You probably won't be surprised when you read today's Wall Street Journal and find out that the income-inequality gap is widening. The wealthiest Americans in the top 1% earned 21.2% of all income in 2005, according to data from the IRS. That's a lot different than in 1986 when the top 1% of earners earned 11.3% of all income earned.
What do you have to earn to be in that top 1% bracket - at least $364,657. People in this group also saw the biggest jump in income. Their 2001 income in current dollars was at least $292,913, which means a $71,744 increase during the five year period or 4.9% per year. There were 1,316,116 tax filers in this bracket.
Next group of earners tracked are the top 5%. (The IRS tracks this cumulatively, so the top 1% is included in the numbers.) The top 5% earned 35.75% of all income in 2005, so those between 1% and 5% earned 14.55% of all income in 2005. To be in this bracket, you would need to have earned between $145,283 and $364,656. People in this group saw an income increase in current dollars of at least $17,379 in earnings between 2001 and 2005, or a 2.7% increase per year. There were 5,304,466 tax filers in this bracket.
How about the top 10%? Well they earned 46.44% of all 2005 income, but the share for those between 5% and 10% is 10.69% of all income earned in 2005. To be in this bracket you would need to earn between $103,912 and $145,282. People is this group saw a $11,158 increase in current dollars between 2001 and 2005 or a 2.4% increase per year. There were 6,630,582 tax filers in this bracket.
Now let's take a look at the top 25%. They earned 67.52% of all income, but for those between 10% and 25% the share was 21.08% of all income. To be in this bracket you would need to earn between $62,068 and $145,281. People in this group saw a $5,983 increase in current dollars since 2001 or a 2.1% increase per year. There were 19,891,745 tax filers in this bracket.
And what about the top 50% of earners. By the time you get to the first half of all earners in this country you're looking at 87.17% of all income earned in this country. The group between 25% and 50% earned 12.83% of all income earned in 2005. Your earnings would have been between $30,881 and $62,067 to fall into this group. People in this group saw a $2,353 increase in current dollars since 2001 or a 1.65%. There were 33,152,910 tax filers in this group.
The rest of 2005 income - 12.8% - was earned by the bottom half of tax filers - people who earn less than $30,881. There were 66,305,818 tax filers in this group.
To add insult to injury the top 1% also got the biggest benefits in tax cut legislation. In 2001 the average tax rate for the top 1% was 27.5% in 2005 it was 23.13% or a 4.37% tax reduction, which based on the bottom of that bracket was at least $15,935. So in addition to highest increases in earnings they got to keep more of it - in fact it's more than the top 10% saw in total raises from 2001 to 2005.
Basically what this shows is that only those in the top 1% truly were better off in 2005. When you take into consideration the increasing costs of health care and energy, most people in the other brackets are facing income stagnation or actual income loss. Still wondering why a majority of the population think we're in a recession or heading there?
Lita Epstein is the author of more than 20 books including "Reading Financial Reports for Dummies" and "Working After Retirement for Dummies."
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Reader Comments (Page 1 of 1)
10-12-2007 @ 2:05PM
Jim Kirksey said...
It's a good thing the top earners have increased
considering the cost to tax payers in supporting
the millions of people that earn nothing but
choose instead to live off the long list of government provided programs for their support.
I'm required to take a random drug test at my job. the government should require the same of those
that I help support with my icome tax.
10-12-2007 @ 2:25PM
W. B. Wilhite said...
Once the rich acquire everything, security will be an excellent growth business. They won't be safe.
10-12-2007 @ 9:19PM
Don Clou said...
Not in the top 1%? Want a tax cut? Demand that Congress immediately triples the personal exemption and standard deduction rates.
10-12-2007 @ 9:20PM
Don Clou said...
Of course this is just based on what is being reported to the IRS. More accurate figures will come out when Congress authorizes the IRS to go after the cheats. All that under-reporting and unreporting income, overstating expenses to increase deductions, all the off shore and foreign accounts and investments to avoid US taxes, will show more realistically how much the top 25% have and how little they pay.
10-13-2007 @ 3:36AM
Rder2007 said...
If they earned it honestly and fairly through hard work they derserve it. This is the USA!
10-13-2007 @ 11:30PM
Casey said...
If it were not for the top 5%, or even top 10%, the rest of the folks would most likely be worse off than now. Between income taxes paid to all agencies (not just IRS) and charitable donations, there would be a lot fewer comfortable people. Yes, be happy you live in the USA...
10-14-2007 @ 3:57PM
wildbill said...
Dear Lita:
While this is interesting and I do agree that the majority of the people are stagnant or in reverse economically, a better picture would be to assess the total holdings of the top 5%. In the days of the "robber barons" a small group held more wealth than the assests of the U.S. government. It would be interesting to see if anything has changed.
10-14-2007 @ 3:58PM
DC said...
Jim, what do drug tests have to do with anything? They're an invasion of privacy and a waste of money.
I think it's terrible how hard it is for a middle class family to survive. The middle class is quickly becoming the lower class because of gas prices, rising food prices, etc, and most of the rising prices are due to the greediness of corporate America, not supply and demand. Don't let yourselves be fooled.
10-15-2007 @ 9:58AM
srotondo2 said...
I wonder why the writer didn't include the percentage of the taxes the upper 25% pay in comparision to the rest of the country? If the top 25% moves to Costa Rica, the US won't have hardly any tax revenue...
10-15-2007 @ 10:20AM
Lita Epstein said...
Srotondo2:
The top 25% of tax filers, those with adjusted gross incomes of at least $62,068 earn 67.52% of all income earned in this country and do pay most of the taxes - 85.9%. There were 33,152,909 tax filers in the top 25% and if you average 2 people per tax filing (probably higher), then that's more than 66 million people. Costa Rica has a total population of about 4 million. I don't think that moving to Costa Rica would be a feasible option for them.
About 50% of the population - people who earn less than $30K a year - pay only about 3% of the tax bill, but they earn only about 13% of the total income earned in this country. There were 66,305,818 filers (or more than 120 million people) in the bottom 50% sharing 13% of the total earnings in this country.