The Top 1% and Income Inequality in the U.S.

Every American should check out Emmanual Saez’s latest data crunch on income gains in the U.S., if for nothing more than to get the facts straight income inequality in our country.

10 pages of interesting data and analysis – quick read and lots of graphs. But if you don’t have time, never fear. I will provide some highlights and commentary.

The “1%” has taken on an increasingly negative connotation, particularly since it numerically pits 99% of the population against 1% of the population.

A bit… one-sided, you might say.

But who is the top 1% even? And how much income do they make? What about the 0.1%? and beyond?

Looking at IRS tax statistics on income,

  • top 10% – 5% = families with annual incomes between $114,000 and $161,000
  • top 5% – 1% = families with annual incomes between $161,000 and 394,000
  • top 1% = families with annual incomes above $394,000
  • top 0.1% = families with annual incomes above $1,600,000
  • top 0.01% = families with annual incomes above $10,250,000 (consists of 16,068 families)

This is after-tax, after-business expense, take-home income.

Before I continue, let me say this…

There are those whose incomes fall in to the top 0.1% who I’m sure are wonderful human beings who have earned their income honestly and via plenty of hard work. They might even be incredibly generous with their income, giving to charitable or other causes.

And there are those whose incomes fall below the U.S. poverty line, who I’m sure are also wonderful human beings who have worked hard and honestly and have no intentions of relying on others for handouts, as is often implied. If they had more income, many of them would be generous with their leftovers as well.

I don’t think it’s productive or fair to demonize the top or bottom, based solely on their income level.

But there is some serious income inequality going on that is worth paying attention to, as concentration of wealth impacts all of us. In recent post-recession years, Saez highlights:

Top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4% from 2009 to 2012. Hence, the top 1% captured 95% of the income gains in the first three years of the recovery… In 2012, top 1% incomes increased sharply by 19.6% while bottom 99% incomes grew only by 1.0%. In sum, top 1% incomes are close to full recovery while bottom 99% incomes have hardly started to recover.

Well, that’s… depressing news. For 99% of us, at least.

Going back even further, the trend is no less disturbing. Real income has increased 86% since 1993 for the top 1%, while only 6.6% for the remaining 99%. The result is that 68% of all real income growth was captured by the top 1%. I’ll repeat that for effect: 68% of all income growth in the last 20 years has gone to 1% of earners.

Short-term gains like this are going to be common with market fluctuation and capital gains (much of which goes to the top 1%). Tax rates, which vary over time, also have a big impact.

However, when you take it back to the beginning of recorded tax documentation in the U.S. (1913), a slightly disturbing picture starts to emerge:


The top 10% now have a 50%+ share, combined – the highest ever recorded.

The top 5% now have a 40%+ share, combined – the highest ever recorded.

And the top 1% now have a 23% share – just a tad bit under, the highest ever recorded.

Meanwhile, the top 0.01%, the richest 16,068 families in the country, now have a 5.5% share of income (550X their population, if income were evenly distributed) – just under their Great Recession peak (and somewhat surprisingly with and without capital gains).

top 0.1% income

Versus the rest of the country, the top 10% has clearly made up a lot of ground.

But when you break income share down among the top 10%, since the late 1970’s (when this trend started taking off) you’ll see a microcosm of the whole:

income inequality

Starting from the bottom, the top 10% have increased their share of total income by over 16% in just the last 33 years.

Almost all of that has been gained by the top 5%. Almost all of the top 5%’s gains have gone to the top 1%. And almost all of the top 1%’s gains have gone to the top 0.1%, and so on. So across the board, you see more and more of the income distribution going to the top.


So why bring this up?

This is the first I’ve seen the #’s that all of the cable news channel talking heads never quite have time to bring up. They are interesting. And more than a bit disturbing. I mean – wasn’t the economic might of this country built on good wages for most Americans in the mid 1900’s? And what happens if it is entirely gone, left in the vaults of an elite few and now flowing through the economy?

Some questions worth considering…

  1. If you’re in the 99% or even 99.9% (only 2% of the readers of this blog make over $250,000, btw) are you concerned, sad, angry, or indifferent with these trends?
  2. If an increasingly larger size of the income share goes to the wealthiest of the wealthy, where do we end up us as a country?
  3. Why do you think this is happening?
  4. How would you fix it, if you think it needs to be fixed? Or do you see no problem and think everyone should just turn a blind eye?

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