Guest guest Posted September 26, 2003 Report Share Posted September 26, 2003 www.bbcnews.com > US inequality gap widens > > By Steve Schifferes > BBC News Online economics reporter > > Money has to stretch further for most Americans > The gap between rich and poor in America is the widest in 70 years, > according to a new study published by the Center for Budget and Policy > Priorities. > The research, based on newly released figures from the non-partisan > Congressional Budget Office, shows that the top 1% of Americans - who earn > an average of $862,000 each after tax (or $1.3m before tax) - receive more > money than the 110m Americans in the bottom 40% of the income > distribution, whose income averages $21,350 each year. > > The income going to the richest 1% has gone up threefold in real terms in > the past twenty years, while the income of the poorest 40% went up by a > more modest 11%. > > The richest Americans have got richer in the past two decades > In 1979, the top 1% received just 7.5% of national income, compared to > 15.5% in 2000. > > The share of the poorest 40%, in contrast, declined from 19.1% to 14.6%. > > Tax cuts and earnings > > In fact, the share of income received by bottom 80% of Americans declined > in the past twenty years. > > INCOMES OF RICH AND POOR > Bottom 20%: 1979 - $12,600 > 2000 - $13,700 > Middle 20%: 1979 - $36,400 > 2000 - $41,900 > Top 20%: 1979: $84,000 > 2000: $141,400 > Top 1%: 1979 $286,300 > 2000: $862,700 > After-tax household income > source: Center for Budget and Policy Priorities, CBO. > Only the top fifth increased their share, with their real incomes going up > by 68%. > > Much of the growth in income at the top has come from the extraordinary > growth in executive pay, coupled with strong earnings growth among > highly-educated professionals like doctors and lawyers. > > But changes in the tax system have also favoured the rich. > > US INCOME DISTRIBUTION > Bottom 20%: 4.9% > Second 20%: 9.7% > Middle 20%: 14.6% > Fourth 20%: 20.2% > Top 20%: 51.3% > Top 1%: 15.5% > % share of total after-tax income > source: Center for Budget and Policy Priorities, CBO. > The effective Federal tax rate on the top 1% dropped from 37% in 1979 to > 33.2% in 2000. > > The tax rate for the middle fifth of the income distribution also went > down, but by less, from 18.6% to 16.7%. > > The two big tax cuts passed by the Bush administration in 2001 and 2003 - > which are not taken into account in this study - will increase that > inequality further. > > According to the Urban Institute-Brookings Tax Policy Center, the top 1% > will gain on average 4.6% in after-tax income (or $26,000 per household) > while the middle fifth of the population gains only 2.6% ($676 per > household). > > The fall in the stock market since 2000, however, has reduced the income > of the rich. > > Political debate > > Rising inequality, and the growing budget deficit, has sparked a debate > among Democrats over whether to repeal those tax cuts. > > Two candidates on the left of the Democratic Party, Howard Dean and > Richard Gephardt, advocate repealing all the tax cuts and using the money > on providing extra benefits, like universal health care, instead. > > But moderate Democrats want to preserve tax cuts for middle-income > Americans. > > "The middle class is stressed today," said Senator Joe Lieberman in a > recent Democratic presidential debate. > > Republicans, meanwhile, argue that giving more money to the rich will > encourage job creation and enrich everyone in the end. > > They point with pride to the growing number of millionaires in the US, > which demonstrates that social mobility is still possible. > > One factor in the political equation is that, with a low turnout in most > US elections, the poor are much less likely to vote than the better-off. > > The CBPP study looked at after tax incomes of the US population in 1979, > 1989, and 2000, peaks of the economic cycle, using new data on top incomes > released by the Congressional Budget Office. A separate study by the > National Bureau for Economic Research studied the income share of the top > 1% from 1913 to the present. Quote Link to comment Share on other sites More sharing options...
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