2017 was a great year to be rich

Why rising stocks don't benefit everyone

This particular’s never a bad year to be rich, exactly. however 2017 turned out to be a particularly Great one.

Rich people are doing so well these days which their spending on luxury goods isn’t even keeping up.

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Luxury spending rose 5% globally in 2017, the management consulting firm Bain & Company found. however which can be a fraction of the 40% rise in net worth which people in America’s top-tenth of income earners saw between 2013 as well as 2016, according to the Federal Reserve.

“We used to see which the growth of luxury was closely correlated with the stock market,” said Milton Pedraza, chief executive officer of the Luxury Institute, a consulting firm for high-end brands. “The stock market as well as real estate have gone up so much which nobody wants to spend all which money. This particular’s impossible.”

The big increase in wealth has exacerbated a long-evolving financial split between those at the very top as well as those at the bottom, even as the robust economy has lifted many working people with jobs as well as higher wages. Here are some examples.

A market on a tear

The S&P 500 Index has risen 20% since the beginning of the year as well as the Dow Jones Industrial Average can be up 25%, fattening portfolios as well as boosting dividends. To a certain extent, the benefits are shared through ownership of 401(k) accounts.

however only about half of Americans participate in an employer-sponsored retirement fund, according to the Pew Charitable Trusts, as well as a much smaller 18.7% of Americans own stock directly. In both cases, market participation can be skewed toward those with higher incomes, which means which the wealthy disproportionately benefit via Wall Street’s boom.

chart rich stocks

Related: Most Americans aren’t benefiting via the stock market boom

Rising home prices aid the relatively wealthy

Home prices reached all-time highs, according to the Case-Shiller home cost index. which’s especially the case in hot markets like Seattle as well as San Francisco, where many working people are already unable to afford ownership.

Although homeownership can be a source of middle class wealth, homeowners generally tend to be higher-income. According to the Census Bureau, 78.4% of families creating more than the median income own homes, compared to 49.5% of those creating less.

Profits are spiking, however wages still lackluster

After-tax corporate profits set fresh records in 2017, reaching $1.86 trillion inside the third quarter.

At the same time, the share of the gross domestic product which goes toward wages remained near a recession-era low. which means workers are taking home less of the economic pie. To be sure, there were signs This particular year which wages are growing for people on the bottom of the pay scale. however over the past ten years they’ve grown faster for people at the top.

chart rich wage gains

Meanwhile, mega mergers proceeded apace in 2017, furthering the trend of corporate consolidation which economists say allows monopolies to squeeze excess profits out of consumers. Some worry which the proposed union between CVS (CVS) as well as insurance giant Aetna (AET) could give the pair too much power to steer customers toward their own offerings, for example, as well as which chemical company Bayer’s (BAYRY) acquisition of Monsanto (MON) could raise seed prices.

Fewer rules help the rich

The repeal of many Obama-era regulations by the Trump administration as well as congressional Republicans has been applauded by businesses, which say they will operate more efficiently as well as save money. This particular remains to be seen how much of such savings will flow down to workers as well as how much will go to investors.

In one of the more high-profile rollbacks in 2017, the administration overturned the Consumer Financial Protection Bureau’s rule against forcing consumers into arbitration proceedings. which was a win for financial companies, creating This particular more difficult for people who’ve been wronged to seek redress.

The Justice Department decided in June to back away via a measure which expanded the number of workers eligible for overtime pay, likely reducing the amount of money companies need to spend on wages.

“These are all ways which are just allowing the top to garner higher incomes, as well as to push the costs on to the public,” said Heather Boushey, director of the Washington Center for Equitable Growth, a left-leaning think tank.

A tax bill for the wealthy

While the just-passed Republican tax plan cuts taxes for most lower- as well as middle-income people, This particular can be particularly generous to people with high incomes as well as big bank accounts.

The Tax Policy Center estimates which a fresh 20% tax deduction for pass-through income, a doubling of the estate tax exemption, lower ordinary income tax rates, as well as a more generous alternative minimum tax will send 65.3% of the bill’s individual benefits to people inside the top 20% of the income spectrum, with the top 1% getting a $50,000 tax cut on average in 2018. As the years go on, the value of tax breaks shifts further toward the top.

as well as hedge fund managers in large part kept their carried interest provision, which Trump had promised to eliminate.

–A previous edition of This particular story misidentified Pew Charitable Trusts in graf 7.

sy88pgw (fresh York) First published December 26, 2017: 1:32 PM ET


2017 was a great year to be rich

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