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American Pie: No matter how you slice it, when it comes to income and wealth in America the rich get most of the pie and the rest get the leftovers. The numbers are shocking. Today the top 1 percent of Americans control 43 percent of the financial wealth (see the pie chart below) while the bottom 80 percent control only 7 percent of the wealth. Incredibly, the wealthiest 400 Americans have the same combined wealth as the poorest half of Americans -- over 150 million people. According to the Center for Budget and Policy Priorities: In 2007, the share of after-tax income going to the top 1
percent hit its highest level (17.1 percent) since 1979, while
the share going to the middle one-fifth of Americans shrank to
its lowest level during this period (14.1 percent). Slate.com collects more data in an article titled "The Great Divergence In Pictures: A Visual Guide to Income Inequality.": Income for the top 20 percent has increased since the 1970s while income for the bottom 80 percent declined. In the 1970s the top 1 percent received 8 percent of total income while today they receive 18 percent. During the same period income for the bottom 20 percent had decreased 30 percent. In the 1970s the top 0.1 percent of Americans received 2 percent of total income. Today they get 8 percent. In 1980 the average CEO made 50 time more money than the average worker while today the average CEO makes almost 300 time more than the average worker. Over the past 30 years the rich in America have become a lot richer, while many millions of Americans have seen their income stagnate or decline. As Warren Buffett, the second richest man in America, famously said, “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” Wealth and income inequality today is by far the worst in the industrialized world and has fallen in line with many Third World countries. Nobel Prize winning economist Joseph E. Stiglitz explains why this is bad news: Some people look at income inequality and shrug their shoulders.
So what if this person gains and that person loses? What
matters, they argue, is not how the pie is divided but the size
of the pie. That argument is fundamentally wrong. An economy in
which most citizens are doing worse year after year—an economy
like America’s—is not likely to do well over the long haul. Where Has All the Money Gone? This may be the one of the most important graphs you will ever see. It show the reason for the decline of the American middle class -- how the rich have become so much richer in the last 30 years and why the rest of us have been left behind: In the post World War II period through the mid 1970s the productivity of the American worker increased at a steady rate. During this period workers were rewarded for their increased productivity with a commensurate increase in wages. Then something happened. Productivity continued to increase, but workers' wages stagnated. Trickle Up Economics As Nobel Prize winning economist Paul Krugman points out, since 1973 national Gross Domestic Product (GDP) per household has increased 46 percent in real terms, but median income per household has only increased 15 percent. Where did the other 31 percent go? It went to the wealthy. ... the gap between economic growth and median incomes has a lot
to do with rising inequality. Supply Side economics is the cornerstone of Republican economic theory and has driven U.S. economic policy since the Ronald Reagan presidency. This is how Investorpedia describes it: Supply-side economics is better known to some as "Reaganomics", or the "trickle-down" policy espoused by former U.S. president Ronald Reagan. He popularized the controversial idea that greater tax cuts for investors and entrepreneurs provide incentives to save and invest and produce economic benefits that trickle down into the overall economy. In other words, if government economic policy focuses on making
the rich richer, the benefits will "trickle down" to everyone
else. As supply siders are
fond of saying, "A rising tide lifts all boats." Since
Supply Side economics came to dominate American economic policy
during the Reagan administration, the rising economic tide has
certainly lifted a lot of yachts, but at the same time it has
left most of the row boats stuck in the mud.
