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Exploring Income Inequality, Part 3: Widening Inequality Since the 1970s

Yesterday’s post showed that the era of shared prosperity ended in the 1970s and highlighted the widening of income inequality since then.  Today, we’ll take a look at what has happened to income since 1979, using the comprehensive data in the Congressional Budget Office’s (CBO) recent report on inequality.

As the slideshow below shows, average after-tax incomes for households in the top 1 percent of the distribution nearly quadrupled between 1979 and 2007, after adjusting for inflation.  That compares with increases of about 40 percent for the middle three-fifths of the distribution and just 18 percent for the bottom fifth.

The CBO data shown here reflect a more comprehensive income definition than the Census data that we showed yesterday. As we explain in our guide, CBO uses a broader measure of income than either Census or tax return data alone can capture.

Tomorrow, we’ll take a closer look at incomes over the 1979-2007 period.