The Wealth Detective Who Finds the Hidden Money of the Super Rich
Gabriel Zucman started his first real job the Monday after the collapse of Lehman Brothers. Fresh from the Paris School of Economics, where he’d studied with a professor named Thomas Piketty, Zucman had lined up an internship at Exane, the French brokerage firm. He joined a team writing commentary for clients and was given a task that felt absurd: Explain the shattering of the global economy. “Nobody knew what was going on,” he recalls.
At that moment, Zucman was also pondering whether to pursue a doctorate. He was already skeptical of mainstream economics. Now the dismal science looked more than ever like a batch of elaborate theories that had no relevance outside academia. But one day, as the crisis rolled on, he encountered data showing billions of dollars moving into and out of big economies and smaller ones such as Bermuda, the Cayman Islands, Hong Kong, and Singapore. He’d never seen studies of these flows before. “Surely if I spend enough time I can understand what the story behind it is,” he remembers thinking. “We economists can be a little bit useful.”
A decade later, Zucman, 32, is an assistant professor at the University of California at Berkeley and the world’s foremost expert on where the wealthy hide their money. His doctoral thesis, advised by Piketty, exposed trillions of dollars’ worth of tax evasion by the global rich. For his most influential work, he teamed up with his Berkeley colleague Emmanuel Saez, a fellow Frenchman and Piketty collaborator. Their 2016 paper, “Wealth Inequality in the United States Since 1913,” distilled a century of data to answer one of modern capitalism’s murkiest mysteries: How rich are the richest in the world’s wealthiest nations? The answer—far richer than previously imagined—thrust the pair deep into the American debate over inequality. Their data became the heart of Vermont Senator Bernie Sanders’s stump speech, recited to the outrage of his supporters during the 2016 Democratic presidential primary.
Zucman and Saez’s latest estimates show that the top 0.1% of taxpayers—about 170,000 families in a country of 330 million people—control 20% of American wealth, the highest share since 1929. The top 1% control 39% of U.S. wealth, and the bottom 90% have only 26%. The bottom half of Americans combined have a negative net worth. The shift in wealth concentration over time charts as a U, dropping rapidly through the Great Depression and World War II, staying low through the 1960s and ’70s, and surging after the ’80s as middle-class wealth rolled in the opposite direction. Zucman has also found that multinational corporations move 40% of their foreign profits, about $600 billion a year, out of the countries where their money was made and into lower-tax jurisdictions.
Share of U.S. Wealth Held by the Top 1%
Data: Gabriel Zucman
Like many economists, Zucman and Saez have embraced the political implications of their research. Unlike many, they champion policy recommendations that are bold and aggressive. Before Massachusetts Senator Elizabeth Warren started her 2020 presidential campaign by proposing a wealth tax, she consulted the pair, who estimated that her tax would bring in $2.8 trillion over the next decade. She conferred with them again before floating a corporate tax on profits above $100 million, which they calculated would raise more than $1 trillion over 10 years. Sanders came looking for their advice on his estate tax plan, which would establish rates as high as 77% on billionaires. And when New York Representative Alexandria Ocasio-Cortez proposed on 60 Minutes to hike the top marginal tax rate to as much as 70% on income above $10 million, Zucman and Saez were fast out with a New York Times op-ed in support.
The pair has now written a cookbook of sorts for any 2020 candidate looking to soak the rich. The Triumph of Injustice, to be published by W.W. Norton & Co. early next year, focuses on how wealth disparity can be fought with tax policy. The tools Zucman has identified to date challenge a series of assumptions, fiercely held by many economists and policymakers, about how the world works: That unfettered globalization is a win-win proposition. That low taxes stimulate growth. That billionaires, and the super profitable companies they found, are proof capitalism works. For Zucman, the evidence suggests otherwise. And without taking action, he argues, we risk an economic and political backlash far more destabilizing than the financial crisis that sparked his work. The Wealth Detective
America’s top wealth detective probes the secrets of the super rich in a tidy, white-walled office with an enviable view of the San Francisco Bay. His methods are unusually brute-force compared with those of recent-vintage U.S. economists, relying not on powerful computers, regression analyses, or predictive models, but on simple, voluminous spreadsheets compiling the tax tables, macroeconomic data sets, and cross-border-flow calculations of central banks. He does it on his own, only rarely outsourcing to graduate students.
