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Photo: Golli.

Richest 0.1 Percent Gets Richer

The wealthiest 242 families in Iceland saw their wealth grow by ISK 28 billion [$207 million, €186 million] last year. On average, each of these families gained ISK 116 million [$858,000, €772,000] in one year, Heimildin reports.

This group, the top 0.1 percent richest Icelandic families, has almost no debt, as their equity ratio stands at 98.4 percent. Each family owned on average ISK 1.5 billion [$11 million, €10 million] at the end of 2022 and owed only ISK 23 million [$170,000, €153,000].

Money attracting money

Although income inequality in Iceland ranks among the lowest in Europe, according to the Gini coefficient, wealth inequality remains a topic of debate. This recent data was reported by Minister of Finance Þórdís Kolbrún Reykfjörð Gylfadóttir in Alþingi as a response to an information request by Logi Einarsson, MP for the Social Democratic Alliance.

The data shows that the richest Icelanders earn most of their money by letting their money work for them. They invest in stocks and bonds, buy and sell businesses, and invest in property to be rented out or sold for profit. Therefore, nearly three quarters of the top 0.1 percent’s income was capital income. These earnings, which include dividends and profits from selling assets, are taxed at a lower rate of 22 percent, compared to the tax on wage income, which varies from 31.45 to 46.25 percent depending on the tax bracket.

In fact, 28 percent of all capital income in Iceland in 2022 went to these 242 families. If the group is widened to include the entire wealthiest top 1 percent, they received 46 percent of all capital income in Iceland last year.

Undervalued assets

Still, the assets of the top 0.1 percent are undervalued in these calculations. The data doesn’t include assets of Icelanders in pension funds and share prices are reported at their nominal value, instead of the market value which they could be sold at currently. The top 10 percent of wage earners last year owned 85 percent of all stocks held by households at the end of last year. These shares are worth a lot more than their nominal value indicates and, in all probability, the richer the family, the more shares it likely owns.

All in all, the wealth of all Icelandic households grew substantially last year, by ISK 1,624 billion [$12 billion, €11 billion] in total. The wealthier families received a disproportionally large share of this increase. Heimildin adds that for most Icelandic households, their wealth increase comes from rising property prices. Three quarters of Icelandic residential housing is held by people who own one property, generally the one they live in. For most people, this wealth could therefore only be realised by them selling their homes.

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