What you haven’t heard about income inequality

We’ve heard quite a bit from President Obama about the ills associated with income inequality in the United States. Alex Adrianson at the Heritage Foundation’s “InsiderOnline” blog cites some interesting information the president has not shared about income changes tied to the Great Recession.

The Brookings Institutions’ Gary Burtless put together this chart, based on data from the Congressional Budget Office, that shows how different segments of the income distribution have fared since 2000. The chart shows everybody gaining except the top 1 percent, and the bottom 20 percent gaining the most.

Burtless:

To be sure, the pre- and post-tax incomes of the top 1% improved in 2010 compared with 2009 while incomes in the bottom 90% of households remained essentially flat. Thus, almost all the net income gains in 2010 went to people at the very top. 2010 was the first year of the current recovery, and a disproportionate share of income gain in the early recovery was concentrated on the well-to-do. Income reports published by the IRS suggest this trend continued in 2011 and 2012, when the most affluent taxpayers continued to enjoy big income gains. The flip side is that Americans at the top of the distribution also saw the biggest percentage losses in their incomes during the Great Recession. CBO’s new numbers show that households in the top income percentile saw their before- and after-tax incomes shrink more than one-third between 2007 and 2009. Middle-income Americans experienced pre-tax income losses of 4.5% and after-tax income losses of just 1.4%. In the bottom one-fifth of U.S. households, after-tax incomes actually edged up during the recession.

06 income gains inequality chart 1

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