“You can conduct this detective work only if you do it to a large extent yourself,” he says. “The wealth is not visible in plain sight—it’s visible in the data.” Lately, he adds, the Bay Area humming outside his window, “I see more of Silicon Valley in my Excel spreadsheets, especially in the amount of profits booked in Bermuda and Ireland.”
Born and raised in Paris, Zucman is the son of two doctors. His mother researches immunology, and his father treats HIV patients. Politics was a frequent dinnertime topic. He says the “traumatic political event of my youth” occurred when he was 15. Jean-Marie Le Pen, founder of the far-right National Front party, edged out a socialist candidate to win a spot in the final round of 2002 presidential voting. Zucman remembers joining the spontaneous protests that followed. “A lot of my political thinking since then has been focused on how we can avoid this disaster from happening again,” he says. “So far, we’ve failed.” (Le Pen’s daughter made the presidential runoff in 2017 and won almost twice as many votes as her father.)
Zucman met his future wife, Claire Montialoux, in 2006, in a university economics class. She’s now finishing her Ph.D. dissertation, which shows how the U.S.’s expansion of the minimum wage in the late 1960s and ’70s helped black workers, narrowing the racial earnings gap. “We share the same vision for why we are doing social sciences,” Zucman says. “The ultimate goal is how can we do better?”
His own graduate work in Paris saw him compile evidence that the world’s rich were stowing at least $7.6 trillion in offshore accounts, accounting for 8% of global household financial wealth; 80% of those assets were hidden from governments, resulting in about $200 billion in lost tax revenue per year. At the same time, he was helping his adviser, Piketty, pull together more than 300 years of wealth and income data from France, Germany, the U.K., and the U.S. They co-authored a paper on the numbers, which became a key part of Piketty’s surprise 2014 bestseller, Capital in the Twenty-First Century. The following year, Zucman’s doctoral research was also published as a book, The Hidden Wealth of Nations.
He arrived in the U.S. in 2013, the same year President Obama was declaring inequality “the defining challenge of our time.” Zucman had been recruited to Berkeley by Saez, winner of economics’ prestigious John Bates Clark Medal in 2009 and a MacArthur Fellowship in 2010. They took up offices next to each other and set about trying to solve the riddle of America’s hidden wealth, unveiling their estimates as a draft paper the following year.
Saez
None of it was easy. Tax collectors such as the IRS generally require taxpayers to report income, not wealth. And much of the world’s wealth is held in forms—homes, art, retirement accounts, non-dividend-paying stocks—that produce no income prior to a sale. A real estate mogul with a billion-dollar property portfolio and billions more in cash stashed overseas can still report a tiny income. Most inequality researchers therefore rely on voluntary surveys, which often fail to identify enough of the very richest, or data on the estate tax, which has gotten easier and easier to avoid.
Zucman and Saez started with the IRS. The agency opens its doors to researchers under strict conditions, and only Saez, a U.S. citizen, was allowed inside a facility, where he downloaded anonymized statistics up to the extreme end of the income scale. The duo then translated the data into wealth estimates. Saez had had the idea for a while. “I was doubting how that could actually be done, because there are so many complications,” he says. “And then Gabriel came along.” With each asset class, from equities and real estate to pensions and insurance, they painstakingly estimated the relationship between income and wealth in the U.S., checking and tweaking based on data from external sources.
They found that something cataclysmic happened around 1980. As Ronald Reagan was winning the White House, the top 0.1% controlled 7% of the nation’s wealth. By 2014, after a few decades of booming markets and stagnant wages, the top 0.1% tripled its share, to 22%, a bit more wealth than the bottom 85% of the country controlled. The data showed the extent of the problem and the absence of a solution: In the aftermath of the financial crisis, while middle-class Americans were burdened by job losses and debt, the rich had swiftly resumed their party. Wealth that had vanished from financial markets after Lehman’s collapse had reappeared, doubling and tripling the portfolios of well-off investors.