Because of hidden tax evasion schemes, the wealth of the super-affluent, or the 1% of the world's households, is probably underestimated, reports Bloomberg, citing research conducted separately by European Central Bank economist Philip Vermeulen and London School of Economics’ Gabriel Zucman.
The 1 percent held 35 percent to 37 percent of wealth in 2010, exceeding the 34 percent indicated in the Federal Reserve’s Survey of Consumer Finances, Vermeulen found in his paper, reports Bloomberg.
Jeffrey Hollender, who is among the wealthiest 1 percent in the U.S., admits that "the more money that you have, the easier it becomes to hide that and avoid taxes.”
Very rich people also have wealth in foundations and holding companies that make calculations difficult, according to Zucman.
Over in Europe, about 10 percent of the wealth is in offshore accounts compared with 4 percent in the U.S.
“We always suspected there was some low-balling of the top 1 percent,” said Joseph Stiglitz, a Nobel-prize winning economist and author of “The Price of Inequality. ‘‘There’s a growing sense that our system is rigged and unfair.’’
According to Stiglitz, a greater concentration of income and wealth at the top could help explain why consumer spending has been slow to rebound from the recession that ended in June 2009.
“Some of the problems in the performance of the economic system are related to the true degree of inequality, not the measured degree of inequality,” Stiglitz told Bloomberg.
This unfair and rigged system is depriving nations of billions in tax revenue and obscuring shifts in global inequality.
Zucman told Bloomberg that "if inequalities are higher than we thought, then maybe it can change views on the extent to which marginal tax rates should be increased on top incomes or the extent to which we should use other tools, like a wealth tax.”
The additional revenues from these taxes could be used by government to address imbalances in wealth.
“People worry about the top 1 percent too much; the real question is whether there is opportunity for everyone else,” Tyler Cowen, an economics professor at George Mason University in Fairfax, Virginia, and co-author of the economics blog Marginal Revolution, told Bloomberg.
“Inequality in a meaningful sense has gone down.”