Top 1 Percent Make 20 Percent of All Income

You know the old saying, “The rich get richer and the poor get poorer?” That adage sums up life in the United States.

According to a new report by the Paris-based Organisation for Economic Co-operation and Development, the top 1 percent of Americans now receive at least 20 percent of all pretax income in the U.S., which is double what they got in 1980.

While other countries have experienced income inequality issues of their own, the report said, “The rise was most spectacular in the United States.” The report noted this staggering statistic: 80 percent of total income growth in the U.S. between 1975 and 2007 was captured by the top 10 percent of income earners.

The super-rich are getting even richer, according to the report. The share of total income of the top 0.1 percent of income earners in the U.S. soared from 2 percent in 1980 to more than 8 percent in 2010.

“By comparison, the top 0.1 percent account for 4 to 5 percent of total pretax incomes in Canada, the United Kingdom and Switzerland, and close to 3 percent in Australia, New Zealand and France,” OECD said.

The Huffington Post noted that the super-rich getting richer might not be so bad, except:

It doesn’t appear the nation’s “wealth creators” are creating much wealth for anyone else. According to the OECD’s report, the pretax, inflation-adjusted incomes of the bottom 99 percent have only grown by an average of 0.6 percent per year in recent decades. Add in the top 1 percent, and the country’s income growth rate jumps to 1 percent.

Why so much income inequality? The OECD report pinpointed several factors, including the change in compensation practices for executives, and trends in taxation, like the reduction of progressive income and inheritance taxes.

CBS News said the OECD, which aims to find policy solutions to ensure a more equal distribution of resources, has a recommendation: “raising taxes on the rich by reducing tax deductions that benefit top earners and taxing all compensation, including capital gains, as ordinary income.”

Money Talks News founder Stacy Johnson recently wrote this opinion piece on income inequality. Check it out, then share your thoughts below or on our Facebook page.

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Comments & discussion

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  • Jake

    Taxing capital gains as ordinary income would hurt the stock market, and a lot of retirees who are living off of retirement income. I think it would do us all some good to stop worrying about how much our neighbors make, and focus on less materialistic things. Also – for context – making $350k puts you in the top 1%, 160k in the top 5%, 114k in the top 10%, 67k in the top 25%, and 33k in the top half.

    • Patrick Seitz

      It would hurt wealthy people the most, retirees very little and the stock market not at all. I’m sure you’re not suggesting that wealthy investors are going to pull out of the stock market and get a job at McDonald’s because of a capital gains tax change. Your comment about neighbors and materialism is a lovely diversion that completely misses the point. Income inequality isn’t about not being able to afford the latest gadget, it’s about not being able to afford a home, food and health insurance. You might want to consider a class on economics…

      • Jake

        I have an MBA and have taken extra masters-level finance courses. Many retirees get a decent percentage of their income from capital gains, and although not everyone would pull out of the stock market, reducing the potential gains from the stock market would be an incentive for investors to consider putting their money somewhere else. That is common sense. The less access to capital that companies have (and the higher their cost of capital), the less they can expand, and the fewer people they can hire. If you can’t afford a home and food in the US, the only legitimate excuse is a disability, in which case the government will step in. You might want to consider studying how the average world citizen lives to get a more accurate perspective about the level of income inequality between the poor in the US and the average world income. Conversations such as these only help perpetuate the victim-mentality that tells people they cannot succeed through no fault of their own, when in actuality, the US is the best place in the world for wealth creation if you come from nothing.

        • FactCheck

          Today if you hold an asset for 12 months (stocks, bonds….) and sell it profit is considered capital gains instead of ordinary income. Why not raise it 36 months. Used to be five years. It will surely reduce speculative tendency and result more investments in business

          • Jake

            If we have identified income inequality as a problem, do we want to fix it by helping those on the bottom, or by hurting those on the top? Why would we want to hurt those who have high incomes? Is it just an effort to make those with lower incomes feel better about themselves because the high-income earners don’t have as high of incomes anymore? How does that help anyone?

          • FactCheck

            Some people believe in the “redistribution” talking point and hurting the super rich. Others believe in fairness, progressive taxation and fair wages. By fair wages I mean tax payers not subsidizing the likes of Wal Mart and McDonalds.

            Where is the fairness in a CEO making x1000 the average wage?

