The link contains informative charts on the individual states.http://www.cbpp.org/cms/index.cfm?fa=view&id=3860
By Elizabeth McNichol, Douglas Hall, David Cooper, and Vincent Palacios
November 15, 2012
A state-by-state examination finds that income inequality has grown in most parts of the country since the late 1970s. Over the past three business cycles prior to 2007, the incomes of the country’s highest-income households climbed substantially, while middle- and lower-income households saw only modest increases.
During the recession of 2007 through 2009, households at all income levels, including the wealthiest, saw declines in real income due to widespread job losses and the loss of realized capital gains. But the incomes of the richest households have begun to grow again while the incomes of those at the bottom and middle continue to stagnate and wide gaps remain between high-income households and poor and middle-income households. As of the late 2000s (2008-2010, the most recent data available at the time of this analysis):
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In the United States as a whole, the poorest fifth of households had an average income of $20,510, while the top fifth had an average income of $164,490 — eight times as much. In 15 states, this top-to-bottom ratio exceeded 8.0. In the late 1970s, in contrast, no state had a top-to-bottom ratio exceeding 8.0.
The average income of the top 5 percent of households was 13.3 times the average income of the bottom fifth (20%). The states with the largest such gaps were Arizona, New Mexico, California, Georgia, and New York, where the ratio exceeded 15.0.
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The long-standing trend of growing income inequality continued between the late 1990s and the mid-2000s.[1]
On average, incomes fell by close to 6 percent among the bottom fifth of households between the late 1990s and the mid-2000s, while rising by 8.6 percent among the top fifth. Incomes grew even faster — 14 percent — among the top 5 percent of households.
In 45 states and the District of Columbia, average incomes grew more quickly among the top fifth of households than among the bottom fifth between the late 1990s and the mid-2000s. In no state did the bottom fifth grow significantly faster than the top fifth.
Similarly, households in the middle of the income distribution fell further behind upper-income households in most states between the late 1990s and the mid-2000s.
On average, incomes grew by just 1.2 percent among the middle fifth of households between the late 1990s and the mid-2000s, well below the 8.6 percent gain among the top fifth. Income disparities between the top and middle fifths increased significantly in 36 states and declined significantly in only one state (New Hampshire).
An examination of income trends over a longer period — from the late 1970s to the mid-2000s — shows that inequality increased across the country.
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Several factors have contributed to the large and growing income gaps in most states.
Growth in wage inequality. This has been the biggest factor. Wages at the bottom and middle of the wage scale have been stagnant or have grown only modestly for much of the last three decades. The wages of the very highest-paid employees, in contrast, have grown significantly.
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Government policies. Government actions — and, in some cases, inaction — have contributed to the increase in wage and income inequality in most states. Examples include deregulation and trade liberalization, the weakening of the safety net, the lack of effective laws concerning the right to collective bargaining, and the declining real value of the minimum wage. In addition, changes in federal, state, and local tax structures and benefit programs have, in many cases, accelerated the trend toward growing inequality emerging from the labor market.
Expansion of investment income. Forms of income such as dividends, rent, interest, and capital gains, which primarily accrue to those at the top of the income structure, rose substantially as a share of total income during the 1990s. (Our analysis captures only a part of this growth, as we are not able to include capital gains income due to data limitations.)
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While it results to a significant degree from economic forces that are largely outside state policymakers’ control, state policies can mitigate the effects of these outside forces. State options include:
Raise, and index, the minimum wage.
Improve the unemployment insurance system.
Make state tax systems more progressive. The federal income tax system is progressive — that is, it narrows income inequalities — but has become less so over the past two decades as a result of changes such as the 2001 and 2003 tax cuts. Nearly all state tax systems, in contrast, are regressive. This is because states rely more on sales taxes and user fees, which hit low-income households especially hard, than on progressive income taxes. (The income inequality data in this report reflect the effects of federal taxes but not state taxes.)
Many states made their tax systems more regressive during the 1990s. Early in the decade, when a recession created budget problems, states were more likely to raise sales and excise taxes than income taxes. Later in the decade, when many states cut taxes in response to the strong economy, nearly all made the majority of the cuts in their income taxes rather than sales and excise taxes.
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Strengthen the safety net.
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Protect workers’ rights.
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A Lost Decade for Low- and Middle-Income Families
Change in average household incomes between late 1990s and mid-2000s
Poorest Fifth: -5.8%
Middle Fifth: 1.2%
Richest Fifth: 8.6%
Richest 5%: 13.9%
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