What is the 1% in America?

The "1%" refers to the top 1% of Americans by income or net worth. Specifically, it means the roughly 1.4 million households who make over $500,000 per year or have net worths exceeding $10 million. As a group, the income and wealth of the 1% sets them apart from all other Americans.

The Growing Income and Wealth Gap

The share of total U.S. income flowing to the 1% has more than doubled from just under 10% in the 1980s to over 20% today. This highlights the rapid growth of income inequality in recent decades:

The rise of the 1% has corresponded with stagnating working and middle class wages. For example, the hourly pay of the typical worker has grown only 14% since 1979, much slower than overall economic growth.

The wealth gap is even more stark – the top 1% hold nearly 40% of all household wealth, while the bottom 50% of Americans jointly own just 2%. This concentration of wealth has fueled a vibrant debate about the impacts on inequality and economic mobility.

Who Makes Up the 1%?

Occupations and Locations

The table below shows the top occupations found in the 1%:

Many are specialized doctors like surgeons, Wall Street executives and investors, corporate lawyers, and tech entrepreneurs or engineers. Business ownership is also a major factor, with over a third of the 1% being executives of companies.

There are also wide geographic differences. Due to higher costs of living, you need an income of over $600,000 to make the 1% in New York, but less than $300,000 in Mississippi. The map below visualizes the income threshold to be in the top 1% by state:

So your location matters greatly in determining if your income qualifies for the 1% nationally. But across all states, the threshold is over $500,000.

Tax Policy and Debates

The rise of the 1% has fueled debates on inequality, tax policy, investment, and mobility. Here are some key elements:

• The 1% pay around 40% of federal income taxes, highlighting their disproportionate share of U.S. income. The average tax rate paid by the 1% is 26%.

• Progressive policy proposals focus on raising tax rates on the 1% through measures like a wealth tax. Supporters argue this would limit inequality and raise revenues. Critics contend it could discourage entrepreneurship.

• From the right, supply-side policies advocate lower taxes on the 1% to drive more business investment and job creation. But evidence linking lower top tax rates to growth is mixed.

• Economists debate whether the 1% have expanded their incomes at the expense of middle class wage growth or helped drive overall growth. The evidence is murky with no consensus.

• While the members of the 1% change over time, some research shows economic mobility has declined. Family background, inherited privilege, educational inequalities, and geographic disparities may make entering and staying in the 1% more difficult.

International Comparisons

Worldwide, an annual income of just $34,000 per year is enough to make you part of the global 1% based on global income distributions. The table below shows the income threshold to be in the 1% for selected countries:

This comparison highlights the vast income inequality between nations. Even middle class incomes in advanced economies like the U.S. or Japan qualify you for the global 1%. This context is important for understanding the privilege and wealth of the 1%, even relative to other citizens within their own countries.

The Bottom Line

In summary, the 1% represents America‘s elite in terms of income and wealth. While thresholds vary based on geography and household size, you typically need to earn over $500,000 per year or have a net worth exceeding $10 million to qualify. This small sliver of households takes home over 20% of U.S. income today. Debates rage around whether the gains of the 1% have come at the expense of the working and middle classes. But their disproportionate income share makes the 1% a focal point for debates around inequality, tax policy, and the American dream in the 21st century.