Read More About Wealth and Income Inequality in America Plutocracy Now A huge share of the nation's economic growth over the past 30
years has gone to the top one-hundredth of one percent, who now
make an average of $27 million per household. The average income
for the bottom 90 percent of us? $31,244. The Great Divergence in Pictures: A Visual Guide to
Income Inequality During the 20th century, the United States experienced two major trends in income distribution. The first, termed the "Great Compression" by economists Claudia Goldin of Harvard and Robert Margo of Boston University, was egalitarian. From 1940 to 1973, incomes became more equal. The share taken by the very richest Americans (i.e., the top 1 percent and the top 0.1 percent) shrank. The second trend, termed the "Great Divergence" by economist Paul Krugman of Princeton (and the New York Times op-ed page), was inegalitarian. From 1979 to the present, incomes have become less equal. The share taken by the very richest Americans increased. Redistribution from the Feds? Not Really The sad but true story of wages in America Recent debates about whether public- or private-sector workers earn more have obscured a larger truth: all workers have suffered from decades of stagnating wages despite large gains in productivity. The current public discussion illogically pits state and local government employees against private workers, when both groups have failed to sufficiently benefit from the economic fruits of their labors. This paper examines trends in the compensation of public (state and local government) and private-sector employees relative to the growth of productivity over the past two decades. Wealth Inequality Destroys US Ideals Since the national rise of Ronald Reagan three decades ago, the United States has been on a deadly course for a Republic, with wealth rapidly concentrating at the top and average Americans sinking or struggling to stay afloat. There Was a Class War. The Rich Won It. What happens if there’s a class war and only one side bothers to
show up and fight it? That’s what happened over the last thirty
years. There was a class war, and the rich won. Period. It’s
over, they kicked our knees out from under us, put on their
steel toed boots and spent the last thirty years telling us that
they were going to trickle on us and we’re going to like it and
beg for more. Beggar Thy Neighbor, Beggar Thyself Having won one class war, Republicans are starting a second. To perpetuate record levels of income inequality not seen since before the Great Depression, conservatives are agitating for middle class Americans to wage a civil war on each other. Their latest divide-and-conquer tactic is to portray government workers as "takers" and "parasites" somehow responsible for the decline of manufacturing and other sectors of the U.S. economy. Of course, like so much Republican mythmaking, the claim not only is untrue, but a cynical diversion to deflect attention from the real winners in the class war. Income Gaps Between Very Rich and Everyone Else More Than
Tripled In Last Three Decades, New Data Show The gaps in after-tax income between the richest 1 percent of
Americans and the middle and poorest fifths of the country more
than tripled between 1979 and 2007 (the period for which these
data are available), according to data the Congressional Budget
Office (CBO) issued last week. Taken together with prior
research, the new data suggest greater income concentration at
the top of the income scale than at any time since 1928. Of the 1%, by the 1%, for the 1% It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. Watch Joseph Stiglitz on Democracy Now HERE and HERE. Widening income-productivity growth gap and inequality It now emerges, from the latest figures released by the BLS in the US, that changes in
workers real hourly compensation has been lagging labor
productivity growth. This effectively means that in relative
terms, workers are getting squeezed from both side. On the one
side, incomes of those at the top are exploding. On the other
hand, their own incomes are not even keeping pace with
productivity growth. Economic Growth and Household Income So the question is, what does account for the divergence between
economic growth and median family income? Why we must raise taxes on the rich Despite an economy that's twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they're employed they're earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That's less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that's only because so many families now have to rely on two incomes.) Record U.S. Income Gap Widening Again In June, an analysis from the Center on Budget and Policy Priorities confirmed that gap between rich and poor in the United States reached levels not seen since 1929. Between 1979 and 2007, the yawning chasm separating the after-tax income of the richest 1 percent of Americans from the middle and poorest fifths of the country more than tripled. But while the Bush recession which began in December 2007 temporarily halted the stratospheric advance of the wealthy, the rich - and the rich alone - have largely recovered their losses. Which means that the record level of income inequality in America is growing once again. The One-Percenters I have no objection to financial success. I've had a lot of it myself. All of my income came from paychecks from jobs I held and books I published. I have the quaint idea that wealth should be obtained by legal and conventional means -- by working, in other words -- and not through the manipulation of financial scams. Warning! Inequality May Be Hazardous to Your Growth Some dismiss inequality and focus instead on overall
growth—arguing, in effect, that a rising tide lifts all boats.
But assume we have a thousand boats representing all the
households in the United States, with boat length proportional
to family income. In the late 1970s, the average boat was a 12
foot canoe and the biggest yacht was 250 feet long. Thirty years
later, the average boat is a slightly roomier 15 footer, while
the biggest yacht, at over 1100 feet, would dwarf the Titanic!
