A quick post regarding income inequality, relying on a couple of wonkish resources. I have made several posts on this subject.
First off, there’s really no disputing that income inequality has been steadily increasing in America for decades. Wealth distribution inequality has increased too.
In terms of income, the highest 20% of households have increased their share of the overall income rather dramatically, as the graph below shows. That graph takes taxes into account.
From the Congressional Budget Office’s Trends in the Distribution of Household Income Between 1979 and 2007:
But the concentration of that increase in inequality has been among the top 1%. From the CBO:
For the 1 percent of the population with the highest
income, average real after-tax household income grew
by 275 percent between 1979 and 2007.
“Real” means inflation-adjusted. Those in the 81st to 99th percentile, by contrast, saw an increase of “only” 65%, but that was still far better than the next four quintiles:
Here’s what that looks like by year since 1979. It’s likely there was a big dip in the income of households in that top 1% during the 2007-2009 recession, but it has likely recovered just as it did after the recession a decade ago:
Econbrowser has a great post discussing some of these trends, including this:
Since 1995, the share of the top 1% has climbed to where the top 1% now earn significantly more than the bottom 50% combined. Despite the noticeable dips in the recessions of 2001 and 2007-2009, in 2009 the top 1% accounted for almost 17% of all the income reported.
The bottom 50% of earners accounted for only 12.8% of income in America in 2009.
The Econbrowser post discusses the progressive nature of income tax rates and the regressive nature of payroll taxes. Here’s the total federal tax burden in percentage terms for various income groups:
The federal taxes paid by that top 1% have been bouncing around some within our progressive tax structure, but right now they’re back at the level of 1990, according to James Hamilton at Econbrowser.
Given the data, Hamilton has this to say: “Trying to prevent an increase in tax rates on the richest 1% of Americans looks to me like a losing strategy for the Republicans.”
Btw, Paul Krugman makes a great point that we don’t really need to talk about the top 1% — an arbitrary number — when it’s really a much smaller cohort with the greatest gains. See: “We Are the 99.9%.” From that column:
If anything, however, the 99 percent slogan aims too low. A large fraction of the top 1 percent’s gains have actually gone to an even smaller group, the top 0.1 percent — the richest one-thousandth of the population.