Report: Less than 1% of North Carolinians hold over $495 billion in wealth

Thursday, Oct. 13, 2022 — A tiny fraction of North Carolina families hold a staggering amount of the state’s wealth, according to a new 50-state report by the D.C.-based research organization the Institute on Taxation and Economic Policy (ITEP). The wealth inequality highlighted by the holdings of these extremely wealthy families limits economic opportunities for everyday North Carolinians, and both reflects and exacerbates racial inequality. Tax policy is a critical way that policymakers could start addressing this inequality, but right now federal and state tax codes barely tax extreme wealth at all, and instead often favor sources of income that are derived from wealth.

“Runaway wealth inequality is an enormous problem for North Carolina, but the good news is that we have the tools to fight it,” said Patrick McHugh, Research Director at the NC Budget & Tax Center. “Closing the tax loopholes that have helped build so much of this nation’s extreme wealth is a commonsense way that lawmakers in Raleigh and D.C. can combat inequality and promote opportunity.”

The report defines extreme wealth as the wealth held by households with net worth over $30 million. This tiny fraction of families holds more than one in four dollars of wealth in the U.S.

Other key findings:

• The tiny group of North Carolinians with over $1 billion have a total of $18 billion in wealth alone.
• A nationwide tax of 2 percent on wealth over $30 million could have raised nearly $415 billion if it were in effect this year, including $4.6 billion from extremely wealthy North Carolinians. This tax would affect just 1 in 1,000 households in North Carolina, or 0.1 percent of the population. Nationally it would affect 0.25 percent of the population.
• Ninety-two percent of extreme wealth is owned by white, non-Hispanic families.
• A large share of North Carolina’s extreme wealth – 43 percent – is held in the form of unrealized capital gains, meaning investment income on which these families have yet to pay tax (and may never pay tax under current law). Nationally, this share is also 43 percent.
• A tax on the stock of unrealized gains in 2022 could be expected to raise between $529 billion and $3.9 trillion nationally depending on the tax rate chosen and the percentage of gains deemed to be realized. This includes between $6.3 billion and $46.5 billion from extremely wealthy North Carolinians. The report models six different policy options for taxing unrealized gains.

In addition to a wealth tax or a tax on unrealized capital gains as outlined above, the report identifies other ways to strengthen the federal taxation of extremely wealthy people, including:

• taxing increases in wealth annually as an asset grows (mark-to-market taxation)
• taxing increases in wealth before they are passed on to heirs (ending stepped-up basis)
• eliminating the tax preference that makes tax rates on realized capital gains lower than on income from work
• strengthening the estate tax
• creating an inheritance tax

All of these are viable policy options for lawmakers looking to curb wealth inequality.

“A very small number of households hold a staggering share of nationwide wealth, and they’ve been able to grow their fortunes in part because our tax system asks very little of them,” said Carl Davis, ITEP’s research director and an author of the report. “New and strengthened taxes on extreme levels of wealth could dramatically reduce the runaway inequality we face today.”

For more information, contact Patrick McHugh, Research Manager, at [email protected]; Mel Umbarger, Communications Manager, at [email protected], or Jon Whiten, ITEP – [email protected] or 917-655-3313.

 

The NC Budget & Tax Center is a non-partisan organization that works to document fiscal and economic conditions in communities to support the work of people, organizations, and government to advance solutions to poverty and pursue racial equity.

The Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan tax policy organization that conducts rigorous analyses of tax and economic proposals and provides data-driven recommendations on how to shape equitable and sustainable tax systems. ITEP’s expertise and data uniquely enhance federal, state, and local policy debates by revealing how taxes affect both public revenues and people of various levels of income and wealth.