When a handful of yachts become ocean liners while the rest
remain lowly canoes, something is seriously amiss. Taxes on the wealthy have gone down dramatically Off-the-charts income gains for super-rich Inequality Data & Statistics Data from tax returns show that the top 1 percent of households
in the United States received 8.9 percent of all pre-tax income
in 1976. In 2008, the top 1 percent share had more than doubled
to 21.0 percent. Top Ten Tax Charts Taxes for the Wealthy have Fallen Dramatically Also on Top Ten Tax Charts: ● The United States is a Low Tax Country Income Gap Between Rich, Poor the Widest Ever The top-earning 20 percent of Americans - those making more than
$100,000 each year - received 49.4 percent of all income
generated in the U.S., compared with the 3.4 percent earned by
those below the poverty line, according to newly released census
figures. That ratio of 14.5-to-1 was an increase from 13.6 in
2008 and nearly double a low of 7.69 in 1968. The Top 10 Tax Breaks -- And How They Help The Wealthy The Most The government spends money through appropriations and writing
checks, but it also showers individuals and companies with a
astonishing array of special exemptions, credits and deductions
that amount to a $1.1 trillion giveaway each year. (For
comparison: the big budget fight that concluded last week cut
spending by about $38 billion.) Supply-Side Failure from Theory, to Outcomes, to Danger
of Citizens United Decision Republican tax cut/deregulation (supply-side) policy assumes the United States to be a closed economic system where the benefit remains in America when in fact we invest in a global economy. A critical break occurred in supply-side theory when enhanced savings from tax cuts was not followed by increased US capital investment. The failure of this policy to stimulate US business investment contributes to its underperformance in jobs creation, job recovery following recession, GDP growth, real annual median household income growth and wage levels. Without economic stimulative effects from this policy, the loss of tax revenue from tax cuts was not offset by increased tax receipts from economic growth and our national debt has substantially increased as a fraction of our economy under all five complete 4-year periods where this policy has been in effect since 1981. With no control over where the wealthy and corporations deploy their capital, the money we borrowed to support tax cuts largely favoring the wealthy has supported job creation and business growth abroad while our job creation has lagged at home. [Emphasis added] Median U.S. household income fell 5% between 1999 and 2009.
Globalization remains the core problem [Emphasis added] Income Inequality: Too Big to Ignore People often remember the past with exaggerated fondness.
Sometimes, however, important aspects of life really were better
in the old days. [Emphasis added] America Is Not a Third World Country - Yet If low taxes are the key to economic growth, as Republicans
claim, why aren't we doing better? What explains the phenomenal
growth of the 1950s, when the top marginal rate hit 91 percent?
Or the years following the Democrats' 1993 tax hike on high
incomes, when the economy boomed, the budget ran a surplus and
the rich did better than ever? The Very Rich Really Are Different “Let me tell you about the very rich. They are different from
you and me,” wrote F. Scott Fitzgerald. He wasn’t talking about
taxes (the laws were very different back in 1926) but his
assertion certainly applies to the way the wealthy fare under
today’s tax law. Middle-Class Americans More Productive, But Earning Less:
Report American workers' productivity has soared over the last 30
years, but that extra output hasn't translating into higher
earnings for the American middle class, according to a report released this week. The big debt lie: After three decades of failed experiments,
you'd think we might finally give up on supply-side economics The betting system the GOP's been playing for the past 30 years
is called supply-side economics. "The theory goes like this,"
explains David Cay Johnston. "Lower tax rates will encourage
more investment, which in turn will mean more jobs and greater
prosperity -- so much so that tax revenues will go up, despite
lower rates." Why More Equality? Our thirty years research shows that: Warren Buffett: 'Trickle Down' Theory Hasn't Worked (VIDEO) "The rich are always going to say that, you know, just give us
more money and we'll go out and spend more and then it will all
trickle down to the rest of you. But that has not worked the
last 10 years, and I hope the American public is catching on,"
Buffett said in the clip from ABC News' "This Week with
Christiane Amanpour." With executive pay, rich pull away from rest of America Whatever people think of it, the gap between the very highest
earners and everyone else has been widening significantly. [Emphasis added] (Not) spreading the wealth The income gap between the wealthy and the rest of the country
has grown along with dramatic increases in CEO pay. Plus three more charts. The world's richest are richer than before the crisis The wealth report highlights the uneven way that the economic recovery is playing out: the net worth of the wealthy has not trickled down to prop up global economies, as the U.S. fiscal deficit and sovereign debt crisis in Europe shows. However, the rich getting richer has funneled into the luxuries industry. World’s wealthiest people now richer than before the credit
crunch The globe's richest have now recouped the losses they suffered
after the 2008 banking crisis. They are richer than ever, and
there are more of them – nearly 11 million – than before the
