I got involved in a discussion on Ed Brayton’s [1] blog earlier today, which referenced yesterday’s Tea-bag ‘protests’. As a result, I ended up doing some research on pre/post tax income from 1979 to 2006. Taxes in this case is defined as ‘effective’ tax rates according to Congressional Budget Office (CBO) guidelines, not some ‘subset’, or arbitrary, or marginal rates. These are the taxes actually paid, and the income actually retained.
Based on the data presented by the CBO [2], with all dollars equalized to the 2006 value, the richest 1% of Americans saw their incomes after taxes increase by 256% since 1979. By comparison, the poorest 20% of Americans saw their income increase by only 11% after taxes over the same time period.
Putting this another way – in 1979 the wealthiest 1% earned, on average, 22.6 times the poorest 20% ($337,100 -v- $14,900). By 2006, the wealthiest 1% had extended their lead to a staggering multiple of 72.75 times the poorest 20% ($1,200,300 -v- $16,500).
The poorest even suffered compared to the ‘average’ American: Americans in the third population quintile (40 to 60% of the population) saw their post tax income increase by 21% over the comparable period, from $42,900 to $52,100. Compared to the poorest their multiplier increased from 2.88 to 3.16. Better off, but not rich.
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[4]Compared to the wealthiest 1%, even the third quintile can feel decidedly poor: in 1979 the wealthiest 1% earned 7.86 times that of the average third quintile American. By 2006, they earned 23.04 times more than the third quintile.
You may feel that I’m attacking only the super rich. But even the moderately rich (the working rich) gained significantly over the past thirty years. In 1979 the top 10% earned $125,200 after taxes. By 2006 their after tax income had soared by 112% to $265,500. They doubled their lead over the poorest (from a multiplier of 8.4 to 16.1), and against the third quintile gained an almost 180% advantage (from 2.9 to 5.1).
Compared to the wealthiest 10% of the population, everyone in the US has done very poorly indeed.
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