          • Jake

            If you are suggesting BOD reforms to help protect the interest of stockholders, I could be for that. I am also for the Fair Tax, which is a progressive consumption-based tax which would do away with any loopholes. Shoot, I’d even be for a straight-up progressive income tax, if we could do it without any special considerations (tax credits, tax deductions, etc.). The problem I have is that conversations about income inequality always resort to the lowest common denominator, which is to attack those who make the most money. I have worked for minimum wage (and even less than minimum wage), and now make far above the average income. This is common. I also pay more in taxes now than I used to make before taxes working minimum wage; that is a progressive tax, and I can agree with that. Most minimum wage positions are transitional positions that people take when they need to only in certain points in their life. If you want to focus on long-term unemployment or helping those that need more education/knowledge to move up from the jobs they have, then lets focus on that. It seems to me that most of the income equality discussions focus on jealousy over those who make a lot of money, instead of helping those that don’t.

          • FactCheck

            Consumption based tax is not progressive but regressive. Income inequality necessarily does not equate to lowest common denominator but middle class. Take look at some comparative statistics on income growth for the last 2 decades.

            Bear in mind that the income inequality is not just US problem but a global phenomenon. Also bear in mind that there is tipping point for inequality and history has shown us that it is revolution by the peasants.

          • Jake

            Please read my posts before responding. Straight consumption-based tax is regressive; the Fair Tax includes pre-bates, which makes it progressive. The lowest common denominator I was referring to was not a class of income, but the envy-driven desire “to attack those who make the most money”.
            If you want to take a global-view of income inequality, then look at the inequality of those on welfare in the US vs the average income of people in countries that are not quite as developed. There are places $300 USD/month is considered well off.

          • http://www.moneytalksnews.com/ Stacy Johnson

            Maybe what we do, Jake, is what this post and this discussion are doing. Namely, shining a light on something that’s unfair and has a negative effect on overall society. Sometimes that alone can lead to change.

            For example, perhaps shareholders of corporations begin to recognize some CEOs may be overcompensated and as a result, vote against ridiculous pay packages. Perhaps some of beneficiaries of our current income disparity read something like this, understand their slice of the pie is neither necessary nor fair, and take steps on their own to change it.

            Success in America wasn’t always solely measured by the amount of physical possessions and income one accumulated. If our society chooses to recognize qualities other than money – like trust, honor, wisdom and charity – we can change things without passing laws or increasing either taxes or welfare.

            It wasn’t Congress or laws that got us here. It was us. Our society. One that’s entirely focused on power and money, and manipulated by those that have it to the detriment of those that don’t.

            Like a pendulum, societal values swing. What makes the pendulum move isn’t the government. It’s our values. We created this situation and we can change it any time we choose. And the way that begins is with articles like this.

            Make sense?

          • Jake

            Well said.

  • nitemare2

    Krystal you again are preaching wealth redistribution. You continue to denigrate those who have worked to make money. They also employ about 70% of the work force either directly or through investments. You compared Costco to Wal-Mart in a previous article with out mentioning that Costco collects a membership fee to shop there and to cover their wages and employ about a quarter of the people Wal-Mart does. Are you related to Stacey because he says he loves capitalism and you hate it.

    • Patrick Seitz

      Costco’s membership fee isn’t to cover wages, it’s to reduce their prices. It’s a safer bet for a business because they got some money whether you shop there or not. That’s how capitalism, which you are apparently an expert on, actually works. Speaking of your reference to capitalism, thanks for making clear that you like to name-call and don’t have any actual arguments in favor of your position. But we already knew that.

      • nitemare2

        Who did I call any names? And your saying they use the membership money just to keep prices low doesn’t hold water either. Unlike Wal-Mart, Costco uses a paid-membership business model. Customers need to become Costco members in order to purchase merchandise at discounted price, paying at least $55 per year for the membership. This allows Costco to collect most of its profits 12 months in advance. Roughly 70% of the company’s operating income is generated in this way. But that is not just what capitalism is. Capitalism is the selling of a product or service that someone will pay you for at a price at which you can make a profit. The liberal/progressive ideology is to control how much that profit can be in the name of social justice or “fairness”. You believe in the right of taking money you did not earn? So where is your “actual argument”? You gave nothing, you claim I called someone a name. I have been following Krystal’s articles for some time and they have all been anti capitalism and anti company pro wealth redistribution and union control. This article is no different she wants the top 1% to give her cause money that they didn’t earn. She wants wealth redistribution.

        • FactCheck

          If you are in support of unfettered capitalism, please go read history of steel barons, oil barons, railroad barons, etc. It will be very educational to form you own opinion about capitalism. While you are reading, ponder this “should we ban or regulate child labor”?

