I have been reading the non-partison CBO (Congressional Budget Office) study showing the trends in wealth distribution since 1979. After I read it, I thought to myself how could there be any question as to why the protesters of Occupy Wall Street took to the streets.
Since the Reagan Administration implemented the trickle-down-economics policies, giving large tax breaks to the wealthy in the belief that with more money in their pockets it will result in job growth, the income gap has reached a level that rivals 1928, a year before the Wall Street crash that marked the beginning of the Great Depression.
Sources of Income — For Middle Class is Wages/Salaries. For Wealthy is Capital Gains
Two factors accounted for the changing distribution of market income. One was an increase in the concentration of each source of market income, which consists of labor income (such as cash wages and salaries and employer-paid health insurance premiums), business income, capital gains, capital income, and other income. All of those sources of market income were less evenly distributed in 2007 than they were in 1979.
The other factor was a shift in the composition of market income. Labor income has been more evenly distributed than capital and business income, and both capital income and business income have been more evenly distributed than capital gains. Between 1979 and 2007, the share of income coming from capital gains and business income increased, while the share coming from labor income and capital income decreased.
More concentrated sources of income (such as business income and capital gains) grew faster than less concentrated sources (such as labor income).
Between 1979 and 2007:
- For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent.
- For others in the 20 percent of the population with the highest income, average real after-tax household income grew by 65 percent.
- For the 60 percent of the population in the middle of the income scale, the growth in average real after-tax household income was just under 40 percent.
- For the 20 percent of the population with the lowest income, the growth in average real after-tax household income was about 18 percent.
The share of income going to higher-income households rose, while the share going to lower-income households fell.
The top fifth of the population saw a 10-percentage-point increase in their share of after-tax income.
Most of that growth went to the top 1 percent of the population.
All other groups saw their shares decline by 2 to 3 percentage points.