The Elite Status: Defining America's Top 1%

Being in the top 1% in the USA is a topic that has intrigued economists for years. The top 1% of Americans have been demonized as fat cats who have grown richer while the middle class has stagnated. This has led to calls for higher taxes on the top 1% to address income and wealth inequality. However, the top 1% is not a monolithic group, and disparities exist within this group as well. The threshold for being in the top 1% varies depending on factors such as location and wage trends. In 2024, the minimum net worth of the top 1% of households was estimated to be around $13.7 million, while the average net worth was about $35.5 million. To be in the top 1% of wage earners, an individual needed to make over $785,000 per year in 2022. The top 1% in the USA constitutes approximately 1.6 million households, and their wealth and income have been steadily rising over the years.

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Income and wealth

The income threshold to be in the top 1% in the US varies by state and local wage trends. In 2021, the threshold was over $1 million in California, Connecticut, Massachusetts, New Jersey, and Washington, with Connecticut having the highest threshold of $1,192,947. In West Virginia, the threshold was lowest at $435,302. In 2024, the average income for the top 1% of wage earners was $785,968.

Wealth disparities between the top 1% and the rest of the population have increased over time. The minimum net worth of the top 1% of households is estimated to be between $5.8 million and $13.7 million. As of the second quarter of 2024, the average wealth of households in the top 1% was about $35.5 million, and these households held 30.3% of the country's total wealth. The top 1% of households and nonprofit organizations held 31.9% of all net worth in the US in the first quarter of 2022, while the lower 50% held just 2.5%.

Much of the wealth of the top 1% comes from stock prices and stock gains. They own more than 50% of the equity shares in private and public companies. They also benefit disproportionately from tax breaks for income, gifts, and estate taxes. The first $13.99 million of an estate is exempt from taxes as of 2025, allowing the wealthy to retain a larger portion of their assets.

There are disparities within the top 1%. Data shows that the income share of the top 1% increased between 1995 and 2015, but the income share of the top 0.1% rose by a higher percentage during this period. The top 0.01% saw the highest rate of increase in income share.

Income share

The income share of the top 1% in the USA has increased over time. Between 1995 and 2015, the income share of the top 1% rose from 15% to 22%. By 2022, the top 1% of wage earners made an average of $785,968, while the average wage for working Americans was $61,136. The threshold for being in the top 1% varies by state, with some states requiring an income of over $1 million per year, while in others, such as West Virginia, the threshold is lower at $435,302. As of 2024, there are 2,781 billionaires globally, with the US having the highest number of billionaires of any country at 813.

The income share of the top 1% is often compared to that of the top 0.1% and 0.01%. While the income share of the top 1% rose the most in percentage points between 1995 and 2015, the 0.01% had the highest rate of increase. The income share of the top 0.1% rose from 6% to 11% during this period, while the income share of the top 0.01% rose from 2.5% to about 5%. The average earnings of the top 0.1% were over $2.8 million in 2022.

The income share of the top 1% can also be compared to that of the bottom 90% of earners. Between 1979 and 2020, the wages of the top 1% increased by 206.3%, while the wages of the bottom 90% grew by only 28.7%. This disparity in income growth has led to a widening gap between the richest and poorest in the USA. The top 1% held about 23.3% of the nation's wealth in the second quarter of 2024, while the lower 50% held only 2.5%.

The income share of the top 1% is influenced by various factors, including stock ownership and tax breaks. The 1% own more than 50% of the equity shares in private and public companies, which contributes to their wealth. Additionally, tax breaks on income, gifts, and estate taxes disproportionately benefit the wealthy, allowing them to retain a larger portion of their assets.

Net worth

The minimum net worth required to be in the top 1% of net worth in the US has been estimated at $5.8 million or higher, $5.81 million, $13.7 million, $13,666,778, and $35.5 million. These figures vary depending on the source and the year of the estimate.

The net worth of the top 1% in the US has grown over time. According to the Economic Policy Institute, the net worth of the top 1% of American households rose steadily through the second half of the 20th century and beyond. In 1962, their net worth was about 125 times that of the average American household. By 2009, their net worth was about 225 times the net worth of the average household. The gap between the richest and poorest in the US more than doubled from 1989 to 2016.

Much of the wealth of the top 1% comes from stock prices. They own more than 50% of the equity shares in both private and public companies. They also benefit from tax breaks for income, gifts, and estate taxes, which allow them to retain a larger portion of their assets.

