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How do economists define the top 1% (income thresholds) in 2023?
Executive Summary
Economists and analysts in 2023 used tax and survey data to identify the U.S. top 1% of households as earning roughly between $650,000 and $790,000 nationally, with substantial state-by-state variation from the mid-$300,000s to well over $900,000 in high-cost states; different studies report different central estimates because they use different years of IRS data and different inflation adjustments [1] [2] [3]. Analysts also highlight that the top 1% control a disproportionate share of income and federal income tax but precise income cutoffs and average incomes vary by data source and by whether the metric is a threshold (minimum to be in the top 1%) or an average income of the group [1] [4] [5].
1. Why the headline numbers diverge: methodological fights that matter
Different analyses use different base years of IRS or survey data and different inflation adjustments, and that produces material differences in the reported top‑1% cutoff. For example, a July 2023 study cites a national cutoff of $652,657 based on 2020 IRS data inflated to May 2023 dollars, while SmartAsset’s January 2023 state‑by‑state work (which adjusts 2022 income data) shows state cutoffs like $374,712 in West Virginia and $955,261 in Connecticut; another 2024 SmartAsset update reports a national threshold near $787,712 using 2021 IRS data adjusted to 2024 dollars [1] [2] [3]. These differences are not trivial: whether a study uses 2019, 2020 or 2021 tax returns, and how it applies CPI adjustments, shifts the reported cutoff by tens of thousands of dollars, producing seemingly inconsistent headlines even though all studies are measuring the same underlying concentration of high incomes.
2. State variation: the top 1% is local, not national
All sources agree that where you live dramatically changes the income needed to be top 1%, with coastal and high‑cost states regularly showing the highest thresholds. The July 2023 report and January 2023 SmartAsset analysis both document ranges from roughly $367k–$374k in West Virginia up to $952k–$955k in Connecticut; SmartAsset and other updates show the five highest states often exceed $800k or even $1 million in later adjustments [1] [2] [6]. The practical implication is that “top 1%” is a relative, geographic concept: being top 1% nationally requires a lower dollar income than being top 1% in wealthier states, and analysts warn against treating a single national dollar figure as universally meaningful without state context [1] [3].
3. Thresholds versus averages: two different stories about the elite
Reports mix two distinct measures: the threshold (the minimum income to belong to the top 1%) and the average income of the top 1%. One source reports the national threshold near $652,657 (threshold), another reports an average top‑1% income near $749,000 or higher in some datasets, and later-year summaries cite average top‑1% incomes above $800,000 — the difference reflecting that average incomes are pulled up by the far tip of the distribution [1] [5]. Analysts point out that average top‑1% income is typically higher than the threshold, and changes over time in the incomes of the ultra‑rich (the top 0.1% or 0.01%) can raise averages even when threshold movement is smaller, so readers must note which metric a study reports.
4. What the studies say about tax incidence and concentration
Beyond cutoffs, the data consistently show the top 1% paying a disproportionately large share of federal income taxes and controlling a large share of reported income and wealth. A tax‑data summary cites the top 1%’s rising share of adjusted gross income and their payment of over 40% of federal income tax in some years, while other summaries link the top 1% to holding “over a third” of U.S. wealth versus 2% for the bottom half [4] [1]. These figures depend on whether analysts use tax return measures (which undercount non‑wage income for some groups) or wealth surveys, but all sources portray a concentration of resources at the top, supporting claims about rising inequality that motivate policy debates.
5. Bottom line: how to read 2023 top‑1% claims responsibly
When you see a 2023 figure for the top 1%, check three things: is the number a threshold or an average; what tax‑year data underlies it; and did the author adjust for inflation or geographic cost differences. The studies provided show national thresholds in the mid‑$600k to high‑$700k range in 2023‑era analyses, state ranges from roughly $370k to $955k, and higher average incomes reported when analysts include later years or focus on averages rather than cutoffs [1] [2] [3]. These are robust, repeated empirical findings: the top 1% is small in share but large in income and tax contribution, and exact dollar cutoffs depend on transparent methodological choices that any reader should inspect before comparing headlines [1] [4].