Home > income inequality, Plutonomy > Decomposing the top decile US income share into 3 groups, 1913-2013

Decomposing the top decile US income share into 3 groups, 1913-2013

from David Ruccio

top shares

The share of total income captured by the top 1 percent actually shrunk in 2013, falling from 21.22 percent to 18.98.

But, as Emmanuel Saez [pdf] explains, that decline is probably a statistical anomaly:

The fall in top incomes in 2013 is due to the 2013 increase in top tax rates (top tax rates increased by about 6.5 percentage points for labor income and about 9.5 percentage points for capital income). The tax change created strong incentives to retime income to take advantage of the lower top tax rates in 2012 relative to 2013 and after. For high income earners, shifting an extra $100 of labor income from 2013 to 2012 saves about $6.5 in taxes and shifting an extra $100 of capital income from 2013 to 2012 saves about $10 in taxes. Realized capital gains are particularly easy to retime, explaining why the drop in top income shares in 2013 is more pronounced for series including capital gains than for series excluding capital gains.

If we take that income-shifting into account (and thus use the average of top-1 percent incomes for 2012 and 2013), we can see that, while average incomes in the United States increased (in real terms) by only 3.5 percent from 2009 to 2013 (from $53, 860 to $55,740), the average incomes of the top 1 percent soared by 24.7 percent (from $975,884 to $1,217,002).

In other words, thus far all of the gains of the so-called recovery are continuing to go to the top 1 percent.

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