But the concentration of fortune among the most prosperous has been on the rise since the 1980s, with some economists worrying that a stock market bubble will again burst with severe economic consequences.
A slew of factors contributes to the country’s income inequality. Among those cited, and often disputed, are tax cuts for the wealthy, assistance to the poor, a decline in the influence of unions, globalization, technological advances, and the minimum wage’s shrinking value.
Liberals argue that the notion that tax cuts will spur business growth has failed repeatedly. Conservatives are less likely to say that the wealth gap is unfair, though they do donate to charities and otherwise help the poor at an individual level instead of addressing the problem systematically.
Tycoons thrived in the Jazz Age, when a list of the country’s richest compiled by Forbes in 1918 included such household names as banking giant J.P. Morgan Jr., steel tycoon Charles M. Schwab, and Vincent Astor, whose family owned a large amount of New York City real estate.
At the time, the top 0.1% accounted for nearly 25% of the wealth, according to research by Gabriel Zucman, an economics professor at the University of California, Berkeley. But then came the stock market crash of 1929, and the amount of wealth held by the richest Americans fell, landing at under 10% by the late 1970s. That number later reversed and is now close to 20%.
President Ronald Reagan started off decades of cuts to the tax rates paid by the country’s top earners, a trend that economists point to as one cause of the enormous wealth gap in today’s United States. The first round of Reagan tax cuts, enacted by both Republicans and Democrats, came in 1981, when the top rate dropped to 50% from 70%.
The second round brought that top rate down to 28% by 1988. The country’s top 1% won a bonanza of $350,000 in tax cuts in 1985 compared to $3,500 for a typical household and a few hundred dollars for the poor, according to John Komlos, an economics historian.