Paul L. Caron
Dean


Tuesday, July 5, 2016

Updated Emmanuel Saez Inequality Data: Bottom 99% Had Income Party Like It's 1999, But Top 1% Did Twice As Well

Emmanuel Saez (UC-Berkeley), U.S. Top One Percent of Income Earners Hit New High in 2015 Amid Strong Economic Growth (July 1, 2016):

The top 1 percent income earners in the United States hit a new high last year, according to the latest data from the U.S. Internal Revenue Service. The bottom 99 percent of income earners registered the best real income growth (after factoring in inflation) in 17 years, but the top one percent did even better. The latest IRS data show that incomes for the bottom 99 percent of families grew by 3.9 percent over 2014 levels, the best annual growth rate since 1998, but incomes for those families in the top 1 percent of earners grew even faster, by 7.7 percent, over the same period. (See Figure 1.)

Saez

Emmanuel Saez (UC-Berkeley), Striking it Richer: The Evolution of Top Incomes in the United States (Updated with 2015 Preliminary Estimates) (June 30, 2016):

In 2015, real average incomes per family have continued to grow substantially by 4.7% relative to 2014. 1 Bottom 99% incomes grew by 3.9% from 2014 to 2015, the best annual growth rate since 1999. Top 1% incomes grew even faster by 7.7% from 2014 to 2015. In 2014 and especially in 2015, the incomes of bottom 99% families have finally started recovering in earnest from the losses of the Great Recession. By 2015, real incomes of bottom 99% have now recovered about two thirds of the losses experienced during the Great Recession from 2007 to 2009. Top 1% families still capture 52% of total real income growth per family from 2009-2015 (Table 1) but the recovery from the Great Recession now looks much less lopsided than in previous years.

Table 1

Nevertheless, income inequality remains extremely high. As top incomes have grown faster than middle and bottom incomes, top income shares have continued to increase in 2015 relative to 2014. For example, the top 10% income share increased from 50.0% in 2014 to 50.5% in 2015 (Figure 1). 50.5% is almost as high as the absolute peak of 50.6% reached in 2012.2 The top 1% income share increased from 21.4% in 2014 to 22.0% in 2015 (Figure 2).

Figure 1

Figure 2

See also UC Berkeley’s Income Inequality Critic's Faculty Salary Puts Him In The Top 1%

Press and blogosphere coverage:

For my perspective, see:

https://taxprof.typepad.com/taxprof_blog/2016/07/updated-emmanuel-saez-inequality-data-the-bottom-99-had-income-party-like-its-1999-but-top-1-did-twi.html

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Comments

These figures, despite the unconscionable disparity between the top 1% and the rest of us, looks like growth for everyone. So why do I keep hearing that the right-wing is so angry about the economy? Sounds like Clinton and Obama did pretty well; Bush 43 not so much. What is missing here?

Posted by: Publius Novus | Jul 5, 2016 6:21:23 AM

As a practitioner, I should be 100% behind Prof. Sanez, and his “beat the rich like a rented mule” philosophy. When I started in this game in 1977 with the IRS, the top tax rate was 70%. The catch, of course, was nobody paid it, particularly liberal Democrats. But, man-oh-man, tax shelter promoters made a bundle. Three to one write-offs, using nonrecourse debt, against 70% rates, I’ll let you do the math.

But as a citizen, I can’t let him get away with this nonsense. Taxes reduce wealth. The government takes from one, gives to the other, and takes its mordita along the way. I’ll say it another way: Wealth is only created by innovation. (Yes, I read Glider.) Because governments are only interested in protecting the status quo, they’ll do whatever it takes to stop innovation, e.g., the City of Austin, Texas shutting down Uber. Remember, if it wasn’t for Henry Ford, we’d still be shoveling horse shit.

Posted by: Dale Spradling | Jul 5, 2016 6:34:55 AM

Dale,
With all due respect it must be admitted that Henry Ford's income was yet another outrageous example of the disparity PN rightly criticizes as "unconscionable." Yes, we all benefited from Ford's innovations, but only in the material sense. Our spiritual psyche is damaged by allowing some folks to have much more than others. As the late philosopher John Lennon famously almost said, "Imagine no more envy."

Posted by: Mike Petrik | Jul 5, 2016 11:03:21 AM

Mike, sorry, I can't help you with your spiritual psyche. I'm too busy doing everything I can to become one of the 1%. May I suggest you talk to a spiritual adviser?

Posted by: Dale Spradling | Jul 6, 2016 8:00:15 AM

I'm still unclear if Saez still excludes non-cash beefits, much of which is tax-exempt, in his income measurements, like he did with Piketty in their famous book. That amounts to around 20% of total compensation today vs. low single digits back in the 1970s.

Posted by: MM | Jul 6, 2016 6:39:51 PM