recession struck. The final nail in the supply side coffin In the first quarter of 2011, aggregate U.S. GDP -- the total
value of all the goods and services produced in the United
States -- was higher than the peak reached before the recession
began in 2007. During the six quarters since the recession
technically ended in the second quarter of 2009, real national
income in the U.S. increased by $528 billion. But the vast
majority of that income was captured as profit by corporations
that failed to pass on their happy fortunes to their workers. Who Has Benefitted from the Post-Great Recession
Recovery? A New Look at the Growth Performance of Jobs, Wages,
Corporate Profits, and Stock Price Indices During the First Two
Years of Recovery Not one of these five groups of full-time wage and salary
workers received a real earnings boost over this two year
period. Each group experienced a modest weekly wage decline of 1
to 2 per cent over this period with the top two wage groups
actually faring slightly worse. Over the entire decade (2001 I –
2011 I), those workers at the top (90th percentile) obtained a
real weekly wage increase of $92 or 6% while those at the bottom
(10th percentile) experienced a wage loss of 1%. The lost decade
did not generate any substantive improvement in the real weekly
earnings of the vast majority of U.S. workers. REPORT: In 12 Years, Income For Richest 400 Americans
Quadruples, Tax Rate Nearly Halved New data released by the IRS reveals that, over a period of 12 years,
tax rates for the richest 400 Americans were effectively cut in
half. In 1995, the richest 400 Americans paid, on average,
29.93% of their income in federal taxes. In 2007, the last year
for which the IRS has released data, the richest 400 Americans
paid just 16.63%. Inequality Is Most Extreme in Wealth, Not Income Here’s a chart I put together showing what percentage of all of
America’s income (including capital gains) is going to each of
several income classes, today versus previous years: Graphing Rising Income Inequality, the Trademark of
Neoliberalism There are three ways to measure global income inequality. The
first measures inequality of incomes between states as a whole,
regardless of their population size. The second adjusts the
first to take account of states populations, hence a slightly
more personal measure of actual Global inequality; the third and
best measure is total global inequality, treating every person
as individual across the globe. The most widely accepted measure
of inequality is the Gini
Coefficient, which simply measures statistical dispersion.
The higher the gini coefficient, the higher the inequality
within a system. Here is the Global Gini Coefficient from 1950 to 1998 using
the third measure in inequality, that between each individual
person on the planet: Winner-Take-All Politics: Public Policy, Political Organization,
and the Precipitous Rise of Top Incomes in the United States That income inequality has grown substantially over the past
thirty years is no longer in dispute. Yet persistent confusion
remains about the exact nature of this change and its main
causes. Indeed, these two sources of confusion are linked, since
properly identifying the character of American inequality is
essential to offering convincing explanations of its rise. Wealth
and Income Inequality: America's Moral Crisis As more income has been pushed to the top over the past 30
years, the income growth of the middle class, and thus its
purchasing power, has not kept pace with the growth of the
economy. Quintile by quintile, the lower 80 percent of America
is down almost $10,000/yr in income distribution since 1979
while the upper 1% is up over $740,000 in average income during
that same timeframe. And with an economy that is 70% personal
consumption, this has resulted in weaker demand for goods and
services and thus slow recovery and higher unemployment (ref). 15 Mind-Blowing Facts About Wealth And Inequality In America The gap between the top 1% and everyone else hasn't been this bad since the Roaring Twenties Reagan Revolution Home To Roost -- In Charts It seems that you can look at a chart of almost anything and right around 1981 or soon after you'll see the chart make a sharp change in direction, and probably not in a good way. And I really do mean almost anything, from economics to trade to infrastructure to ... well almost anything. I spent some time looking for charts of things, and here are just a few examples. In each of the charts below look for the year 1981, when Reagan took office. Conservative policies transformed the United States from the largest creditor nation to the largest debtor nation in just a few years, and it has only gotten worse since then:
Working people's share of the benefits from increased productivity took a sudden turn down: 
Surprise! Census Data Contains Good News... For The Rich Today's Census Bureau release of household income data contains some awfully gloomy numbers: The nation's poverty rate is 15.1 percent, the highest since 1993, and median household income in 2010 was only $369 higher than in 1989. But, as usual, the new data contains some good news... for the rich. Here's a chart showing mean household income from 1978 to 2010 for the bottom, middle, and top quintiles:
Huge disparity in share of total wealth gain since 1983 ... wealth is now lower for the typical household than it was a generation ago in 1983, while the wealth at the upper end expanded a great deal. ... In other words, the richest 5 percent of households obtained roughly 82 percent of all the nation’s gains in wealth between 1983 and 2009. The bottom 60 percent of households actually had less wealth in 2009 than in 1983, meaning they did not participate at all in the growth of wealth over this period.
