Top Income Distributions in the US

“The World Top Income Database” has not only collected income by bracket for some 30 countries over the last century, but has also provided a graphic tool that allows you to choose the countries that you want and the income brackets.  The official credit for the cite is contained in the citation: Alvaredo, Facundo, Anthony B. Atkinson, Thomas Piketty and Emmanuel Saez, The World Top Incomes Database, http://topincomes.g-mond.parisschoolofeconomics.eu/ .  The work of Piketty and Saez have been covered in many media recently. Thomas Piketty’s new 700 page book Capital in the Twenty-First Century is also a sellout, and his conclusions and suggested remedys for income and wealth inequality is engendering a debate between the free market capitalism and increasing progressive taxes on income and wealth.

Not being an economist or politician, I am not involved in such debate.  Before, I gave articles on the distribution of wealth.  Now I am generating graphs on their site to look at income distributions.   The dates of these graphs are May 4, 2014.

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The blue data above are the top 1% income share including their capital gains income.  The red date are employment and business income.  We note the surge in capital gains before the 1929 crash, and before the 2008 “Great Recession” collapse from the housing-derivatives risks at the end of the Bush administration.

The top income shares from 10% to 0.1% are shown in the graph below.  The shares are inclusive, like the 10% share includes all those above 10%.  The exclusive brackets, say from 1% to 0.5% for 2012, are found by subtracting from 15.16% of incomes for the top 1%, the 8.82% of total income of the top 0.5%, to give 6.34% for the exclusive bracket from 1% to 0.5%.  The 2012 shares have reached that of the “roaring twenties”.  Interestingly, the decline did not start with the market collapse in 1929, but with the start of US involvement in World War II in 1941. Perhaps that was due to the the spirit of sacrifices for the war effort, and so many people working on government contracts.  The recent rise in income share stared in 1987.

The increase in income for the top 0.1% rose from about 2% in the 60’s and 70’s to almost 9% today, a rise of 7% or about 4.5 times.  The income increase for the top 0.5% is from 5% to 15%, or an increase of 10% or about 3.0 times.  The rise for the top 1% is from about 8% to 19%, or an increase 11% or of 2.4 times.  The income increase of the top 5% is from 21% to 36%, or an increase of 15% or of 1.7 times.  The rise for the top 10% is from about 32% to 48%, or an increase of 16%, or of 1.5 times.

Given the above inclusive share increases, we can subtract them to find the increase from each exclusive bracket range to find out if it is the highest earners that are responsible for all the increases from the 60’s and 70’s.  So the top 0.1% is responsible for a 7% increase of income share, for all inclusive shares that contain it.  The next exclusive bracket, from 0.1% to 0.5%, then only gained the difference of 10% minus 7%, or 3%.  The next exclusive bracket, from 0.5% to 1%, only gained 1%.  The 1% to 5% exclusive bracket gained 4%.  The last exclusive bracket we are considering, from 5% to 10%, gained 1%.  So of the inclusive share of the top 10% which gained 16%, 7% of that or almost half was due to the increase of the top 0.1%.  The gains of the set of exclusive brackets above were 7%, 3%, 1%, 4%, and 1%.  Of course, the total 16% rise in share of the top 10% were generously provided by a decrease in the income share of the lower 90%.

From another Piketty and Saez article, the top 0.o1% had 4.08% of the income, or 5.47% of the income including capital gains in 2012.

If you are wondering what bracket you are in, the average income of the top 1% was $1.02 million, or with capital gains, $1.26 million.  The average income of the top 0.01% was $21.6 million, or with capital gains, $30.8 million.

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About Dennis SILVERMAN

I am a retired Professor of Physics and Astronomy at U C Irvine. For a decade I have been active in learning about energy and the environment, and in lecturing and attending classes at the Osher Lifelong Learning Institute (OLLI) at UC Irvine.
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