I’ve been harping on the importance of capital gains for years — mainly emphasizing that (i) this is a massive and growing source of income, especially for the very wealthy, and (ii) this income is largely untaxed, due to a variety of loopholes around capital gains taxation (iii) the gains are not well understood from a macroeconomic standpoint.
The latest data release from the Federal Reserve contains data through the end of 2021, and it’s a doozie. The top-line number is absolutely huge: $16.2 trillion in nominal capital gains (93.8% of net national income), or $6.97 trillion in real capital gains (39.2% of net national income).
Most of the capital gains came from equities (very unequally distributed) and real estate (somewhat unequally distributed).
Capital gains were by far the main contributor in the increase in household net worth over the past year. Nominal net worth increased by $18.9 trillion in 2021. Of the total, $2.3 trillion came from savings / increased capital investment, and $16.7 trillion came from capital gains.
Private savings, as traditionally measured in the National Income and Product Accounts, does not include the value of real capital gains. The figure below adds in real capital gains to savings and compares the two magnitudes.
