CBO study shows growing income disparity

CBO study shows growing income disparity

CBO study shows growing income disparity – Oct. 26, 2011.

 From 1979 to 2007, average household income for the nation’s top 1% more than tripled, while middle-class incomes grew by less than 40%, according to a new report from a research arm of Congress.


“Over the past three decades, the distribution of income in the United States has become increasingly dispersed — in particular, the share of income accruing to high-income households has increased, whereas the share accruing to other households has declined,” the CBO said.


For the top 1% of the population, average inflation-adjusted household income grew by 275%. The rest of wealthiest fifth of the population, not including the top 1%, saw household income grow by 65% during that time, faster than the rest of the population, but “not nearly as fast as for the top 1%.”


Household income grew by just under 40% and the poorest fifth of the population saw their incomes rise by just 18% in a little less than 30 years, according to the study, which was based on IRS and Census data.


“The rapid growth in average real household income for the 1% of the population with the highest income was a major factor contributing to the growing inequality in the distribution of household income between 1979 and 2007,” the report said. “Shifts in government transfers and federal taxes also contributed to that increase in inequality.”

Here are some facts directly from the CBO source:

CBO finds that, between 1979 and 2007, income grew by:

  • 275 percent for the top 1 percent of households,
  • 65 percent for the next 19 percent,
  • Just under 40 percent for the next 60 percent, and
  • 18 percent for the bottom 20 percent.

Government transfers and federal taxes both help to even out the income distribution. Transfers boost income the most for lower-income households, while taxes claim a larger share of income as people’s income rises.

In 2007, federal taxes and transfers reduced the dispersion of income by 20 percent, but that equalizing effect was larger in 1979.

  • The share of transfer payments to the lowest-income households declined.
  • The overall average federal tax rate fell.

Also, according to a recent CBS/NYTimes poll, 2/3 of Americans oppose tax cuts for corporations, support increasing taxes on millionaires, and believe wealth should be distributed more evenly across the country.


NeilS — So here is some food for thought.  The income gap has risen dramatically with the top 1% benefiting massively over the last 30 years, yet government transfers to redistribute wealth are actually less than 30 years ago.  So to anyone out there that calls for absolutely no tax increases on the rich, the jig is up.  Everyone knows that the only way to tackle our debt problem is with both revenues and spending cuts.  For the short term, we need the Americans at the very top to contribute a little bit more until we can raise taxes more broadly. It makes me sick to my stomach that the same people that benefited from lax regulation and less income redistribution still clamor for even less regulation and less taxes while the 99% suffer.  You out there know who you are and I hope you are losing sleep about how unpatriotic and greedy you are (I’m looking at you Boehner, Ryan, and McConnell).  Stop protecting your own interests and start listening to the actual majority.