Photo: Daniel Goodman / Business Insider
Since Occupy Wall Street started camping out in Zuccotti Park, and since the movement started spreading like wildfire across the globe, everyone is talking about inequality in America.Now the Congressional Budget Office is adding their voice to the conversation with a report called Trends in the Distribution of Household Income Between 1979 and 2007. Click on the link for the full report.
Bottom line, from 1979 to 2007 average household income in the United States grew by 62%, but the rich are the ones who benefitted from that growth. Those on the bottom barely felt a thing (from the report):
- For the 1 per cent of the population with the highest income, average real after-tax household income grew by 275 per cent between 1979 and 2007.
- For others in the 20 per cent of the population with the highest income (those in the 81st through 99th percentiles), average real after-tax household income grew by 65 per cent over that period, much faster than it did for the remaining 80 per cent of the population, but not nearly as fast as for the top 1 per cent.
- For the 60 per cent of the population in the middle of the income scale (the 21st through 80th percentiles), the growth in average real after-tax household income was just under 40 per cent.
- For the 20 per cent of the population with the lowest income, average real after-tax household income was about 18 per cent higher in 2007 than it had been in 1979.
Here’s another shocking fact: From 2005 to 2007, the after-tax income received by the top 20% of Americans alone was more than the rest of the 80% altogether.
Now here’s why:
The CBO says the main reason why after tax-income has become so unequal, is that market income (income before government transfer, taxes etc.) became heavily concentrated in the hands of the upper class.
There are two reasons for that.
- “One was an increase in the concentration of each source of market income, which consists of labour income (such as cash wages and salaries and employer- paid health insurance premiums), business income, capital gains, capital income, and other income. All of those sources of market income were less evenly distributed in 2007 than they were in 1979.”
- And the other —”From the Between 1979 and 2007, the share of income coming from capital gains and business income increased, while the share coming from labour income and capital income decreased.”
Basically, the businesses and ways to make money became concentrated in the hands of a few. And labour stopped making much money at all. The result is that a lot of people are left with only a little.
And while market income distribution is the major factor, our tax policies played a significant role as well. According to the report, from 1979 to 2007 the federal tax the federal tax rate fell by a small amount because income taxes were lowered. The government started collecting more revenue from payroll taxes, and who does that effect? Wage earners.
The specific result of that policy is that the richest Americans saw their income increase by 43% from 1979 to 2007. The top 1% saw their income almost double. The people at the bottom started collecting only about 5% of all income made in America.
These aren’t easy figures to swallow. And its even more dramatic when you look at these three simple charts.
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