November 11, 2025

Increasing wealth concentration has a tendency to undermine democracy, according to a recent working paper by Manuel Schechtl, a 2022–2024 Stone Center postdoctoral scholar who is now an assistant professor of public policy at the University of North Carolina at Chapel Hill. Schechtl’s study combines two new sources of data to compare the extent of democratic backsliding in all 50 U.S. states. The combination of state-level wealth disparities and partisan politics “actively erode American democratic institutions,” he writes in his paper, which is part of the Stone Center Working Paper Series.

Schechtl recently spoke to the Stone Center about his findings. This interview has been edited for clarity and length.

In your paper, you say that “a substantial body of scholarship documents a negative link between income inequality and democracy.” Why isn’t there much research focused on a link between wealth inequality and democracy, and is the lack of research what led you to investigate this connection?

Schechtl: The main issue is the availability of data. We’ve always had more income data than wealth data, especially cross-nationally. Only recently has there been the development of databases that cover substantial numbers of countries, so that we can compare wealth inequality estimates over time and across countries.

In general, I think we do not have enough understanding of the downstream consequences of wealth inequality. The Stone Center and many other academic centers have done a lot of research on how much wealth inequality there is, and how concentrated it is. Does the top 10 percent hold more now than 20 years ago, and those types of questions. And that has been super important. But we also need to tackle the question of: Does this matter, in terms of social outcomes? For which characteristics of societies does it matter, if it even does, that wealth is distributed unequally, and is becoming even more so increasingly over time?

So there’s this broader agenda, where I ask if wealth inequality is explaining something else, rather than being the thing that is explained.

Why is wealth inequality, compared to income inequality, a factor that might exert a strong influence on politics and democratic institutions?

Schechtl: Wealth has become so unequally distributed at this point, and has increased so wildly throughout the last 25 years, that we are living in a totally different reality than even in the 1990s. I don’t think we realize that enough. At the very top, some people are simply above any consequences for their actions. People in that position can use their money for whatever political interference they’re interested in.

And there’s no way that income inequality or income concentration can translate in the same way. The disparities are not big enough. Also, income is a stream: you receive it every month or so. Wealth, in contrast, is a stock of resources that you’re sitting on that you can do whatever you want with, or that can be passed along to your children or held in some tax-free fund that goes on in perpetuity.

What is the benefit of focusing within a country, rather than across countries?

Schechtl: I do cross-country studies myself, but they’re tricky in the sense that countries are so different, in many different dimensions. The good thing about focusing on the U.S. is that we have 50 states, and there are different regulations among those states, but they all share a common federal framework. They’re all subject to the same constitution. And even if this is a minimum kind of commonality, it’s way more than, I don’t know, what the U.S. shares with a country in East Asia. For cross-country studies, oftentimes they would compare a democracy to an autocracy, which is difficult to quantify. And maybe we don’t need such huge differences to see the consequences of wealth concentration.

What were your sources of data for this project?

Schechtl: Last year, the GEOWEALTH team, based at the University of Toronto, Arizona State University, and the London School of Economics, published wealth inequality estimates at the state level in the U.S. for the very first time. Before then, no one had any wealth inequality estimates at the state level. Their data are based on multiple imputations and algorithm work, basically: the Census, community surveys, and the Survey of Consumer Finances. At the state level, these are big enough units to get to reasonable aggregates, I would say. There’s a lot of observations in the Census for every state.

The same is true for the other data source I used, which is the State Democracy Index, from researchers at UC Berkeley. That’s also new. Before that, there was no comparable measure of the quality of democracy by state.

These databases have never been combined before, essentially because they didn’t exist even a year ago. I simply put the two together.

Your paper shows a connection between rising wealth concentration and democratic backsliding. What could be done about this?

Schechtl: One important thing to note: the paper looks not at the level of quality of democracy in any given state; it looks at the change over the last 20 years. And it’s looking at wealth inequality. New York is one of the most unequal states in terms of wealth, but it’s not a bad one in terms of democracy scores. There might be states that are, let’s say, less unequal than New York, but they experienced much more pronounced democratic backsliding.

As for the connection between rising wealth concentration and democratic backsliding, there are two things we could do. One is to try to get rid of concentrated wealth. Wealth tax, state taxes, inheritance taxes, capital gains taxes, unrealized capital gains taxes: all of these proposals have been on the public stage at some point in the last couple of years. So, you could change how wealth is distributed, get rid of the top, essentially.

Or you could try to tackle the ways through which we assume wealth concentration translates into political power: you might have wealth, but you can’t buy candidates, or you can’t fund their campaigns, if there are effective limits. If you cannot buy the media, if you cannot fund the think tanks, then maybe you cannot do those things with the money that you have that actually yield influence in the political arena.

Currently, there’s nothing really constraining growing wealth concentration at the top. And there’s also very little in place that limits the channel from wealth to political power. These two ways tackle different dimensions of the problem. If I were a policymaker, I would push for both, of course.

States can do these things, too. Massachusetts has a millionaire’s tax on income. And it was just in the news that the state made way more money than expected from it [nearly $3 billion in fiscal 2025], and millionaires are not leaving the state. States can do this by themselves, and it actually works.

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