Rich Americans are increasingly unaware they’re classed as wealthy, say analysts—and Bain say a rise in ‘luxury shame’ means they may try to hide it
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EXCLUSIVE: UBS’s Paul Donovan notes that many wealthy Americans don’t perceive themselves as rich, leading to confusion between the reality and perception of wealth, a distortion fueled by social media. Bain & Co’s Claudia D’Arpizio highlights a rise in “luxury shame,” with consumers curbing visible status purchases and luxury brands needing to shift focus from elitism to culture and innovation as social pressures mount.
In times of economic volatility, wealth is often a subject that becomes politicized.
Under Trump 2.0, that means debates over who should be taxed and by how much, what constitutes ‘wealthy’, and how that private capital should be mobilized to address public finance concerns.
The Oval Office’s ‘One, Big, Beautiful Bill’ has divided opinion, after estimates from the Congressional Budget Office (CBO) found the policies would cost the poorest Americans roughly $1,600 a year while increasing the income of the wealthiest households by an average of $12,000 annually.
This is courtesy of policy tweaks such as an increased exemption threshold for estates and gifts to $15 million, as well as changing the cap amount on deductions for state and local taxes (SALT) from $10,000 to $40,000.
One issue with current debates about wealth taxes, says UBS’s chief economist Paul Donovan, is that often, America’s wealthier voters don’t realize they are rich.
Speaking on a roundtable last week, Donovan explained: “A rather interesting issue that we’re starting to see come up more and more in discussions … about things like wealth taxes and inheritance taxes is that increasingly there is a gap between the perception of wealth and the reality of wealth.
“So people will say, ‘yes, we must be doing a wealth tax for millionaires, but not me, I don’t count as a millionaire’ when in fact, you own a two-bedroom apartment in Manhattan. You are by definition, a millionaire.”
Donovan continued that social media also distorts wealth. Even if wealth inequality hasn’t changed, he said, people feel worse off because of the extravagance shared online.
“As a result, people are perhaps again getting more confused between their perception of their wealth and the realities of their wealth,” Donovan added.
“Many people are wealthy but they perceive themselves as somehow being disadvantaged because they’re not living the best life of a social media influencer.”
With wealth becoming an increasingly divisive topic socially—with even the well-off distancing themselves from the reality of their situation—consumers are already curbing their status symbol buys and experiences.
