Ever since my post on the the unemployment situation in the U.S. last Sunday, I have been trying to get up to speed on what is known about income equality. My starting point was "15 Mind-Blowing Facts About Wealth And Inequality In America" comprising 15 graphs, the most impressive of which I reproduce below in a slightly modified form to make the comments at the top and bottom legible.
Because the fine print in this figure could scarcely be read even in its web-published version, I reproduce those comments in the quotes below, which refer to the three vertical green bars in the top graph and then the two red bars in the lower graph.
The greater the gap between the rich and everyone else, the more dangerous economics becomes.
In 1928, a year before the U.S. economy nose-dived into depression, the top one-hundreth of 1 percent of U.S. families averaged 892 times more income than families in the bottom 90 percent.
In 1980, the last pre-Reagan year, families in the bottom 90 percent averaged $30,446 in income, after adjusting for inflation, $72 more than the the $30,374 comparable families earned in 2006. The top 0.01 percent in 1980 took home an average $5.4 million, less than one-fifth the $29.6 million average income of the super-rich in 2006.
In 2006 the top 0.01 percent averaged 976 times more income than America's bottom 90 percent.
In 1944 the top marginal tax rate -- the rate on income in the highest tax bracket -- hit 94 percent. In that year, taxpayers making more than $1 million, in 2005 inflation-adjusted dollars, paid Uncle Sam 65 percent of their total income in tax.
In 2005 taxpayers making more than $1 million faced a top marginal rate of 35 percent. These deep pockets paid just 23 percent of their income in federal tax.
Still, this nicely colored and annotated visual is a second-hand product. So I searched the web to find the authors of the two graphs. It turned out that the bottom graph was relatively well known (here for example), whereas the upper one was exclusively the result of relatively recent research by Professor Emmanuel Saez and his coworkers. The main publication on the subject authored by Thomas Piketty and Saez is entitled Income Inequality in the United States 1913--1998 and was published in the February 2003 issue of The Quarterly Journal of Economics. It has since been updated to 2006. These papers are based on study of individual income-tax returns that have been published by the IRS ever since 1913. The authors have carefully studied these returns in order to separate the shares of each source of income, such as wages, business income, and capital income. Their plotted data are for "tax units" defined as a married couple living together or a single adult, including dependents if any. Because of the much larger exemptions prior to 1944, uniting these data with the more recent data restricted them to studying only the top decile. However, they innovatively broke out the top decile into progressively smaller fractiles (see table below), where income is defined as gross income excluding capital gains and before individual taxes.
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http://impactglassman.blogspot.com/2010/04/food-for-thought-graphical-peek-at.html