Looking for some good economic news? Well, don't look to the latest data on the nation's rapidly expanding wealth and income gaps. As the Center on Budget and Policy Priorities noted in a pair of its "In Focus" reports this week: a) the richest Americans are getting richer – much richer.
Economists Thomas Piketty and Emmanuel Saez recently issued an updated version of their groundbreaking data series on income inequality in the United States. The data, which are based on Internal Revenue Service (IRS) files, are unique because they provide detailed information on income gains at the top of the income scale, extend back to 1913, and provide the first detailed look at the distribution of income in 2006.
The new data show:
- Between 2005 and 2006, the average income (before taxes) of the top 1 percent of households increased by $73,000 (or 7 percent), after adjusting for inflation, while the average income of the bottom 90 percent of households increased by just $20 (or 0.1 percent). (In 2006, the top 1 percent of households were those with incomes above about $375,000.)
- 2006 marked the fourth straight year in which income gains at the top outpaced those among the rest of the population. Since 2002, the average income of the top 1 percent of households has risen 44 percent, or $335,000, after adjusting for inflation. The average income of the bottom 90 percent of households has risen about 3 percent, or about $1,000.
As a result, the share of the nation's income flowing to the top 1 percent has increased sharply, rising from 15.8 percent in 2002 to 20.3 percent in 2006. Not since 1928, just before the Great Depression, has the top 1 percent held such a large share of the nation's income. In 2000, at the peak of the 1990s boom, the top 1 percent received 19.3 percent of total income in the nation.
and (surprise, surprise!), b) their taxes are falling.
New Internal Revenue Service (IRS) data show that the 400 U.S. taxpayers with the very highest incomes pay only 18 percent of their income, on average, in federal individual income taxes. The data, published by the Wall Street Journal and the Urban-Brookings Tax Policy Center, provide detailed income and tax information for the 400 tax filers with the highest adjusted gross incomes (AGI) in each year from 1992 to 2005.They show that while the incomes of those at the top have skyrocketed, their tax rates have fallen significantly, with the largest reductions occurring after the capital gains tax cuts of 1997 and 2003.
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