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Top Incomes Shot Up Last Year, New Figures Show

The average before-tax income of the richest U.S. households rose sharply in 2012, according to an analysis of preliminary 2012 tax return data by economist Emmanuel Saez.  By some measures, the top households had the largest share of the nation’s total before-tax income on record, in statistics computed by Saez and his colleague Thomas Piketty that go back a hundred years. This chart shows the Piketty-Saez statistics featured in our newly updated guide to statistics on historical trends in income distribution.  As it shows, the share of before-tax income, including capital gains, going to the richest 1 percent of households has been rising since the late 1970s.  In the past decade, it has climbed to levels not seen since the 1920s.
The vast majority of the increase reflects rising incomes among the top 0.5 percent of households. The shares of income going to the top 1 percent and top 0.5 percent aren’t quite back to their heights in 2007, just before the financial crisis and Great Recession.  But they are higher than in any year except 1928, 2006, and 2007. And the share of income flowing to the top 10 percent of households reached its highest level on record in 2012, at 50.4 percent, as the New York Times points out. As Saez observes, some of the 2012 increase in income at the top may reflect wealthy taxpayers selling assets in 2012 and paying taxes on their capital gains before income tax rates went up in 2013.  But even if you exclude capital gains, before-tax incomes at the top rebounded strongly in 2012. Piketty and Saez will update these results when the complete IRS data for 2012 become available.  Nevertheless, the rise in top income shares since 2009 looks similar to what happened after the dot-com collapse in the early 2000s, when the share of income at the top resumed its upward march, and may well presage a further increase in income concentration in the years ahead.