Equality and Efficiency Do societies inevitably face an invidious choice between efficient production and equitable wealth and income distribution? Are social justice and social product at war with one another? In a word, no. ... It may seem counterintuitive that inequality is strongly associated with less sustained growth. After all, some inequality is essential to the effective functioning of a market economy and the incentives needed for investment and growth (Chaudhuri and Ravallion, 2007). But too much inequality might be destructive to growth. Beyond the risk that inequality may amplify the potential for financial crisis, it may also bring political instability, which can discourage investment. Inequality may make it harder for governments to make difficult but necessary choices in the face of shocks, such as raising taxes or cutting public spending to avoid a debt crisis. Or inequality may reflect poor people’s lack of access to financial services, which gives them fewer opportunities to invest in education and entrepreneurial activity.
The Lost Decade for the Middle Class
... It is a mantra among economists that the growth of productivity translates into the an increase in society’s living standards. But what if that growth eludes the middle class and the poor? The productivity mantra is an average mantra—it does not account for the growth of income inequality. Today’s Census data show that since median HH inc peaked in 1999, the amount of income loss you suffered was very much a function of where you were in the income scale…the higher the better, or the least worst, I should say. Here’s a little table of household income changes at various percentiles (not that these Census data leave out realized capital gains, which play a large and important role in the increase in inequality.
... These Census results should force us to be very clear eyed in recognizing that markets sometimes fail and when they do so, the federal gov’t must fill two very important roles.
CHARTS: Here's What The Wall Street Protesters Are So Angry About... The problem in a nutshell is this: Inequality in this country has hit a level that has been seen only once in the nation's history, and unemployment has reached a level that has been seen only once since the Great Depression. And, at the same time, corporate profits are at a record high. In other words, in the never-ending tug-of-war between "labor" and "capital," there has rarely—if ever—been a time when "capital" was so clearly winning. Let's start with the obvious: Unemployment. Three years after the financial crisis, the unemployment rate is still at the highest level since the Great Depression (except for a brief blip in the early 1980s)
Income Distribution: Poor, Rich, And Richest [GRAPHIC] In 2008, the top 0.01 percent of earners controlled 5 percent of the nation's wealth, as depicted by Catherine Mulbrandon at Visualizing Economics. At the same time the bottom 90 percent of earners' share of income was slightly over half. But the gap between the super-rich and everyone else wasn't always so wide. Indeed, the share of income belonging to the top 1 percent of earners in the U.S. more than doubled between 1982 and 2008, according to the Wall Street Journal. ...
What are the Occupy Wall Street protesters angry about? The same things we’re all angry about. The only difference is the protestors turned their anger into public action. Occupy Wall Street lit the embers and the sparks are flying. Whether it turns into a genuine populist prairie fire depends on all of us. Now is not the time for wonky policy solutions, as the media meatheads are calling for. Rather, it’s time to air our grievances as loudly as possible, which is precisely what Wall Street and its minions fear the most. Here’s a brief list of why we should be angry and the charts to back it up. 1. The American Dream is imploding...
America's 99 percent are not just imagining it. The gap between the incomes of the rich and poor in this new Gilded Age is strikingly broad and deep, according to an October report from Congress' data crunchers. ...
