Friday, October 31, 2008

The rich get rich, and the poor get poorer

The results are even more, much more, lopsided when figures for the top 0.1% are looked at.

The median income is the point where half the people make less, have make more.

By David Lightman | McClatchy Newspapers

WASHINGTON — The gap between rich and poor in America has grown bigger in recent years than any time since the 1920s, and there are no easy ways for the presidential candidates to close it.

The nation's top 1 percent of earners, those making more than $603,402 in 2008, had a 22.9 percent share of all pretax income in 2006, according to a March study by University of California-Berkeley economist Emmanuel Saez.

The top 1 percent's share of the national income pie had hovered around 9 to 10 percent from the 1950s through the 1970s, then began climbing in the 1980s. While Americans at all income levels saw their wealth increase during the 1990s, the top 1 percent's income exploded. Since George W. Bush became president, their share kept growing while everyone else's income barely rose.

Obama's tax plan aims to close the income gap a bit. A Tax Policy Center analysis found that those in the lowest 20 percent of income earners, making below $18,981 a year, would see a 5.5 percent boost in after-tax income next year. Those in the top 5 percent, making above $226,918, would see after-tax income drop by 0.1 percent.

Under McCain's plan, the lowest 20 percent would see a 0.2 percent increase in after-tax income next year, while the top earners would gain 3.3 percent. Once McCain's plan is fully phased in, during 2012, the top earners would gain 5.3 percent and the lowest 0.9 percent.

After-inflation median household income last year was $50,233, according to the U.S. Census Bureau. The top 1 percent earned above $603,402, and the top 10 percent earned above $160,972, according to the Tax Policy Center.

Both candidates want to shrink an income gap between classes that widened in the early part of this decade, as the Bush administration implemented multi-trillion-dollar tax cuts in 2001 and 2003.

Saez found that from the mid-1920s to 1940, the top 10 percent of income earners had about a 45 percent share of national income. That declined to about 32.5 percent during World War II, and as government maintained its highly progressive tax structure, remained around 33 percent through the 1970s.

During the past 25 years, however, Saez said "the top (10 percent) share has increased dramatically . . . and has now regained its prewar level."

The gap closed a bit from 1993 to 2000, when Bill Clinton was president, the top two tax rates went up and the economy boomed. Saez found that real incomes grew by 2.4 percent a year for the bottom 99 percent, while the top 1 percent saw a 10.1 percent annual increase then.

Only the rich gained much during the Bush years of 2002 to 2006, however. The top 1 percent saw their real annual pretax incomes grow at an 11 percent clip, while everyone else's income grew at an annual rate of only 0.9 percent growth.

During those years, "the top 1 percent captured almost three-quarters of income growth" Saez wrote.

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