Wealth Blog

Finance Blogs » Wealth » The rich triple their income

The rich triple their income

By Judy Martel · Bankrate.com
Sunday, October 30, 2011
Posted: 10 am ET

The rich are indeed getting richer -- by leaps and bounds when compared to the rest of the population. Between 1979 and 2007, the wealthiest 1 percent of Americans saw their after-tax income nearly triple, while the 60 percent of the population that largely makes up the middle class saw an increase of just under 40 percent.

The Congressional Budget Office measured after-tax income (income after federal taxes, Social Security and unemployment insurance) of Americans and concluded that federal government policies since 1979 are less effective in evenly distributing income through taxes. It also concluded that federal benefit programs such as Social Security contribute to the income gap by providing income to all older Americans regardless of their wealth.

Here is the report's breakdown on how much income increased for Americans from 1979 to 2007:

  • 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.

While income from labor decreased over the past three decades, income from capital gains and business, which generally favor the wealthy, increased.

The data will no doubt add fuel to the Occupy Wall Street movement whose goal is to call attention to the nation's wealth gap, but it also will open up arguments about the role and responsibility of the federal government in evening out income through taxes and benefit programs.  As Congress seeks ways to reduce unemployment and possibly reform the tax structure to lower the federal deficit, this report will provide key findings for debate.

How do you feel about the income gap?

Keep up with your wealth and follow me on Twitter.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
7 Comments
Francoise
November 02, 2011 at 6:47 pm

I don't think that our "classes" are quite as fluid as some would like to believe-or possibly to perpetuate. If you took the lowest 10% of earners, I'd guess that their families have been part of that quartile for generations.

This is probably the main issue-in the Post War era the nation began providing opportunities for the less fortunate, but this trend has weakened over the last 30 years, to their detriment. All the while, the tax code has favored the wealthy.

Anon
November 02, 2011 at 1:44 pm

Regarding what Gunner said:

We don't actually KNOW that the SAME rich people trippled their wealth. The "rich class" gained wealth. Maybe some lost all their money (Enron?) and others gained even more (stock in Apple?). Maybe some whiz kid got out of high school and invented Facebook or something??

Think about it, how many workers who were working in 1979 are still working now 28 years later (since they are using income, we'll limit this to workers). I am in the workforce now, but wasn't BORN in 1979! My wealth went up INFINITELY since then simply becasue I have SOME! That's why these are not VALID statistics for the comparisons being made. You have to compare individuals (or at least households/filers) to say that the rich people got richer. Similarly, I bet a lot of the rich from 1979 were dead in 2007 when the later statistic was taken!

Gunner
November 02, 2011 at 9:46 am

"4. What do rich people with their money? They don't put it under a mattress. They can buy lots of stuff, which provides jobs and income to the sellers & manufacturers. Or they can invest it in stocks and funds which provide capital to companies that employ people and provide goods and services. Or they put it in a bank which is then able to provide loans, credit, mortgages etc. to others."

If this is what is happening, then why isn't our economy boomer?
The rich have triple their wealth, but what you describe hasn't happened....It great to think that the wealth would be put back into the economy. But you can't agrue with the fact that it isn't.

Trickle down economics is a lot smaller than a trickle...it appears to be more like a drop.

Logan
October 31, 2011 at 11:33 am

1. I agree, "evening out income" AKA redistribution of wealth is not a function of our government.

2. Social Security was not designed to be a welfare program for the poor, it is a forced savings account for everyone. You put money in, you get it back with interest when you retire. How would you feel about a savings account at a bank that only let you withdraw if you had a low income? It's your money!

3. Income from capital gains is up? Sound like a good reason to invest. You don't have to be rich, anyone can get in on the action. Upset that oil companies are getting rich? Buy oil stocks.

4. What do rich people with their money? They don't put it under a mattress. They can buy lots of stuff, which provides jobs and income to the sellers & manufacturers. Or they can invest it in stocks and funds which provide capital to companies that employ people and provide goods and services. Or they put it in a bank which is then able to provide loans, credit, mortgages etc. to others.

I could go on but all this article is trying to do is incite jealousy.

Carl
October 31, 2011 at 10:32 am

One would think a link to the actual article would be good to provide.... http://www.cbo.gov/doc.cfm?index=12485

Anon
October 31, 2011 at 7:39 am

I have several problems with this article. First of all, in this country we do NOT have stagnant classes of people. Comparing the top/bottom percentages DOES NOT MAKE SENSE since peole can and do move about in their earnings/wealth over time. Therefore, the statistics provided aren't valid for the comparisons made - with inflation alone the "rich" percents will get "richer." For the comparison to be valid, you need to compare individuals over time to THEIR OWN wealth to see if the rich people got richer. BRACKETS ARE NOT PEOPLE!!!

Secondly, I don't recall "evening out income" as one of the functions of our government listed in the Constitution. Why does Ms. Martel's article make it sound as if it is? Moreover, why does she confuse *wealth* with *income*?? They are vastly different thigns. For illustration, I know retiree's whose income is small, but who own SEVERAL homes. They have more wealth than I do (a mother of young children in a one-income household), but far less income.

I expect better of articles on bankrate.com. This was below standard for this site.

AJ White
October 30, 2011 at 6:32 pm

How about the OWS movement call attention to crony capitalism so that EVERYONE has the opportunity to get rich??