In case there was any doubt about the growth of inequality in America, a new study based on IRS data shows that:
Corrected for inflation, the average annual income of the bottom 90% of workers in 2011 was $30,437. In 1966, the average was $30,378. That’s an increase of $59 in 45 years.
Meanwhile, the average income of the top 10% almost doubled, rising from $138,793 to $254,864, an increase of roughly $116,000, while the average income of the top 1% rose by $628,000. For the top 0.1%, the increase was $18 million!
More recently, since 2009, the top 1 percent received 81% of the growth in income. The top 0.1% received more than 50% of the growth.
The wealthiest Americans are pulling away from the rest of us because income has shifted from labor to capital, and because of lower taxes on capital gains, dividends, estates, and other income that is especially important to people with a lot of money.
Policies that especially benefit people with high incomes could be changed (in theory). Yet, in the words of economist David Cay Johnston:
“It has become widely understood that we cannot balance our federal budget by raising taxes only on those at the top, because there is not enough income there, even if we taxed away everything the top makes. What is equally true is that we cannot increase tax revenue if the incomes of the vast majority keep falling [or remain stagnant]. That, however, has yet to become part of the debate on how to finance government.”