Understanding and Fixing America’s Wealth Gap

The Top of the Mountain: Understanding America's Wealth Gap and How to Fix It

Economic inequality is a very common topic for debate throughout the United States. The discussion ends with the finger almost always pointed to the “1%.” The corporate lawyers, tech executives, major stockbrokers. But to truly understand the wealth inequality, we have to climb to the peak of the mountain that is our economy. The true inequality in the economy isn’t found between the middle class and 1%, rather it’s found between the 1% and top 0.01%. With the continuous increase in daily necessities like groceries, housing, and gas prices, the average American struggles to stay on the mountain without being blown off. Because of this, the luxuries of the ultra wealthy seem like a piece of fiction more than an actual reality. This prevents the true nature of the 0.01% from being analyzed by most Americans as studies by Michael Norton and Dan Ariely have found that less than 1% of Americans truly understand the actual difference in wealth between the ultra rich and the average person. In fact, some Americans would rather skip over the topic entirely instead of being forced to reflect on the uncomfortable reality of the US economy. While there are many problems with this mindset, the most major one is that the intense observation of how the top 0.01% operates reveals exactly why our economy feels unbalanced and also offers a roadmap on how to fix it.

Climbing to the Top: Focusing on the 0.01%

To truly understand the reality of wealth concentration we must first look at the numbers. In order to enter the 1%, your household must make at minimum around $780,000. It is impossible to deny that this is quite a large sum when compared to the national median household income of $84,000. However, the minimum income needed to enter the 1% is still far below the requirement for the top 0.01%. This group represents about 1 out of every 10,000 households or 13,000 families total. In order to enter this elite group, your family would have to make a minimum of $17.8 million. If you really wanted to establish your place in this group, IRS tax records compiled by CBS News show that average incomes within this group reach around $35.1 million. Adding onto this, long-term tracking data published by Inequality.org reveals that the average income of the richest 0.01% of households has grown vastly faster than the bottom 20% over the last four decades. Unfortunately for us, the divide becomes increasingly grim when looking at the total net worth instead of average income. The Federal Reserve’s Distributional Financial Accounts show that the wealthiest 1% of Americans hold 31.7% of the country’s total wealth. The grandness of this number is evident as it is also the largest it’s been since the recording of this data began in 1989. Meanwhile, the bottom 50% of the population which accounts for about 165 million people collectively share a meager 2% of the nation's overall wealth. The top 0.01% alone holds more wealth than millions of middle-class families combined.

Better Climbing Tools? Analyzing How the Ultra-Wealthy Pull Away

All these statistics lead to a natural question. How did the gap get this wide? It’s not because the ultra-elite are putting in thousands of hours while the everyday worker isn’t. Nor is it because immigrants, whether undocumented or not, are working across the country. Instead, the answer lies in the methods through which they make their money.

Wages vs Assets:

Everyday people earn money through monthly wages or annual salaries. The ultra-wealthy earn money by owning assets. This allows the vast majority of the top 0.01% to make their fortune through corporate stock, private business equity, and specialized investments.

Leverage:

The wealth of the 0.01% is constantly compounding whenever the stock market goes up. This growth partnered with access to more resources than the average person and specialized investments gives the ultra-wealthy the ability to grow their fortune quickly. A worker who relies on a paycheck simply cannot scale their income at that speed.

The Tax Advantage:

Research conducted by the London School of Economics (LSE) Inequalities Blog notes that as America’s top 0.01% accumulates more wealth, they have actually paid a smaller share of total US taxes relative to their total wealth holdings. Under the current tax code in the US, income from capital gains is often taxed at a much lower rate than income made from traditional salaries. This concentration of wealth has tangible effects for everyone else. Extreme economic concentration can limit economic mobility for those in the lower and middle classes by causing them to have less access to education, healthcare, homeownership, and investing opportunities.

Souvenirs for Everyone: Structural Solutions to Balance the Economy

Fixing an issue as big as this one requires structural changes. Charity, while helpful, is unable to fix this problem alone. We do not need to eliminate wealth, but we do need to update the rules that control the economy so everyone can thrive. Here are three solutions that economists and policy experts have pointed to in order to help re-balance the scale.

1. Equalize Tax Rates:

As of today, the top marginal tax rate on regular income is 37%. However, the long-term capital gains tax rate tops out at just 20%. By taxing income from investments at the exact same rate as income from wages, we can ensure that the ultra-wealthy contribute proportionally to the betterment of society along with everyone else. One could even argue for a bigger increase in tax rates specifically for higher income earners solely due to the current gap between the rich and poor in our society.

2. Stop Estate and Trust Loopholes:

Massive fortunes are often passed down through generations using complex legal bodies like Dynasty Trusts. These bodies allow wealth to grow and bypass estate taxes forever, creating an unfair playing field for a group of people over everyone else. An economic aristocracy of sorts. Closing these loopholes would help ensure that multimillion-dollar estates face necessary taxes to help better the country and its citizens.

3. Reinvest in America:

The money made from changing the current tax policies can be reinvested into policies to support the everyday American.

Universal Early Childhood Education: This has already started to be implemented in some states. However, making it universal would lower the cost of childcare for working parents with young children and help support young families.

Lowering the Price of Healthcare: Prevents medical emergencies from bankrupting everyday families and gives more people the access to the health care they need.

Increasing Worker Protections: Make sure that workers receive fair compensation for company success or accidents.

Trekking On:

Economic inequality can feel overwhelming and impossible to fix. It’s important to keep in mind that this gap is the result of deliberate policy decisions made over the past several decades. These rules were written by people, which means they can be rewritten by people. By focusing on the extreme concentration at the top 0.01%, we can move past dividing politics and focus on practical solutions. Changing our perspective from Left vs Right to Top vs Bottom will hopefully let us move past our differences and create an economy that creates a more prosperous and fair America for everyone. Remember, everyone has a voice. We just have to use it.

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Inequality.org. “Income Inequality.” Inequality.org, 2019, inequality.org/facts/income-inequality/. ‌

Anderson, Sarah. “Ten Facts about Wealth Inequality in the USA.” LSE Inequalities, 2 Jan. 2025, blogs.lse.ac.uk/inequalities/2025/01/02/ten-facts-about-wealth-inequality-in-the-usa/. ‌

Buchholz, Katharina. “Wealth of the 1% Reaches Decade High in the U.S.” Forbes, 30 Jan. 2026, www.forbes.com/sites/katharinabuchholz/2026/01/30/wealth-of-the-1-reaches-decade-high-in-the-us/. ‌

Gold, Howard. “Never Mind the 1 Percent. Let’s Talk about the 0.01 Percent.” The University of Chicago Booth School of Business, 29 Nov. 2017, www.chicagobooth.edu/review/never-mind-1-percent-lets-talk-about-001-percent.