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Sunday, November 20, 2011

Half of Households Own 2.2%, Half of Workers Earn 12.3%,  and Half of Households Receive 19% of the Nation's Income.
(see below, in blue) 
Smaller share for 90%  -- Household Income Distribution

Growing share of income for the rich

Inequality in the U.S. has has grown steadily since the 1970s, following a flat period after World War II. In 2008, the wealthiest 10 percent earned almost the same amount of income as the rest of the country combined.

SHARE OF NATION'S INCOME  Including capital gains
The top 0.1 percent of the population (those making about $1.7 million or more) saw the sharpest increase in income share, taking home 2.6% of the nation’s earnings in 1975 and 10.4% in 2008. (See the source here.)

The best years for the U.S. economy were 1942 to 1982, and the graph from U.C. Berkeley professor Saez also shows this distribution. (See here, page 6, Figure #1)

A Congressional Budget Office report of October 2011 showed (page 8) in 2007 the income percentages for household quintiles  (groups of 20% each representing 23 million households) before and after all taxes and transfers. Before: 2%, 7%, 12%, 19%, and 60%. Meaning, the top-earning households in percentiles 81% to 100% took in 60% of all pre-tax income. The after-tax-and-transfer income shares were: 4%, 9%, 14%, 20%, 53%. Meaning the top-earning 81% to 100% took in 53% of all income after all taxes and transfers.  This also shows that half the households receive 19% of all income, the other half receives 81%. It also shows that 44% of lower-earning households as a block received the same share of total income as the top-earning 1%, each group received about 17% of total income. 

The top-earning 1% of households received 21% of before-tax income and 17% after-tax-and-transfer income. 
In 1979 the share for the top-earning 1% was 8%. Their share grew from 8% to 17%, after-tax, 1979 to 2007 (page 6). 

The Congressional Budget Office report in October 2011, "Trends in Household Income Distribution 1979 to 2007" concluded, "For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent between 1979 and 2007 (see Summary Figure 1)."

Gini Inequality Index
The pre-tax inequality Gini coefficient was reduced from 0.590 to after-tax 0.483 (see Appendix B). What that means is Brazil has a Gini of 55.0, Argentina of 48.8, Mexico of 51.6 at the top end, while Japan's is 24.9, Germany's is 28.3, and France's is 32.7. The U.S. has the greatest inequality among developed nations. 

Tax Rates for all Income Groups
In another report, the tax rate for different household income quintiles is shown, "All Americans Pay Taxes", by the Citizens for Tax Justice. The top 1% pay an overall effective tax rate of 30.8%, while the lower 99% pay an average 28.2%. (the middle quintile of households pays 25.3% the lowest quintile pays 16.0%.) "Overall effective" means -- the actual amount paid relative to total income, and to all government agencies. 

Household Inequality, Wage Inequality, Wealth Inequality 
About the CBO report, they show that half of U.S. households receive 19% of all income, the other half 81%. 
The Social Security Administration, reporting on wage and salary income, reports half of all workers receive 12.3% of wage income, the other half receive 87.7%. 
Sylvia Allegretto, a U.C. Berkeley economy professor, reporting in State of America's Wealth, reports that half of the U.S. households own 2.2% of all wealth, (not 22% but two point two percent) the other half own 97.8%. The top 1% own 37%. (See Table 3.)

See the make-up of the top one percent here.  The threshold income was $343,927 in 2009, and the average income was $1,300,000 plus. See this paper that reports the income share of the top 0.1% grew from 2.2% to 8%, 1981 to 2007. The graphs at the bottom are easy to read. 

Any politician callous to these inequalities, who insists on a "no tax increase on the rich" position, such a politician deserves retirement. 

Transferring from the Top 1% to the Lower 60%

If the top-earning 1% of households received 8% of post-tax income, as they did in 1979, instead of 17% as they did in 2007, according to the CBO, and their loss of share (9%) was transferred to the lower-earning 60% of households, about 70 million households (out of the total 117 million U.S. households), the incomes of all the lower-earning 60% would increase by 50%. Those with incomes of $12,000 would increase to $18,000, and those with $50,000 would receive $75,000, and so forth across the spectrum. It's time to return to the 1950s, in my opinion, when the tax rates on high income were over 90%. The nation needs it.    

Income for the lower-earning 90% of households drops by 6.4% --- a negative 6.4% --- over a 35 year period. (While the income for the top-earning one percent increases by 275 times, see above. Really, this is no way to run an economy in a democracy.)
See this study from the Chicago Political Economy Group to confirm, and the table below from another report

Top 0.1%152,000$5.6 million+385%
Top 0.1-0.5%610,000$878,139+141%
Top 0.5-1%762,000$443,102+90%
Top 1-5%6.0 million$211,476+59%
Top 5-10%7.6 million$127,184+38%
Bottom 90%137.2 million$31,244-1%

THIS BLOG: My February 2011 essay, the Six Point Program, is a comprehensive proposal to restore prosperity. I recommend it. Go the the column at the right, click-on February, 2011. Look for the Contents page also, December of 2010. We can do two major things in this nation: we can create jobs for all workers, and we can assure all jobs pay a decent wage. We achieved this in 1943 and 1944, but the motivation of a war is not necessary.  From American Economic Development Since 1945, by Samuel Rosenberg, page 20: "By 1944, the unemployment rate had fallen to a low of 1.2 percent, a level never again achieved in the postwar period." Between 1939 and 1944, the number of people working increased from 45.8 million to 65.0 million, an increase of 42%, and GDP rose by 75% during the same years. Today we need to increase employment by 9.0%, so we face a much smaller challenge. 

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