% holds just 2.8% of total U.S. net worth, reflecting a widening wealth inequality.

Current data from the Research Department at the Federal Reserve Bank of St. Louis, or FRED show a huge spike in wealth disparity.

Wealth Gap Visual

Equitable Growth (OECD) found that the top 1 percent received 45.3 percent of capital gains from 2002–2021, while the top 10 percent received 75.7 percent; it estimated an effective tax rate of 5.2 percent on real capital gains after accounting for realization and other features. At the same time, capital income gained more favorable treatment relative to labor income. The Center for Public Integrity posts that in 1981 the ERTA gave the wealthiest Americans who received dividend and interest payments a hefty yearly tax cut of $6.7 billion, the equivalent of $21 billion today. Out of 95 million taxpayers who filed that year, this bounty went to just 82,000: the richest sliver of the top 1%.

Wealth Gap Visual

The contemporary “K‑shaped” economy starkly illustrates a legal and structural divergence between the asset‑owning elite and ordinary workers. While median U.S. household wealth hovers around $192,000 and median individual income is roughly $45,000–$55,000, the top 1% typically hold over $10 million in wealth and many Fortune 500 CEOs earn 200–350 times the pay of their median employees—e.g., a CEO at $15–20 million annually versus a worker at $50,000–$70,000. This upper “arm” of the “K” grows through legally sanctioned mechanisms that shield income and wealth — trusts, estates, complex corporate structures, and preferentially taxed returns on stocks and bonds.

The US Census Bureau reported that in 2022, the median U.S. family had net worth of approximately $192,900. In 2024, median annual earnings were about $51,370 among U.S. workers with earnings. At large publicly traded companies, the Federal Reserve reports that CEO compensation was vastly higher: the Economic Policy Institute estimates that CEOs at the 350 largest U.S. firms received average realized compensation of $22.98 million in 2024—about 281 times the compensation of a typical worker. This upper “arm” of the “K” grows through legally sanctioned mechanisms that shield income and wealth — trusts, estates, complex corporate structures, and preferentially taxed returns on stocks and bonds.

Capital-gains preference
Investment gains can face lower rates than top wages
Step-up in basis
Untaxed appreciation may escape capital-gains tax at death
Deferral
Unrealized gains can grow for years without income tax
Estate-tax exemptions and planning
Large transfers can be reduced through exemptions, trusts, valuation techniques, and other planning
Corporate and pass-through structures
Owners may choose timing, character, and location of income more easily than wage earners
Offshore structures
Cross-border capital mobility and tax havens make enforcement more difficult

IRS Definition of Direct Taxes (Educational Series)

"A tax that cannot be shifted to others, such as the federal income tax."

https://www.IRS.gov/ Understanding Taxes

IRS Definition of Indirect Taxes (Educational Series)

"A tax that can be shifted to others, such as business property taxes."

" An indirect tax is one that can be passed on -or shifted- to another person or group by the person or business that owes it."

https://www.IRS.gov/ Understanding Taxes

American Express Co. v. Michigan, 177 U.S. 404 (1900)

"As the means by which the burdens of taxes may be shifted are as multiform and as various as is the power to contract itself, it follows that the argument relied on, if adopted, would control almost every conceivable form of contract, and render them void if they had the result stated. Thus, the price of all property, the result of all production, the sum of all wages, would be controlled irrevocably by a law levying taxes if such a law forbade a shifting of the burden of the tax and avoided all acts which brought about that result. It cannot be doubted that to adopt by implication the view pressed upon us would be to virtually destroy all freedom of contract, and in its final analyses would deny the existence of all rights of property."

American Express Co. v. Michigan, 177 U.S. 404 (1900)

Moore v. United States (2024)

"Article I of the Constitution affords Congress broad “Power To lay and collect Taxes, Duties, Imposts and Excises.” Art. I, §8, cl. 1. That power includes “‘two great classes of’” taxes—direct taxes and indirect taxes. Brushaber v. Union Pacific R. Co., 240 U. S. 1, 13 (1916). Generally speaking, direct taxes are those taxes imposed on persons or property." ...

By contrast, indirect taxes are the familiar federal taxes imposed on activities or transactions. That category of taxes includes duties, imposts, and excise taxes, as well as income taxes. U. S. Const., Art. I, §8, cl. 1; Amdt. 16.

Moore v. United States, 602 U.S. 572 (2024)

Calculated with data from:

'Dataset: 'Table 3.1. Government Current Receipts and Expenditures [Billions of dollars].' U.S. Bureau of Economic Analysis. Last revised March 27, 2025. b) Dataset: 'Table 3.2. Federal Government Current Receipts and Expenditures [Billions of dollars].' U.S. Bureau of Economic Analysis. Last revised March 27, 2025. c) Dataset: 'Table 3.3. State and Local Government Current Receipts and Expenditures [Billions of dollars].' U.S. Bureau of Economic Analysis. Last revised March 27, 2025. d) Dataset: 'Table 5.11U. Capital Transfers Paid and Received, by Sector and by Type [Millions of Dollars; Quarters Seasonally Adjusted at Annual Rates].' U.S. Bureau of Economic Analysis. Last revised March 27, 2025."

Bureau of Economic Analysis: National Income

Stanton v. Baltic Mining Co., 240 U. S. 103

"... it was settled that the provisions of the Sixteenth Amendment conferred no new power of taxation but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged and being placed in the category of direct taxation subject to apportionment by a consideration of the sources from which the income was derived, that is by testing the tax not by what it was-a tax on income, but by a mistaken theory deduced from the origin or source of the income taxed."

Stanton v. Baltic Mining Co., 240 U.S. 103 (1916)

Bureau of Economic Analysis: National Income

Eisner v Macomber (1920)

"As repeatedly held, this did not extend the taxing power to new subjects, but merely removed the necessity which otherwise might exist for an apportionment among the States of taxes laid on income. Brushaber v. Union Pacific R. R. Co., 240 U. S. 1, 17-19; Stanton v. Baltic Mining Co., 240 U. S. 103, 112 et seq.; Peck & Co. v. Lowe, 247 U. S. 165, 172-173.

A proper regard for its genesis, as well as its very clear language, requires also that this Amendment shall not be extended by loose construction, so as to repeal or modify, except as applied to income, those provisions of the Constitution that require an apportionment according to population for direct taxes upon property, real and personal. This limitation still has an appropriate and important function, and is not to be overridden by Congress or disregarded by the courts."

Moore v. United States, 602 U.S. 572 (2024)

"FECA’s political-party coordinated-expenditure limits violate the First Amendment."

"National Republican Senatorial Committee v. Federal Election Committee, Docket number 24-621, dated 6/30/26."

National Republican Senatorial Committee v. Federal Election Committee