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Top Earners Doubled Share of Nation’s Income, Study Finds


Charmaine Marriott was a long way from Wall Street, but sympathy for the protesters there led her to make her own statement in Albany last week. A new report may spur the protests.
Hans Pennink/Associated Press

Graphic
Share of the Nation’s Income Earned by the Top 1 Percent
The top 1 percent of American earners controls as much of the nation’s total income as it did on the eve of the Great Depression. Now, however, their money comes from skyrocketing paychecks more than from unearned income, as it did in 1928.
http://www.nytimes.com/interactive/2011/10/26/nyregion/the-new-gilded-age.html

By ROBERT PEAR
Published: October 25, 2011

WASHINGTON — The top 1 percent of earners more than doubled their share of the nation’s income over the last three decades, the Congressional Budget Office [ http://topics.nytimes.com/top/reference/timestopics/organizations/c/congressional_budget_office/index.html ] said Tuesday, in a new report [ http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.pdf ] likely to figure prominently in the escalating political fight over how to revive the economy, create jobs and lower the federal debt.

In addition, the report said, government policy has become less redistributive since the late 1970s, doing less to reduce the concentration of income.

“The equalizing effect of federal taxes was smaller” in 2007 than in 1979, as “the composition of federal revenues shifted away from progressive income taxes to less-progressive payroll taxes,” the budget office said.

Also, it said, federal benefit payments are doing less to even out the distribution of income, as a growing share of benefits, like Social Security [ http://topics.nytimes.com/top/reference/timestopics/subjects/s/social_security_us/index.html ], goes to older Americans, regardless of their income.

The report, requested several years ago, was issued as lawmakers tussle over how to reduce unemployment, a joint committee of Congress weighs changes [ http://www.nytimes.com/2011/10/11/us/politics/deficit-reduction-panel-is-criticized-for-its-secrecy.html ] in the tax code and protesters around the country rail against disparities in income between rich and poor.

In its report, the budget office found that from 1979 to 2007, average inflation-adjusted after-tax income grew by 275 percent for the 1 percent of the population with the highest income. For others in the top 20 percent of the population, average real after-tax household income grew by 65 percent.

By contrast, the budget office said, for the poorest fifth of the population, average real after-tax household income rose 18 percent.

And for the three-fifths of people in the middle of the income scale, the growth in such household income was just under 40 percent.

The findings, based on a rigorous analysis of data from the Internal Revenue Service and the Census Bureau, are generally consistent with studies by some private researchers and academic economists. But because they carry the imprimatur of the nonpartisan budget office, they are likely to have a major impact on the debate in Congress over the fairness of federal tax and spending policies.

Also cited as factors contributing to the rapid growth of income at the top were the structure of executive compensation [ http://topics.nytimes.com/top/reference/timestopics/subjects/e/executive_pay/index.html ]; high salaries for some “superstars” in sports and the arts; the increasing size of the financial services industry; and the growing role of capital gains, which go disproportionately to higher-income households.

The report found that higher-income households got a larger share of the pie, while other households got smaller shares.

Specifically the report made these points:

¶ The share of after-tax household income for the top 1 percent of the population more than doubled, climbing to 17 percent in 2007 from nearly 8 percent in 1979.

¶ The most affluent fifth of the population received 53 percent of after-tax household income in 2007, up from 43 percent in 1979. In other words, the after-tax income of the most affluent fifth exceeded the income of the other four-fifths of the population.

¶ People in the lowest fifth of the population received about 5 percent of after-tax household income in 2007, down from 7 percent in 1979.

¶ People in the middle three-fifths of the population saw their shares of after-tax income decline by 2 to 3 percentage points from 1979 to 2007.

The study was requested by Senators Max Baucus, Democrat of Montana and chairman of the Finance Committee, and Charles E. Grassley of Iowa, when he was the senior Republican on the panel.

Representative Sander M. Levin of Michigan, the senior Democrat on the Ways and Means Committee, said the report was “the latest evidence of the alarming rise in income inequality [ http://topics.nytimes.com/top/reference/timestopics/subjects/i/income/income_inequality/index.html ].”

House Republicans pushed back Tuesday against President Obama’s complaint that they were blocking bills to create jobs. Speaker John A. Boehner said he agreed with Mr. Obama’s new slogan, “we can’t wait [ http://www.pbs.org/newshour/rundown/2011/10/president-obama-moves-from-pass-this-bill-to-we-cant-wait.html ],” and he said that 15 House-passed bills were “sitting over in the Senate, waiting for action.”

On Tuesday, the White House endorsed another bill, which is likely to be passed by the House this week with bipartisan support. The bill would repeal a requirement for federal, state and local government agencies to withhold 3 percent of certain payments to suppliers of goods and services and to deposit the money with the Internal Revenue Service.

This requirement was originally adopted as a tax-compliance measure, and the Congressional Budget Office said its repeal would reduce federal revenues by $11 billion over 10 years.

House Republicans would offset the cost with a bill that reduces federal spending on Medicaid [ http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicaid/index.html ] under the 2010 health care law [ http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_managed_care/health_care_reform/index.html ]. The White House said it supported the bill, intended to fix an apparent error in the law, under which hundreds of thousands of middle-income early retirees can get Medicaid coverage meant for the poor.

