STWR - Share The World's Resources

23rd Jan 07 - Lawrence Mishel, Jared Bernstein & research assistance by James Lin, Economic Policy Institute

Newly released data from two separate sources reveal just how skewed the distribution of economic growth has been over the current recovery.  Data from the Bureau of Economic Analysis through the third quarter of 2006 show that a historically high share of corporate income is going into profits and interest (i.e., capital income) rather than employee compensation.  And a newly released Congressional Budget Office (CBO) analysis of household incomes shows that a greater share of this capital income goes to the richest households than at any time since the CBO began tracking such trends.  In other words, our economy is producing more capital income and that type of income is more likely to go to those at the very top of the income scale.  Together, these dynamics are contributing to a uniquely skewed recovery.

22nd Jan 07 - Declan, Crawl Across the Ocean

I see that the Economist had a recent cover story entitled: "Rich Man, Poor Man: The Winners and Losers from globalisation." And it does seem that The Economist is worried about inequality. More specifically, the Economist seems to be concerned that, given fast-growing inequality, given millions of middle-class workers making no progress, given millions and millions more stuck in poverty while a few at the top make massive gains there is a very real risk that there could be a backlash which attempts to limit the exorbitant pay of CEO's.

The curtains opened at the eagerly awaited World Social Forum meeting yesterday with a vow to fight inequality and social injustice in the world.

Hundreds of delegates converged at Uhuru Park, signalling the beginning of intense discussion on how to tackle some of the world's major problems.

The delegates, drawn from both developing and the developed world, shared the common goal of making the world a better place.

Speakers representing the world's major continents spoke against free trade models which they said were being pushed down the throats of the world by the Bretton Woods Institutions and some western countries to impoverish the world.

The tax system in the United States is supposed to mitigate inequality. But a recent report by Congress’s budget agency provides fresh evidence that Bush-era tax cuts have done more to reinforce inequality than to redress it.

The agency found that in 2004, the latest year for which comprehensive data were available, the top 1 percent of households pocketed 14 percent of total after-tax income in the United States, up from 12.2 percent in 2003. That increase, the third largest in one year since the agency started keeping track in 1979, works out to an extra $128 billion. And yet despite that hefty gain, the effective federal tax rate of the top 1 percent decreased slightly.

In contrast, the share of after-tax income going to households in the middle of the income distribution fell to 15 percent in 2004, down from 15.4 percent in 2003 — the equivalent of a $29 billion loss. In that time, the share of their income going to federal taxes stayed about the same.

In his Dec. 14 editorial-page commentary "The Top 1% ... of What?" Alan Reynolds casts doubts on the interpretation of our results showing that the share of income going to the top 1% families has doubled from 8% in 1980 to 16% in 2004. His critique contains serious misunderstandings of our work.

First, Mr. Reynolds points out that, in contrast to our results, the official Census Bureau figures show only a modest increase in the top 5% income share. The reason for the discrepancy is that the Census Bureau estimates are based on survey data that are not suitable to study high incomes because of small sample size and top coding of very high incomes. In contrast, tax return data provide a very accurate picture of reported incomes at the top. Our key contribution was precisely to use those tax data to construct better inequality estimates. We found only families within the top 1% experienced very large gains relative to the average since 1980 and that upper middle class families (the next 4% below the top 1%) experienced only modest gains. This shows that the Census Bureau figures, based on data that cannot measure top 1% incomes, misses the extraordinary gains going to the top 1%, which is perhaps the most striking change in the U.S. income distribution in recent decades.

Edmund L. Andrews, 8th Jan 07 - The New York Times

Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study.

Based on an exhaustive analysis of tax records and census data, the study reinforced the sense that while Mr. Bush’s tax cuts reduced rates for people at every income level, they offered the biggest benefits by far to people at the very top — especially the top 1 percent of income earners.

Though tax cuts for the rich were bigger than those for other groups, the wealthiest families paid a bigger share of total taxes. That is because their incomes have climbed far more rapidly, and the gap between rich and poor has widened in the last several years.