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Income Inequality Is Higher Than Ever.

Income inequality reached record highs in 2005. Twenty percent of households with the highest incomes received 50.4 percent of aggregate income—the largest share on record in data going back to 1967.  That share was almost twice as large as that of the bottom 60 percent of households (26.6 percent).  The top 1 percent of households received 19.3 percent of income in 2005—the same level as in 2000, and the highest since 1929. Ratios comparing household income at various points along the income distribution also broke records in 2005. For example, income at the 95th percentile (the lower income boundary for the top 5 percent of households) was 3.6 times higher than income at the middle of the income distribution, and 8.7 times higher than income at the 20th percentile (the upper income boundary for the bottom 20 percent of households).

[Bureau of the Census, U.S. Department of Commerce, Income, Poverty, and Health Insurance Coverage in the United States: 2005, Table A-3, and Historical Income Tables, Table H-2; Piketty, Thomas and Emmanuel Saez, “Income Inequality in the United States: 1913-1998,” Quarterly Journal of Economics, February 2003 (updated data available at]

Federal Taxes Only Slightly Lessen Income Inequality and Have Become Less Progressive Under President Bush.  

Because of the progressive nature of the federal income tax, after-tax income is slightly less unequally distributed than pre-tax income. Nevertheless, the 20 percent of households at the top of the income distribution still received half of aggregate after-tax income in 2004. The top 10 percent of households received 36 percent of after-tax income, while the bottom 60 percent of households received only 30 percent. Because President Bush’s tax cuts have reduced the progressivity of the tax system, it has become less effective at combating the rise of pre-tax income inequality.

[Congressional Budget Office, Historical Effective Tax Rates: 1979 to 2004, December 2006, Table 1C.]

The Sharp Divergence Between Corporate Profits And Wages In Recent Years Has Exacerbated Income Inequality. 

In 2005, wages and salaries accounted for the smallest share of national income ever recorded in data going back to 1929, while corporate profits captured the largest share on record. These trends have worsened income inequality, since wages and salaries make up a greater proportion of household income in moderate- and lower-income households compared with higher-income households, which hold a disproportionately high share of corporate stock.

[Bureau of Economic Analysis, U.S. Department of Commerce, NIPA Table 1.12.]

The Concentration Of Wealth Is Even More Unequal Than That Of Income.

In 2004, the wealthiest 1 percent of households held more of the country’s total net worth (33 percent) than the bottom 90 percent of households combined (31 percent). Together, the wealthiest 10 percent of households held 69 percent of total net worth.

[JEC staff calculations using data from Federal Reserve Board, Survey of Consumer Finances, 2004.]

Most Households Have Very Little Wealth.

Even after accounting for housing wealth, the median net worth of the bottom 25 percent of households was only $2,000 in 2004. The median net worth for the next 25 percent of households was less than $50,000. By contrast, the wealthiest 10 percent of households had a median net worth of $1.4 million.

[JEC staff calculations using data from Federal Reserve Board, Survey of Consumer Finances, 2004.]