Income Inequality and Tax Policy
Here's an interesting look at the results of several recent studies on tax policy and the resulting inequity of income, from a famous journalist and professor in the tax policy arena. If you want to know the *actual* long-term effects of continuous tax cuts, here you go. Hint - it's not making the economy stronger or benefiting the vast majority of citizens. And as more and more of the economic output goes to the rich, the tax burden on everyone else becomes more onerous every year.
In 2011 the average AGI of the vast majority fell to $30,437 per taxpayer, its lowest level since 1966 when measured in 2011 dollars. The vast majority averaged a mere $59 more in 2011 than in 1966. For the top 10 percent, by the same measures, average income rose by $116,071 to $254,864, an increase of 84 percent over 1966.
Plot those numbers on a chart, with one inch for $59, and the top 10 percent's line would extend more than 163 feet.
Now compare the vast majority's $59 with the top 1 percent, and that line extends for 884 feet. The top 1 percent of the top 1 percent, whose 2011 average income of $23.7 million was $18.4 million more per taxpayer than in 1966, would require a line nearly five miles long.
That disparity in income growth rates comes as the total federal tax burdens on those at the top have been slashed, compared with 1966, especially for the long-term capital gains that account for about a third of total income at the very top.
This $59 increase for the vast majority covers a time longer than most people work. Back in 1966, the first Star Trek episode aired and Barack Obama started kindergarten.
Skyrocketing growth at the top and, in recent years, plummeting income for the vast majority caused a major re-slicing of the national income pie. That re-slicing results in large part from tax, employment, and other rule changes that began with President Reagan and intensified under President George W. Bush. The situation changed slightly this year under President Obama, but the rules allow the rich to make their fortunes grow like a giant snowball rolling down a hill.
Candidate Bush said his tax cuts would make everyone prosper. But the real average pretax income of the bottom 90 percent in 2011 was $5,340 less than in 2000, a decline of more than $100 per week, or 15 percent, in pretax income. The top 1 percent of the top 1 percent saw their incomes plummet even more after the Bush tax cuts were enacted, down $7.5 million or 24 percent in real terms in 2011 compared with 2000.