Monday, September 27

Income of top one percent can be volatile

What has happened to the share of national income earned by those at the very top? This explanation and chart from Putting a Face on America’s Tax Returns: A Chartbook from the Tax Foundation illustrates.

Many people believe that the fortunes of the top 1% are an indicator of inequality in America. If that is the case, then inequality is no worse today than it was during the second term of the Clinton administration. The top 1%’s share of the nation’s income is now roughly where it was in 1997. Inequality did actually increase by 12% during the 1990s despite the tax hikes of 1990 and 1993, which increased the top income tax rates on the rich. Because the wealthy derive much of their incomes from highly volatile sources such as capital gains and business profits, the fortunes of the top 1% — and inequality in general — tend to follow the peaks and valleys of the business cycle.