The top decile of income earners control wealth that is 22 times greater than that of the middle quartile. Getty Images/iStockphoto
 
           
Americans are getting richer, and that’s mainly thanks to a record stock market. But while over half of U.S. households own equities, either directly in individual shares or in pooled investments such as mutual funds or exchange-traded funds, the big gains accrued to the top 10% of income earners.

Those are some of the Federal Reserve’s latest survey of consumer finances, an exercise it undertakes only every three years. Unlike most economic data that measure things in aggregate, however, this survey breaks down the numbers on a granular level.
The median value of all types of financial assets—bank accounts, bonds, stocks, funds, retirement accounts, cash-value life insurance and other managed accounts—increased 8%, to $23,500 in 2016 from $21,900 in the previous survey conducted in 2013. The mean value, however, jumped 22%, to $340,000 from $278,500, reflecting the skewing of wealth toward the top end.

By far the biggest driver of the increase was the jump in pool investments, either mutual funds or ETFs, which jumped to a mean of $776,000 per household, an increase of 63% from $477,300. The median increase in funds and ETFs was 38%, to $114,000 from $82,500. As the Fed report points out, the mean holdings for the top income decile was nine times that of the “upper-middle” (50-89.9 percentile) cohort.

Despite the rise in the stock market, households’ direct holdings of individual equities rose to a mean of $327,800 from $303,500, an increase of just 8%. The median holdings of individual stocks actually fell 10%, to $25,000 from $27,800. Only 14% of American households owned individual stocks in 2016, according to a research note from JPMorgan Chase on the Fed’s consumer-finance survey. That reflects the growing preference for funds among all income groups.

Whatever form in which households hold assets, wealth is now skewed even more toward the top end. Notes JPMorgan, the top decile of income earners control wealth that is 22 times greater than that of the middle quartile; that is twice the multiple of 11 times in 1995.

The concentration at the top end may be dampening the impact of the so-called wealth effect, the bank’s economists add. Upper-income households tend to have a lower propensity to spend their wealth, possibly because some of those assets are illiquid, especially their own businesses. If so, “gains in wealth that highly concentrated at the top may deliver less ‘bang for the buck’ in terms of aggregate consumption outcomes.”

There also could be political consequences, especially if Bernie Sanders, the self-proclaimed Socialist senator from Vermont and contender for the Democratic presidential nomination last year, has his way.

Under his health-care reform proposal, he would hit the top 0.1% of U.S. households with a 1% tax on their wealth to help fund his single-payer $1.4 trillion scheme. Not a tax on income, but on accumulated wealth.

Specifically, the Bernie tax would be levied on fortunes over $21 million at a rate of 1%. So, a billionaire would be on the hook for $9.79 million. This takes a page from French economist Thomas Piketty, who has called for a global wealth tax to fight inequality.

Can it happen here? As Willie Sutton is reputed to have said when asked why he robbed banks, that’s where the money is. Could heavily indebted governments put stock-market wealth in their sights one day? Never say never.