04/04/25
US: Almost all wealth is owned by top 50% of Americans. Tax cuts may deepen divide, experts say.
As published on: cbsnews.com, Friday 4 April, 2025.
A recent snapshot of U.S. wealth from the Federal Reserve depicts a nation where the top 50% of households controls 97.5% of the country's assets — a lopsided distribution that experts say could accelerate if President Trump's tax cuts are extended and low- and middle-income Americans take a hit from his tariff barrage.
While wealth inequality has always been part of American society, it's widened since the late 1980s, with the gains disproportionately flowing to the very wealthiest Americans, the Fed data shows. At the end of 2024, the top 1% of households owned 31% of the nation's assets, up from 23% in 1989, when the Fed data begins. Over that same period, the share owned by the bottom half slipped to 2.5% in 2024, down from 3.5% in 1989.
The data comes as Mr. Trump is seeking to extend his 2017 tax cuts in addition to a host of other reductions he promised on the campaign trail — from getting rid of taxes on Social Security income to making interest for some auto loans tax deductible. The benefits from those tax cuts are forecast to accrue largely to the top-earning households. At the same time, Republican lawmakers are eyeing cutbacks to some social safety net programs, such as Medicaid and food stamps, to pay for the tax cuts.
That combination could create a double-whammy for lower-income households, who wouldn't see much benefit from the tax cuts while also facing a loss of federal supports, according to a March 19 analysis from the Yale Budget Lab, a public policy think tank.
The lowest-earning 20% of households is forecast to take a hit of $1,125 per year if the tax cuts are extended and public benefits are cut, while the top 1% would enjoy an effective income boost of $43,500 annually under the same scenario, the group estimates.
"The combination is pretty devastating" for lower-income households, said Emily DiVito, senior adviser for economic policy at Groundwork Collaborative, a left-leaning think tank, and a former policy adviser at the Treasury Department. The wealth inequality "trend we have been experiencing for the last 40 years would be exacerbated."
The rising fortunes of America's richest households
The top 0.1% of U.S. households have seen their wealth surge to more than $22 trillion at the end of 2024. That represents more than 5 times that of the assets of the bottom half of American households, who hold a combined $4 trillion in assets.
High-income households are more likely than low- and middle-income families to have money left over after they pay their bills, which they can sock away into investments such as stocks or bonds, she noted. Extending Mr. Trump's tax cuts could provide top-earning households with even more disposable income, allowing their wealth to snowball over time, in other words.
To be sure, the Trump administration argues that the tax policies will help a broad range of Americans, with Mr. Trump saying in his joint address to Congress on March 4 that his tax cuts are "for everybody." He added, "We're seeking permanent income tax cuts all across the board."
Despite the nation's widening wealth disparities, Americans as a whole have grown much wealthier since the 1980s, with gains lifting the assets of every income group. The bottom 50% of households, for instance, has seen its wealth surge more than fivefold to $4 trillion last year compared with $700 billion in 1989, with most of those gains accruing since the start of the first Trump administration, the Fed data shows.
Still, the overall share of U.S. assets owned by the bottom half has declined since 1989 because a larger portion of the pie has been captured by the nation's wealthiest households, according to the Fed data.
Tariff impact on Americans
Mr. Trump is aiming to pay for some of the tax cuts by raising revenue from tariffs, which so far include 25% import duties on cars and auto parts imported into the U.S. as well as tariffs on steel, aluminum and other products. The president is set to announce a new round of tariffs on April 2, aimed at introducing so-called reciprocal tariffs to equalize the trade barriers between the U.S. and other nations.
Tariffs act as a tax on imported goods, which are paid by American companies that import the products from other nations. Those companies, such as Walmart or automakers like GM, are expected to pass on most or all of the tariff costs onto consumers, economists say.
That could impact low- and middle-income households the hardest because these households spend a larger share of their incomes on consuming the basics — from food to utility bills — than do higher-income Americans.
"[T]ariffs are a regressive tax, meaning people with lower incomes will pay a larger share of their earnings in taxes than high-income people," Senior Economist Adam Hersh and Chief Economist Josh Bivens at the Economic Policy Institute wrote in a March 28 research post. "Tariffs are essentially a consumption tax, and consumption as a share of income tends to fall as incomes rise."
Still, it's unclear how long the Trump administration's tariffs might persist, while economists note that the impact is likely to be felt most acutely by U.S. consumers in the short term. Mr. Trump's proposed tariffs on Canadian, Mexican and Chinese imports, slated to go into effect on April 2, could cost the typical household $1,200 per year, according to the Peterson Institute for International Economics.
That would come at a time when many consumers are already financially strapped after years of elevated inflation, with the lowest earning 20% of U.S. households spending 95% of their income on necessities, the Bank of America Institute said in a March 20 analysis.
The impact of the tariffs as well as cuts to safety net programs like Medicaid could "redistribute income from working- and middle-class families to the wealthy," said Brendan Duke, senior director for federal budget policy at the Center on Budget and Policy Priorities, a policy think tank, in an email.
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