There has been no shortage of headlines this week about the growing income and wealth inequality in the United States. A new study from the Congressional Budget Office, for example, found that income of the top 1 percent of households increased by 275 percent in the 30-year period ending in 2007. American households at the bottom and in the middle, meanwhile, saw income growth of just 18 to 40 percent over the same period But less attention has been paid to the fact that not only are the numbers bad in America, they’re particularly bad when compared to other developed nations. A new report (.pdf) by the Bertelsmann Foundation drives this point home. The German think tank used a set of policy analyses to create a Social Justice Index of 31 developed nations in the Organisation for Economic Co-operation and Development (OECD). The United States came in a dismal 27th in the rankings. Here, for example, is a graph of one of the metrics, child poverty, in which the U.S. ranked fourth-to-last (click for larger size):
For most of the post-World War II era, we tolerated relatively high inequality because we envisioned it as a necessary side effect of an exceptional economy that (supposedly) guaranteed opportunities for advancement. As the Wall Street Journal put it, we believed that “it is OK to have ever-greater differences between rich and poor … as long as (our) children have a good chance of grasping the brass ring.” However, the last three decades have invalidated our standing hypothesis. After the conservatives’ successful assault on the New Deal, America has lived a different reality — one perfectly summarized by a new Federal Reserve study revealing that today’s increasing inequality accompanies comparatively low social mobility. “U.S. family income mobility has decreased over the 1969-2006 time span, and especially since the 1980s,” notes the Fed paper, adding that “a family’s position at (the) end of (the) 2000s was … more correlated with its start position than was the case 20 years earlier.” Of course, some class mobility still exists. The trouble is that it’s primarily of the downward kind. As the Pew Charitable Trusts reports, roughly a third of those who grew up in the middle class have now fallen below that station in adulthood. This is why, for all the right-wing mythology about “Eurosocialism” snuffing out upward mobility, data from the Organization for Economic Cooperation and Development show that social mobility in uber-capitalist America is actually lower than in most industrialized countries.
But here’s the rub: The overall income of the top 1 percent has risen significanly faster than that over the same time period. The second chart shows that the percentage change of the overall average income of the top one percent has risen by 119 percent. That’s more than twice the amount of the change in their income tax, which grew by 54 percent in that time:
In the eight decades before the recent recession, there was never a period when as much as 9 percent of American gross domestic product went to companies in the form of after-tax profits. Now the figure is over 10 percent. During the same period, there never was a quarter when wage and salary income amounted to less than 45 percent of the economy. Now the figure is below 44 percent. For companies, these are boom times. For workers, the opposite is true. ...  Note: Personal taxes includes state and local income taxes, taxes on personal property and employee share of payroll taxes Source: Bureau of Economic Analysis, via Haver Analytics
Recession's Brief Dip in Income Inequality is Already Over With the rise of the Occupy movement and confirmation from the nonpartisan CBO that the U.S. income gap is at its highest level since 1929, defensive conservatives by necessity spawned a thriving if laughable cottage industry in income inequality denialism. Now with word from the New York Times that the share of income for the top 1 percent dropped from 23 to 17 percent between 2007 and 2009, you can expect more cries of "so get a time machine, Occupy Wall Street!" But the right-wing echo chamber need not worry about the plight of the tragically rich. While working Americans continue to struggle as the economy slowly recovers from the Bush recession, the rebound of Wall Street has ensured that the upper crust has already recouped its losses. As the data show, millionaires are not only making a rapid comeback. For the gilded class, the economic downturn is already over. Seizing on federal tax data showing that the average income for the top 1 percent fell to $957,000 in 2009 from $1.4 million in 2007, conservatives have complained that income inequality is so over: Analysts say the drop largely reflects the stock market plunge, and most think top incomes recovered somewhat in 2010, as Wall Street rebounded and corporate profits grew. Still, the drop alters a figure often emphasized by inequality critics, and it has gone largely unnoticed outside the blogosphere. By focusing on the top 1 percent, the Occupy Wall Street movement has made economic fairness a subject of street protest and political debate. "It's very interesting that this has become such a big topic now when the numbers are back to where they were in the 1990s," said Steven Kaplan, an economist at the University of Chicago's business school. "People didn't seem to be complaining about it then." That might have been because during the 8-year Clinton boom that generated 23 million new jobs, the rising tide for once did lift all (or at least most) boats. But after the Bush recession that started in December 2007, many Americans' dinghies were capsized by yachts once again cruising at full speed. As it turns out, the recession that has proved so devastating for most Americans for the wealthy has been merely a hiccup.