          • nitemare2

            This is not the 1800s there are laws and the jobs today for the most part are skilled. You and the liberals like Reid want to portray company owners as greedy people looking to screw their workers. Just like non union companies are slave labor right. The auto industry plants which are non union pay the same have just as good benefits but the workers don’t have to pay for some union boss. The best trucking company I drove for in my36 year career was non union better pay good benefits and new equipment every 3 years. Let’s hear your facts to back up your statement. Companies pay for the skills they need flipping burgers is not a skill. The President is more worried about illegals, spreading the wealth, anything but jobs. He extends benefits instead of correcting the problem. Come on tell me about all those greedy people who create jobs and employ people

          • FactCheck

            Isn’t Right Wing against all laws and regulations? Don’t believe you got the point.

          • nitemare2

            I don’t believe you have a point! Right wing really? I believe in rules and regulations that make sense. I don’t believe in the liberal ideology of creating 7 regulations that contradict on the way a floor should be mopped. I don’t believe regulations should be made just for the sake of making regulations. And I don’t believe regulations should be made for political reasons. I believe laws should be enforced period. If I speed and get caught I don’t make excuses I pay the fine. The President is deciding which laws he wants enforced and he does not have that power. The AG decides to ignore a order of contempt against him because he doesn’t respect those who passed the vote. No where in the law is there a if it says he shall obey and execute the order. I was told by my father that those who believe people cheat, steal, are greedy and want to do harm think so because they do so themselves. So I guess you feel companies would revert to those things is what a left winger would do.

    • http://www.moneytalksnews.com/ Stacy Johnson

      First, let’s get something straight. Krystal isn’t preaching anything. Krystal is a freelance writer who is given specific writing assignments. In this case, she was assigned to review several sources about a new report that came out on income inequality, then condense that information into a short article.

      She was assigned that post by me. So if you’ve got a beef about this article, it’s not with Krystal, it’s with me.

      Second, neither Krystal or anyone else here is denigrating people who work or make money. That would be pretty foolish, since that’s exactly what everyone here does.

      This article, and others like it, are meant to provoke thought, not preach, denigrate or take a particular stand. These issues are complex and multi-faceted. There probably isn’t a perfect path or right or wrong answer to many issues we may write about.

      In short, there’s every reason to offer an opinion, but no reason to get freaked out or read things into articles that aren’t there.

      • nitemare2

        I’m sorry but it seems every article you give Krystal is anti company. She has done why minimum wages should be raised. She has been anti Walmart I asked how she could compare Costco to Walmart when 70% Costco’s income is from membership fees plus low prices they don’t have to worry about minimum wages. They also employ 1/4 of the people Walmart does. You statement about making money I give you MSNBC several of their shows are pure anti capitalism are they not in business to make money? So if I have a beef with you it would be tell both sides of the story instead of only the liberal view. Krystal is not being fair have her get something from Charles Krauthammer instead of all liberal media there are many others who have honest opposite reasons as to why this subject has been and will for ever be. And is not the great destroyer liberals make it out to be.

    • FactCheck

      I depends on your definition of work. If you consider speculation and market manipulation as work then you may be right. On the other hand, if you consider producing goods and services and adding to real wealth then speculation and manipulation cannot be considered as work. Why do you think our economy melted down in 2008 with just real estate derivatives went kaput?

      • nitemare2

        Your fact check is having trouble. The melt down was because of laws passed that let banks gamble. Not derivatives but sub prime mortgages. And as I said a product or service. You want to keep changing things? You can always find negatives in anything but they are not the majority. The normal now is part time low pay jobs and Pelosi and friends seem to like that idea. The unemployment numbers drop because of people no longer looking and part time jobs. Not new jobs

    • FactCheck

      So does Sam’s Club. Why aren’t Sam’s paying the same wages as Costco?

      • nitemare2

        It’s two different companies one owned and run by 1 person the other run by a board. And it all boils down to the point of if you don’t like the pay get a job where you get what you think you are worth.

  • FactCheck

    Exactly what happens when you transition to a speculative economy. For long time commodities could only speculated who actually used them. Now, J P Morgan is allowed to manipulate aluminum priced just by putting it on trucks and moving it around from warehouse to warehouse to meet regulatory constraints.

    Get the banks out of commodity speculation, make businesses pay living wages, control overblown executive pay by levying taxes when stocks and bonuses were granted by treating it like ordinary income.

  • Andrew

    Article doesn’t mention that the top 1% also pay THIRTY PERCENT of the total income taxes collected. That’s more than the bottom 90-something percent pay, yet people keep screaming for the rich to pay MORE in taxes. I think they just need to make the tax system fair for EVERYONE; about the only way to REALLY do this is to institute that national sales tax and get rid of income tax on individuals (keep corporate taxes but SIMPLIFY them… get rid of most if not all tax subsidies but to balance it out make the corporate tax rates reasonable.