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POLICY INSIGHT
BEYOND THE NUMBERS

Top 1% Leaving Others in the Dust, Cont.

I recently wrote about new Congressional Budget Office data showing that over the past three decades, after-tax incomes jumped by a stunning 281 percent for the richest 1 percent of Americans, while rising just 25 percent and 16 percent for households in the middle and bottom of the income scale, respectively. The table gives the relevant dollar figures for different income groups. (All figures here are adjusted for inflation.)

Average After-Tax Income by Income Group
1979 - 2007 (in 2007 dollars)
Income Category 1979 2007 Percent Change Dollar Change
1979-2007 1979-2007
Lowest fifth $15,300 $17,700 16% $2,400
Second fifth $31,000 $38,000 23% $7,000
Middle fifth $44,100 $55,300 25% $11,200
Fourth fifth $57,700 $77,700 35% $20,000
Top fifth $101,700 $198,300 95% $96,600
Top 1 Percent $346,600 $1,319,700 281% $973,100

Just in the last year of the study (2007), the top 1 percent of households saw their average incomes rise by $89,000 — much more than the entire average income of families in the middle.

As past studies have shown, the top-heavy growth of recent decades marks a sharp change from the three decades following World War II, when the benefits of economic growth were shared much more widely. In fact, incomes grew faster over those earlier decades for the bottom 90 percent of households than for the top 1 percent.

Between 1979 and 2007, after-tax household incomes rose by 55 percent for the nation as a whole, the CBO data show. If this growth had been shared equally across all income groups:

  • Middle-income Americans would have seen their incomes rise to $68,300 instead of $55,300, which would have meant an extra $13,000 a year in their pockets.
  • Households in the bottom fifth of the income scale would have seen their incomes rise to $23,710 rather than $17,700, giving them an extra $6,010.

For more, here’s my recent report on the CBO data.