Inequality of Wealth and Income

Posted on November 16, 2010 by Andrew Kurz

Download PDF Report >>> Income-Wealth

This article is related to health care costs because new sources of revenue will be needed to help balance the federal budget.  There simply are not enough reasonable cuts in spending to close the deficit gap.  Tax increases will be necessary and this analysis examines effects of past tax policies.

SUMMARY

After years of neglect, political America has awakened to the problems of rising deficits that are developing  at all levels of government. Economists and politicians may argue endlessly about  causes and solutions.  Cutting spending, raising taxes, growing the economy all have their place.  This essay examines income, wealth, and taxes, not just in terms of rates but also where those rates have affected income growth.

By every measure, U.S. wealth and income have skewed heavily and continue to tilt to the top 1%, approaching an unhealthy situation. A robust middle class will spend more of its earnings than the wealthy, and in this country consumer spending constitutes the largest economic component.

METHODOLOGY OF REPORT

All the data used in this report are derived from government sources. Income and tax data are from Congressional Budget Office (CBO).  CBO published tax and income data from 1979 through 2007, dividing data of households into five quintiles (20% each) as well as the top 10%, 5%, and 1%. Wealth data come from the Federal Reserve’s 2007 Survey of Consumer Finances Chartbook divided into four quartiles plus top 10%.

DISCUSSION – Tax Rates

Beginning in the Reagan administration, there has been an overall trend towards lower tax rates as shown in the graph below.  Despite differences in timing, the total average tax rate for middle America has declined virtually the same as for the highest 1% of households.

The next graph shows trends in who is paying how much in total federal taxes.  Here clearly shows tax rate reductions have brought down the share of lower 80% of all taxpayers from 45% of total taxes to 35%. One group that has an increased share is the top 1%, rising from 15% to a 28% share.  With declining rates and overall increases in share of tax payments can mean only one thing.  The top 1% are increasing income at a significantly faster rate than other taxpayers. Continue reading →

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Inequality of Wealth and Income – Paged

Posted on November 16, 2010 by Andrew Kurz

Download PDF Report >>> Income-Wealth

This article is related to health care costs as new sources of revenue will be needed to help balance the federal budget.  There simply are not enough reasonable cuts in spending to close the deficit gap.  Tax increases will be necessary and this analysis examines effects of past tax policies.

SUMMARY

After years of neglect, political America has awoken to the problems of rising deficits being incurred at all levels of government. Economists and politicians may argue endlessly of causes and solutions.  Cut spending, raise taxes, grow the economy all have their place.  This essay examines income, wealth, and taxes, not just rates but where those rates have affected income growth.

By every measure, U.S. wealth and income has skewed heavily and continues to tilt to the top 1%, approaching an unhealthy situation. A robust middle class will spend more of its earnings than the wealthy and in this country consumer spending constitutes the largest economic component.

METHODOLOGY

All the data used in this report are derived from government sources. Income and tax data are from Congressional Budget Office (CBO).  CBO published tax and income data from 1979 through 2007, dividing data of households into five quintiles (20% each) as well as the top 10%, 5%, and 1%. Wealth data come from the Federal Reserve’s 2007 Survey of Consumer Finances Chartbook divided into four quartiles plus top 10%.

GO TO DISCUSSION – Tax Rates

GO TO DISCUSSION – Household Income

GO TO DISCUSSION – Household Wealth

CONCLUSION

The wealthy always had the lion’s share of income and assets.  At some point, however, excessive accumulation of wealth can tend to stymie economic growth.  A robust middle class will spend more of its earnings than the wealthy and in the US economy, consumer spending constitutes the largest economic component.

Download PDF Report >>> Income-Wealth

 

Filed under: Analyses, Congressional Budget Office (CBO), Federal Reserve, Health Costs, Wealth and Income | Tagged: , , , , , , , , , , | 1 Comment »