Saturday, February 14, 2015

Income and Wealth Distribution in the US: Are you worth $4 million? Make $392K last year?

Your net worth (assets minus debt) had to be at least $3.96 million in 2012 to join the top 1% wealth club.  Is your family income at least $392,000?  That's the minimum it took in 2013 to qualify for the top 1% income club.

Has inequality been growing over time?  What proportion of income goes to the rich? Does it make a difference if Democrats control the White House or Congress?  We now have pretty accurate answers to these questions.  All data in this post are from the links below.

The bottom 90% of all families own only 22.8% of all the wealth.  The wealthiest 1% owns 41.8% of all there is to own, up from about 23% in 1978.  Switching from wealth to income, the top 1% of all income earners rakes in almost 20% of all income.  This has more than doubled since 1986, from a little over 9%.  At the high end of income, there were 16,300 families in 2013 (.01%) earning an average income of almost $25 million apiece, with an average wealth of over $371 million apiece.

From 1993-2013 total income in the US grew 15.1%.  Had this growth been shared equally, all income levels would have earned about 15% more in 2013 than in 1993.  But the richest 1% took up well over half (59%) of total income growth during this period.  After all was said and done, the poorest 99% increased their income by an average of 7.3% while the top 1% increased their income by an average of 62.4%.

But income for the bottom 90%, adjusted for inflation, declined a little over $200 from 1993 to 2013, even as total income increased 15.1%.  Had the bottom 90% gotten an equal share of the increase, each family would have been earning over $5000 more than the $31,652 they averaged in earnings in 2013.

During the Clinton years the richest 1% took 45% of new growth. During the Bush years from 2002-2007 the richest 1% took 65%.  And during the first four years of the Obama administration the richest 1% gobbled up a whopping 91% of  new growth.  Only during the Bush recession in 2001 and during the Great Recession of 2007-2009 did the wealthiest 1% suffer any losses. Democrats and Republicans may have disagreed on everything else, but no one until very recently questioned the consequences of all those tax cuts to the wealthy.  Certainly not Barack Obama.

New Mexico is not behind Mississippi here:  we are Numero Uno in two major categories:  the gap in income between the richest 20% and the middle 20% and between the richest 20% and the poorest 20%.  And we are in the top 10 states in the worsening of income inequality over the past few decades.  Link here for the data.

The best picture we have today of income and wealth distribution in the U.S. comes from the work of two economists, Tomas Piketty and Emmanuel Saez, who have been studying these issues for about 15 years.  Here are some links:  Piketty and Saez, "Income Inequality in the U.S., 1913-1998," to update excel files to 2013 click here and then scroll down to the Jan 2015 update link.  Emmanuel Saez and Gabriel Zucman, "Wealth Inequality in the U.S. since 1913:  Evidence from Capitalized Income Tax Data," and Emmanuel Saez, "Striking it Richer:  The Evolution of Top Incomes in the United States."

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