Tax rates are at the lowest rates in 60 years. Company stock shoots up when people get laid off.
Now we find that the richest Americans – a tiny sliver of the country’s population – are literally getting all the benefits of the recovery.
Since 2009, 95% of the total gain in income went to the top 1% of wage earners in America. Only 4% went to the rest of all other Americans. As Thomas Edsall said on the Diane Rehm show this morning, the very top are doing superbly and everyone else is on a flat line.
The new report is from economists at the University of California, Berkeley, the Paris School of Economics and Oxford University who analyzed Internal Revenue Service figures dating to 1913. They found that over the last 20 years, the wealthy have made most of the gains in income:
From 1993 to 2012, for example, average real incomes per family grew by only 17.9% over this 19 year period (implying an annual growth rate of .87%). However, if one excludes the top 1 percent, average real incomes of the bottom 99% grew only by 6.6% from 1993 to 2012 (implying an annual growth rate of .34%). Top 1 percent incomes grew by 86.1% from 1993 to 2012 (implying a 3.3% annual growth rate). This implies that top 1 percent incomes captured just over two-thirds of the overall economic growth of real incomes per family over the period 1993 – 2012.
Economist Emmanuel Saez of University of California Berkeley explains how things have gotten much worse since the end of 2009. During that period:
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.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
What kind of income are we talking about? The top 1 percent of American households had pretax income above $394,000 last year. The top 10 percent had income exceeding $114,000.
Even during more recent economic downturns and recoveries, the income gains have been more equitable: in the economic expansion of the 1990s, the top 1 percent had a 45 percent share of all income increases and a 65 percent share from the expansion that followed the 2001 recession.
Don’t want to pay more for your healthcare or to pay more taxes so other people can get healthcare? Too bad, that’s the system we’ve set up. Everything is getting more expensive, but income isn’t going up for anyone except the very rich. Nothing in the market is helping 99% of people in America to get ahead or even stay afloat, never mind pay for healthcare. Productivity has increased steadily since the 1980s but wages have been flat. That contrasts to the 60s when productivity gains were matched by increases in wages.
If we are creating a system where there are no economic opportunities for people to pay their own way, increasing taxes to help them get healthcare is the only alternative to a country where half the population has no healthcare.
I include the information on tax rates and the graph below because of a recent e-mail exchange with a reader. He said my recent column about the real reason behind the resistance to universal healthcare was unproductive name calling. He said that the real reason some people are opposed to the expansion of Medicaid and Obamacare is because we are taxed too much already. In fact, tax rates are at the lowest levels in decades.
A report from the Congressional Research Service from September 2012 shows that tax rates have dropped steadily since the 1950s. Also, capital gains tax rates have dropped even more:
Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.