The joint Congressional committee on deficit reduction is considering changes in a wide range of benefit programs.

Representative Steny H. Hoyer of Maryland, the No. 2 House Democrat, said Tuesday that he was hopeful but not entirely confident that the panel would succeed in reaching a bipartisan agreement to reduce federal deficits by $1.2 trillion over 10 years.

“Hopeful is not confident,” Mr. Hoyer said.

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Related

New Poll Finds a Deep Distrust of Government (October 26, 2011)
http://www.nytimes.com/2011/10/26/us/politics/poll-finds-anxiety-on-the-economy-fuels-volatility-in-the-2012-race.html

As the Data Show, There’s a Reason the Wall Street Protesters Chose New York (October 26, 2011)
http://www.nytimes.com/2011/10/26/nyregion/as-data-show-theres-a-reason-the-wall-street-protesters-chose-new-york.html

Times Topic: Occupy Wall Street
http://topics.nytimes.com/top/reference/timestopics/organizations/o/occupy_wall_street/index.html

Related in Opinion

Room For Debate: Rising Wealth Inequality: Should We Care?
http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care

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© 2011 The New York Times Company

http://www.nytimes.com/2011/10/26/us/politics/top-earners-doubled-share-of-nations-income-cbo-says.html [ http://community.nytimes.com/comments/www.nytimes.com/2011/10/26/us/politics/top-earners-doubled-share-of-nations-income-cbo-says.html ]


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Rick Perry: 'I Don't Care' If Tax Plan Helps the Rich


Getty Images

Video
Rick Perry's Economic Plan
CNBC's John Harwood has the details on presidential hopeful Rick Perry's spending plan. Perry says hard decisions will need to be made in order to get the U.S. economy back on track.

By: John Harwood
Published: Tuesday, 25 Oct 2011 | 10:18 AM ET

Simpsonville, S.C. — Texas Gov. Rick Perry, seeking to jump-start his GOP presidential campaign with a 20 percent flat tax, said “I don’t care” if his plan gives millions to wealthy Americans because he says it will accelerate economic growth.

Mr. Perry this morning will unveil what he calls his “Cut, Balance and Grow” plan at a pivotal point in the race for the Republican nomination. He rocketed to the top of the race after his late entry in August, then faded after weak performances in some early debates.

Developed with prominent Republican economic thinkers Steve Forbes and David Malpass, Mr. Perry’s plan would:

—Introduce a 20 percent flat rate on individual and corporate income, down from the current top rate of 35 percent.

—Provide an exemption of $12,500 per person, so that a family of four would face no tax on its first $50,000 in income.

—Preserve deductions for mortgage interest, charitable donations, and state and local taxes on incomes below $500,000.

—Allow anyone to file under the current system if they choose.

—Shift to a territorial system of corporate taxation, allowing corporations to repatriate profits still parked overseas at a 5.25 percent rate.

In an exclusive interview with CNBC, Mr. Perry was asked about the millions in tax benefits that would provide for wealthy taxpayers.

"I don't care about that," the governor replied. "What I care about is them having the dollars to invest in their companies, to go out and maybe start a business because they got the confidence again 'cause they actually get to keep more of what they work for.

“Those that want to get into the class warfare and talk about, oh my goodness, there are going to be some folks here who make more money out of this, or have access to more money, I'll let them do that.”

Concerning his nomination rival Mitt Romney, who has derided the flat tax in the past as a boon to “fat cats,” Mr. Perry said:

“Well I would said that he ought to go look in the mirror, I guess. I consider him to be a fat cat. I consider what Mitt's doing kind of nibbling around the edges. I consider what we're doing bold.”

Mr. Perry said he would combine those tax cuts with steps to reduce spending, such as raising the Social Security retirement age. He vowed that his plan would balance the federal budget by 2020.

Asked whether the loss of revenue would increase the deficit in the meantime, he said: "I'm looking long term. I'm looking to get this country back on track."

“If you're looking for somebody that's going to nibble around the edges, if you're looking for somebody that's going to say, ‘Hey listen we're not going to make it hard on you, it's all going to work it out, and it's just, you know, kumbaya,’ I'm not your guy."

Mr. Perry repeated his calls for repeal of the new Dodd-Frank financial regulation bill. Asked if he believes the regulatory system that existed before the 2008 financial crisis was adequate, Mr. Perry said, “Yes, absolutely, I think it was adequate. We had a bunch of regulators that weren't doing their job."

His message to Occupy Wall Street, the governor added is: “I hope what they will see is that America's a fabulous country and it gives them the opportunity to go say your piece, go protest on the street. But at the end of the day America's about having the opportunity to take care of your family.”

Asked what he would tell a middle-income member of the Tea Party about his plan for large tax cuts for top earners, he added, “I say to them that we want those people at the top to be investing in this country so that you have a chance to have a job. Because that's the way this country has always worked.”

© 2011 CNBC.com

http://www.cnbc.com/id/45030263 [with comments]


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Yet More Grim Inequality News from the CBO


Oct. 25, 2011
http://motherjones.com/kevin-drum/2011/10/yet-more-grim-inequality-news-cbo [with comments]