Top 1 percent take record share of U.S. income
The very wealthiest Americans earned more than 20 percent of the country’s household income last year — their biggest share since 1928, according to an analysis of Internal Revenue Service figures dating to 1913 by economists.
The New York Times
The rich get richer ...
22.5 percent: the income share of the top 1 percent of earners last year
90 percent: the percentage of stock owned by the richest 10 percent of households
1 percent: growth in incomes for 99 percent of earners in 2012
20 percent: growth in incomes for the top 1 percent of earners in 2012
WASHINGTON — The top 10 percent of earners took more than half of the country’s total income in 2012, the highest level recorded since the government began collecting such data a century ago, according to an updated study by prominent economists Emmanuel Saez and Thomas Piketty.
The top 1 percent took more than one-fifth of the income earned by Americans, one of the highest levels since 1913, when the government instituted an income tax.
The figures underscore that even after the recession the country remains in a new Gilded Age, with income as concentrated as it was in the years that preceded the Depression of the 1930s, if not more so.
High stock prices, rising home values and surging corporate profits have buoyed the recovery-era incomes of the most affluent Americans, with the incomes of the rest still weighed down by high unemployment and stagnant wages.
“These results suggest the Great Recession has only depressed top income shares temporarily and will not undo any of the dramatic increase in top income shares that has taken place since the 1970s,” Saez, an economist at the University of California, Berkeley, wrote in his analysis of the data.
The income share of the top 1 percent of earners in 2012 returned to the same level as before both the Great Recession and the Great Depression: just greater than 20 percent. It jumped to about 22.5 percent in 2012 from 19.7 percent in 2011.
That increase is probably, in part, due to one-time factors. Congress made a last-minute deal to avoid the expiration of all of the Bush-era tax cuts in January. That deal included a number of tax increases on wealthy Americans, including bumping up levies on investment income. Seeing the tax changes coming, many companies gave large dividends and investors cashed out.
But the economists noted that the trends looked the same for income figures including and excluding realized capital gains — suggesting that the temporary tax moves were not the only reason the top 1 percent did so well relative to everyone else in 2012.
The top 1 percent of American households had pretax income above $394,000 last year. The top 10 percent had income exceeding $114,000.
More generally, richer households have disproportionately benefited from the boom in the stock market during the recovery, with the Dow Jones industrial average more than doubling in value since it bottomed out early in 2009.
About half of households hold stock, directly or through vehicles such as pension accounts. But the richest 10 percent of households own about 90 percent of the stock, expanding both their net worth and their incomes when they cash out or receive dividends.
The economy remains depressed for most wage-earning families. With relatively high rates of unemployment, businesses are under no pressure to raise their employees’ incomes because both workers and employers know that many people without jobs would be willing to work for less.
There is a glimmer of good news for the 99 percent, though. Piketty and Saez show that the incomes of that group stagnated between 2009 and 2011. In 2012, they started growing again — if only by about 1 percent. But the total income of the top 1 percent surged nearly 20 percent that year. The incomes of the very richest, the 0.01 percent, shot up more than 32 percent.
The new data show that the top 1 percent of earners experienced a sharp drop in income during the recession, of about 36 percent, and a nearly equal rebound during the recovery of roughly 31 percent. The incomes of the other 99 percent plunged nearly 12 percent in the recession and have barely grown — a 0.4 percent uptick — since then. Thus, the 1 percent has captured about 95 percent of the income gains since the recession ended.
Saez and Piketty have argued that the concentration of income among the top earners is unlikely to reverse without stark changes in the economy or tax policy. The increases that Congress negotiated in January are not likely to have a major effect, Saez wrote, saying they “are not negligible, but they are modest.”
Saez and Piketty, of the Paris School of Economics, plan to update their data again in January, after more complete statistics become available.