Wealth Inequality Accelerates Worldwide on Inheritance, Tax Avoidance
Wealth inequality is growing worldwide, according to a new report by Credit Suisse. A greater share of wealth is being held by a smaller number of ultra-rich families worldwide as larger inheritances, family trusts, and similar arrangements to avoid taxes help the ultra-wealthy gain a greater portion of total capital in economies throughout Europe, Asia, and in the United States.
According to the report, wealth inequality is likely to worsen in the near term thanks to a lack of wealth and inheritance taxes and low interest rates, which are combining to encourage greater capital gains that benefit the portfolios of ultra-high net worth individuals. According to the report, “inheritance tends to raise the level of wealth inequality and to ensure that wealth inequality persists over time, especially in slower growth economies.”
Additionally, the Credit Suisse report said that governments were failing to tackle income inequality as “family trusts and similar arrangements are frequently used to mitigate estate tax liability”, urging governments to implement “progressive income and capital taxes [that] are likely to lower wealth inequality.”
Greater Holdings in Top Decile Worldwide
The share of wealth in the top decile rose considerably in many developing economies, according to the report. In China, Hong Kong, and India, the top 10% saw a “rapid rise” in their share of the total national wealth. In 2000, the top 10% in China held 48.6% of the nation’s wealth. In 2014, that number had ballooned to 64%.
However, China remains a considerably more egalitarian nation than the United States, where the top decile holds 74.6% of the total wealth in the nation in 2014.
The only nations that have low wealth inequality (in which the top decile has less than half of the nation’s total wealth) in 2014 are Belgium and Japan. The highest inequality can be found in Hong Kong, Switzerland, and the United States, while high inequality is found in Austria, Denmark, Germany, Israel, Norway, Sweden, and nine emerging markets, where the top decile holds more than 60% of the nation’s wealth.
Thirty Five Million Millionaires Worldwide
The report estimates that there are about 35 million adults worldwide with net worth exceeding $1 million, while 3.2 billion have net worth under $10,000. The combined wealth of the world’s millionaires is 15 times the combined wealth of the bottom 3.2 billion.
The combined global wealth is currently $55,957 per capita, according to the Credit Suisse report.
Wealth Inequality Exceeds Income Inequality, Debt Risks
The report argues that wealth inequality “is much higher than income inequality” both in the United States and worldwide. While income inequality has seen a sharp rise in the late 20th century, Credit Suisse believes that wealth inequality has risen in the top 10% worldwide since 1989.
However, the report notes that most wealth inequality is probably substantially worse in the United States than most estimates suggest. “While top decile wealth shares above 70% are high by international standards, they understate the true level of wealth inequality in the United States since the estimates are derived from the Survey of Consumer Finance (SCF), which explicitly omits coverage of a small number of holdings (roughly those of billionaires) at the apex of the pyramid.”
While Credit Suisse believes wealth inequality is rising in the United States, the report notes that debt levels in the U.S. remain relatively low. “Debts of USD 57,800 per adult are not extreme by international standards,” said the report.