Moral Low Ground


Shocking New Statistics on US Income Inequality

March 26, 2013 by Brett Wilkins in Rich & Poor with 0 Comments


Analysis of Internal Revenue Service data has revealed shocking disparities in income growth among American workers over the past six decades.

Writing for Tax Analysts, a non-profit tax news and analysis organization, Pulitzer Prize-winning tax policy journalist David Cay Johnston reports that between 1966 and 2011, average inflation-adjusted income of the bottom 90 percent of US workers grew by a negligible $59. Meanwhile, income of the top 10 percent of workers soared by $116,071. Depicted on a chart with $59 represented as one inch, it would take a piece of paper more than 163 feet long to show $116,071.

The numbers are even more jaw-dropping when comparing the bottom 90 percent to the top 1 percent and the top .01 percent. On a chart with $59 equalling one inch, the top 1 percent’s line would extend 884 feet, while the top .01 percent’s, whose 2011 average income of $23.7 million was $18.4 million more than it was in 1966, would need a sheet of paper nearly five miles long to depict.

Economists Emmanuel Saez and Thomas Piketty, who analyzed the IRS data, found that incomes and tax revenue rose in the years 2009-2011 as a result of the sluggish economic recovery, but 149 percent of the increased income went to the top 10 percent. How is such a figure possible? Because incomes for everyone else fell. The rich are indeed getting richer, and everyone else is getting poorer.

In order to be counted among the top 10 percent of US income earners, an individual requires an adjusted gross income (AGI) of $110,651. The threshold for the top 1 percent is $366,623, and to make it into the top .01 percent would require an AGI of at least $7.97 million.

According to the analysis, the disparity in income growth rates is largely attributable to the reduction of federal tax burdens for the wealthiest Americans. Johnston writes of a “major re-slicing of the national income pie” resulting from “tax, employment and other rule changes that began with President [Ronald] Reagan and intensified under President George W. Bush.”

The Saez-Pikkety analysis comes less than two years after the Congressional Budget Office (CBO) released statistics that showed an alarming increase in income inequality from 1979 to 2007. According to the CBO, the inflation-adjusted after-tax income of the top 1 percent of US households soared 275 percent in the 28 years studied. For the bottom 20 percent, income rose by a very modest 18 percent in that same period. In the CBO analysis, if national income was a pie, the top 1 percent’s share of that pie rose from 8 percent in 1979 to 17 percent in 2007, while the bottom 20 percent’s share dropped from 7 to 5 percent.

It should come as no surprise that, according to the US Census Bureau, 1 out of every 6 Americans is living in poverty, with poverty rates as high as 27.6 percent for blacks and 31.2 percent among families with a female head of the household.

According to the United Nations, the United States ranks 52nd in global income equality, falling between Senegal and Cambodia.

As for the current economic rebound, according to Saez, the richest 1 percent of Americans account for fully 93 percent of the recovery’s gains.

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