Changes in the Distribution of Income Among Tax Filers Between 1996 and 2006: The Role of Labor Income, Capital Income, and Tax Policy Summary This report examines changes in income inequality among tax filers between 1996 and 2006. In particular, the role of changes in wages, capital income, and tax policy is investigated. Inflation-adjusted average after-tax income grew by 25% between 1996 and 2006 (the last year for which individual income tax data is publicly available). This average increase, however, obscures a great deal of variation. The poorest 20% of tax filers experienced a 6% reduction in income while the top 0.1% of tax filers saw their income almost double. Tax filers in the middle of the income distribution experienced about a 10% increase in income. Also during this period, the proportion of income from capital increased for the top 0.1% from 64% to 70%. Income inequality, as measured by the Gini coefficient, increased between 1996 and 2006; this is true for both before-tax and after-tax income. Before-tax income inequality increased from 0.532 to 0.582 between 1996 and 2006—a 9% increase. After-tax income inequality increased by 11% between 1996 and 2006. Total taxes (the individual income tax, the payroll tax, and the corporate income tax) reduced income inequality in both 1996 and 2006. In 1996, taxes reduced income inequality by 5%. In 2006, however, taxes reduced income inequality by less than 4%. Taxes were more progressive and had a greater equalizing effect in 1996 than in 2006. Three potential causes of the increase in after-tax income inequality between 1996 and 2006 are changes in labor income (wages and salaries), changes in capital income (capital gains, dividends, and business income), and changes in taxes. To evaluate these potential reasons for increasing income inequality, a technique to decompose income inequality by income source is used. While earnings inequality increased between 1996 and 2006, this was not the major source of increasing income inequality over this period. Capital gains and dividends were a larger share of total income in 2006 than in 1996 (especially for high-income taxpayers) and were more unequally distributed in 2006 than in 1996. Changes in capital gains and dividends were the largest contributor to the increase in the overall income inequality. Taxes were less progressive in 2006 than in 1996, and consequently, tax policy also contributed to the increase in income inequality between 1996 and 2006. But overall income inequality would likely have increased even in the absence of tax policy changes.
Inequality, Poverty, and Why We’re Definitely Not Brokey First, on inequality, Michael Tanner from the Cato Institute couldn’t understand why I kept going on about inequality. It doesn’t have anything to do with poverty (Scott Winship of the Brookings Institution made a similar argument in a Senate hearing a few weeks back). Tanner argued that if everyone’s income doubled, poverty would go down but inequality wouldn’t change, so inequality must not matter. Um…ok…but that’s a total non-sequitur. What’s been happening for most—not all—of the past 30 years is the pattern of real income growth you see here, from a recent CRS study. Sure, if everyone’s income grew at the overall average of the first bar–20%–we’d have less poverty and less inequality. But in the real world, average income grew 20%, fell 6% at the low end, and was up 60% for the top 1%.
... This isn’t rocket science. If growth reaches the bottom, there’s less poverty. If inequality diverts growth from the bottom, poverty goes up.
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This
would be ok if the US hadn’t been getting richer, getting more
productive, ever since then, but I’m sure you won’t be surprised
to hear that, well, actually, productivity and whatnot has kept
going up. Yet somehow wages didn’t.
With
Tax Day fast approaching and deficit reduction all the rage, one
fact deserves significant attention: the wealthy are enjoying
some of the lowest taxes in generations. The Figure shows the
average tax rate in 1979, 1992, and 2007, as well as the tax
rate for the top 1% of households, and the top 400 households
(who have an average annual income of nearly $350 million).
Since 1979, the country’s overall average tax rate—the share of
income paid in taxes—has fallen slightly, but for those at the
top of the earnings ladder this share has fallen dramatically.
Put
together 
Technologically
induced productivity whose benefits are only partially (if at
all) passed along to workers. Union busting. Squeezing
workers to do more with less (which was something some hotshot
facilitator at a management seminar once called "work smarter,
not harder" before that insulting slogan went viral). Erosion of
the buying power of the minimum wage. A deteriorating
manufacturing base abetted by "free trade" agreements that pit
Americans against workers in China, India and elsewhere who earn
10 percent at companies which can compete without bothering with
safety and environmental regulations. The sum? One of the
plagues of the U.S. economy during the past few decades:
stagnant wages.