The top 1% of households and nonprofit organizations held 31.9% of all net worth in the US in the first quarter of 2022, according to DQYDJ. In contrast, the lower 50% of households and nonprofit organizations held only 2.5% of all net worth. The Federal Reserve reported that as of Q2 2024, the top 1% held 23.3% of the nation's wealth, or nearly three times as much as the 8.1% held by the middle 40% to 60% of Americans.

The ultra-high net worth individuals (UHNWI) represent another level of financial elite within the top 1%. In the US, it takes a minimum net worth of $30 million to be considered a UHNWI.

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Ultra-high net worth

In the United States, an ultra-high-net-worth individual (UHNWI) is typically defined as someone with a net worth of at least $30 million in investable assets. This definition, however, is not set in stone and is subject to change over time as more people become millionaires and billionaires. For instance, the Boston Consulting Group (BCG) uses a household definition of UHNW, placing individuals with more than $100 million in liquid financial wealth in this category.

UHNWIs are a small yet growing segment of the global wealthy population. They represent a minuscule portion of the global millionaire population (1%) but hold a disproportionately large share of their wealth (32%). As of the end of 2023, there were 626,600 UHNWIs worldwide, according to Knight Frank's 2024 Wealth Report, with the US home to the most UHNWIs of any country, at 208,560. The number of UHNWIs is projected to increase by 28.1% from the end of 2023 to 2028, with particularly high growth expected in India and China.

UHNWIs have distinct characteristics and behaviours when it comes to their wealth. They tend to allocate a significant portion of their portfolios to equities, commercial real estate, and bonds. Many UHNWIs store the majority of their wealth outside of traditional investment vehicles such as certificates of deposit, money market accounts, or 401(k)s. UHNWIs often have complex needs and expectations regarding their wealth, and their relationship with money can be influenced by how they acquired their wealth, be it through inheritance, earned income, or entrepreneurship.

The concentration of wealth among UHNWIs and the top 1% in the United States is significant. While the specific figures vary depending on the year and the methodology used, the top 1% of households in the US typically hold well over a third of the country's total wealth. In 2007, the richest 1% of Americans owned 34.6% of the country's wealth, while the bottom 50% held only 2%. In the first quarter of 2022, the top 1% of households held 31.9% of all net worth, while the lower 50% held just 2.5%.

The American upper class, often associated with the top 1%, is a social group defined by the highest social rank, economic wealth, lineage, and typically educational attainment. Their primary sources of income are assets, investments, and capital gains rather than wages and salaries. This group includes owners of large private companies, heirs to fortunes, and top executives of publicly traded corporations.

Income disparities

Income

In terms of income, the threshold to be considered part of the top 1% varies across states. In 2021, residents of California, Connecticut, Massachusetts, New Jersey, and Washington needed an adjusted gross income (AGI) of over $1 million to qualify for the top 1%. On the other hand, residents of Mississippi, New Mexico, and West Virginia could qualify with less than $500,000 in AGI, with West Virginia setting the lowest bar at $435,302. As of 2022, the average wage for working Americans was $61,136, while the average wage for the top 1% of wage earners was $785,968.

Net Worth

When it comes to net worth, the threshold to be in the top 1% is considerably higher. According to the Knight Frank Wealth Report, an individual in the US needs a net worth of about $5.8 million or higher to be in the top 1%. However, this figure may be even higher, with some sources citing a minimum net worth of $13.7 million for the top 1% of households.

Income vs Net Worth

While there is some correlation between wealth and income, it is not as strong as one might expect. High earners often have substantial assets, but this is not always the case. For example, individuals with high net worth may have their wealth tied up in illiquid assets like real estate or certain types of stocks, resulting in relatively lower incomes.

Trends Over Time

Income and wealth disparities have widened over time, with the wealthiest Americans growing richer much faster than the rest of the population. Between 1995 and 2015, the income share of the top 1% rose from roughly 15% to 22%. Similarly, between Q1 1990 and Q2 2024, the wealth held by the top 1% grew from 16.5% to 23.3%. As of Q2 2024, the top 1% of households held about 30.3% of the nation's wealth, while the bottom 50% held only 2.5%.

Factors Contributing to Disparities

One significant factor contributing to income disparities is stock ownership. The top 1% own more than 50% of the equity shares in private and public companies, and their wealth is closely tied to stock prices. Additionally, tax breaks for income, gifts, and estate taxes disproportionately benefit the wealthy, allowing them to retain and pass on their assets more easily.

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