The U.S. Market

Table 2 summarizes the Federal Reserve’s data on who owns how much of the U.S. stock market, and there are massive differences across race and class.7,8 At the end of 2022, the U.S. market was valued at over $46 trillion, of which more than 64% belonged to White Americans in the top 10% of the wealth distribution, while the bottom 89% of all Americans owned only 8% of their market, all Blacks and Hispanics together owned merely 1% yet made up one third of the population, and the poorest half of Americans owned barely 0.4%. In contrast, rich foreign investors (both individuals and governments) owned about 23% of the U.S. stock market and did not even pay capital gains taxes to the United States.9 However, other analyses find that up to 40% of the U.S. market may now belong to foreign investors.

As a result of this highly unequal ownership of the U.S. stock market, IRS data show that the percentage of income derived from stocks is about 13% for the median American and rises steeply up the wealth ladder to 68% for billionaires.10,11 Table 2 also contains my own calculations for the average growth of net worth for each class since 1989, and this shows that the rate of return on saving is largely determined by the proportion of assets invested in stocks. Thus, due to compound interest, the pace of wealth accumulation increases as one rises up the wealth ladder. This fact is visible in the Federal Reserve’s graph of wealth distribution in the United States, which shows that each class accumulates wealth faster than the class below it, and that the bottom 50% of Americans never accumulate wealth at all (Figure 2).

In short, the evidence shows not only that rising wealth inequality is driven by unequal ownership of the U.S. stock market, but that compound interest will continue to increase wealth gaps across race and class unless we change who owns it. To solve this problem, we must think about the limits of taxation.