Is Wealth Concentration Creating Economic Risk?

California is weighing a one-time 5% wealth levy on residents worth more than $1 billion to help plug Medicaid funding gaps.

The proposal faces legal and political hurdles, and critics warn it could push billionaires to relocate. Yet the broader issue extends beyond one state ballot measure.

The richest 1% now hold 32% of total US wealth, or $54.8 trillion, according to Federal Reserve data. The top 0.1% alone control 14.4%.

Meanwhile, the bottom half of households own just 2.5%, down from 3.5% in 1990. Consumption patterns reflect that shift.

Moody’s $MCO ( ▼ 0.33% ) data show the top 20% of households now account for nearly 60% of personal outlays, up from 50% in the early 1990s.

Much of billionaire wealth sits outside the traditional income-tax system. Executives such as Mark Zuckerberg have taken nominal salaries, while investors like Warren Buffett historically relied on stock ownership.

Borrowing against appreciated shares rather than selling them (a strategy often described as “buy, borrow, die”) can defer capital-gains taxes for decades.

A National Bureau of Economic Research working paper estimates the 400 wealthiest Americans face an effective tax rate of 24%, versus 45% for top labor-income earners.

The economic concern is not only fairness. As spending becomes increasingly concentrated among the ultrawealthy, overall demand grows more sensitive to equity markets. If markets fall sharply, consumption from that narrow cohort could retreat, amplifying downturns.

Even if California’s proposal fails, wealth concentration and tax structure are unlikely to fade from the national conversation.