• Forecast
  • News Tip
  • Categories
Temperature Precipitation
Estimated read time
3m 25s

Richest Americans see huge growth in income

By Aimee Picchi/CBS News 9:35 AM May 3, 2014

Here’s a startling fact that illustrates how income inequality is changing the U.S.: The top 1 percent of Americans now take home 20 percent of all pre-tax income in the country, or more than double their share in 1980.

The findings, from a report out this week from the Paris-based Organisation for Economic Co-operation and Development, illustrate the diverging economic fortunes of the top 1 percent of households in America and everybody else, whose earnings have failed to keep pace during the same time period.

The level of income inequality in the U.S. is now much worse than that in other countries, although the rich in countries ranging from Canada to Denmark have also increased their share of the income pie. The rise of the 1 percent was “most spectacular in the U.S,” the report states.

While the rich saw large income gains in the U.S. between 1980 and 2010, the super-rich have done even better: Total pre-tax income for the top 0.1 percent of earner more than quadrupled over that period, to over 8 percent, according to the OECD.

Average U.S. income grew at a rate of about 1 percent from the mid-1970s through the late 2000s. But, the study points out, after stripping out the enormous gains of the country’s top earners, 99 percent of Americans saw their incomes rise by an annual growth rate of only 0.6 percent.

“The disproportionate surge in top incomes also helps explain why so many people have not felt their incomes rising in line with national GDP growth,” the study notes.

So what’s driving America’s worsening inequality?Taxation policies may be to blame, given the reduction in both progressive income and inheritance taxes since the 1970s. The study also notes theories such as the “superstars” idea — that top employees are rewarded more than run-of-the-mill workers — although that idea is less persuasive as the main cause given that not all countries witnessed the same level of income disparity.

“While top tax rates were equal to or above 70 percent in half of the OECD countries in the mid-1970s, this rate had been halved in many countries by the end-2000s,” the study found. That’s led to higher disposable income, which allows the rich to “to save and accumulate capital which eventually increases incomes further.”

The findings come amid a widespread public attention on French economist Thomas Piketty and his best-selling economics tome, “Capital in the Twenty-First Century.” The book, which has earned positive reviews from the likes of Nobel Prize-winning economist Paul Krugman, analyzes centuries of data on wealth and economic growth.

Piketty’s point is that the rate of return on capital has historically outpaced the rate of economic growth. With growing income inequality, the richest 1 percent are able to capture a growing share of a nation’s wealth and income.

The OECD, a group encompassing 34 of the world’s largest economies, notes that its analysis (which uses data developed by Piketty) is aimed at finding policy solutions to ensure a more equal distribution of resources.

The group’s recommendations? Raising taxes on the rich by reducing tax deductions that benefit top earners and taxing all compensation, including capital gains, as ordinary income.

Piketty’s book has set off a vigorous debate about economic inequality, and some dissenting voices have questioned the validity of his findings, which are based on an analysis of tax and estate records going back more than a century.

Leonid Bershidsky at Bloomberg View argues that Piketty’s data fails to includegovernment transfers, such as Social Security or food stamps. Before taking on policy changes, he notes, data on these government redistributions should be analyzed.

On the left, some have questioned Piketty’s theoretical framework, accusing him of misinterpreting history and soft-pedaling problems that critics say are inherent to capitalism.

© 2014 CBS Interactive Inc.. All Rights Reserved.

Latest Stories

  • Crime

    Anchorage police searching for person of interest in Penland Parkway homicide

    by KTVA CBS 11 News on May 03, 8:59

    Anchorage police are asking for the public’s help finding 40-year-old Alvin Rodriguez-Moya, who they say is a person of interest in an early-morning homicide case. APD is investigating the death of an adult male at a residence located on the 3000 block of Penland Parkway, in Airport Heights. Police were called to the residence just after […]

  • DayBreak

    Kick, push: Alaskan streetwear brand exposes Anchorage’s skateboard culture

    by Sierra Starks on May 03, 2:23

    Kicking, pushing and coasting on a skateboard is all 22-year-old Taylor Goldade thinks about. So much so, that he spends his hard-earned paychecks on two things — bills and skate gear. Goldade, who’s lived in Alaska for most of his life, happened upon skateboarding after school sports didn’t work out. There was just one problem trading […]

  • Sports

    East High girls cruise to 5-3 win over Chugiak; boys tie 1-1

    by KTVA Sports on May 03, 1:35

    The East Anchorage High School girls soccer team let loose against the Chugiak Mustangs Saturday morning, scoring three goals in the first half and going on to win, 5-3. The boys team could not produce as much offense, tying Chugiak, 1-1. Mickey Victor and Olivia Grant each scored two goals for the T-Birds in the […]

  • Crime

    Kodiak man sentenced after guilty plea in sexual assault case

    by Associated Press on May 02, 18:58

    A judge is sending a man he calls “one of the most dangerous people to come to Kodiak” to prison for attempted assault and coercion. The Kodiak Daily Mirror (http://bit.ly/1I6eZ3r) reports Judge Steve Cole sentenced Robert Zoellner Jr. to 15 years behind bars as part of a plea deal. Six of the years will be […]

  • News

    Supporters pledge to help save old 4th Avenue Theatre

    by Dave Leval on May 02, 18:07

    Bruce Kelly has fond memories of the old 4th Avenue Theatre. “I can remember a lot of fun times,” said Kelly. “Really, it was a great place to go.” Kelly joined dozens of others who hope to make more memories inside the building. They gathered across the street from the closed theater on Fourth Avenue […]

  • Crime

    AST: Man arrested after allegedly punching girlfriend’s sister in face

    by KTVA CBS 11 News on May 02, 17:45

    Troopers arrested a man Sunday on assault and disorderly conduct charges after he allegedly punched his girlfriend’s sister in the face. On April 12, a Kobuk woman reported that “she’d been punched in the face by her sister’s boyfriend,” according to an online Alaska State Troopers dispatch. The woman sustained “serious injuries,” troopers say, adding […]

  • News

    Lt. Gov. Mallott to discuss trans-boundary issues during British Columbia visit

    by Associated Press on May 02, 15:55

    Lt. Gov. Byron Mallott plans to meet with Canadian officials, tribal leaders and Canadian mining interests during a trip focused on trans-boundary resource issues. Mallott’s visit to British Columbia is scheduled to begin Monday. He said in a release that he looks forward to the trip and seeing the Canadian side of the trans-boundary issues. […]

  • News

    Plans advancing to demolish 3 Anchorage properties acquired for Knik project

    by Associated Press on May 02, 13:18

    The state transportation department plans to move ahead with demolishing three Anchorage properties acquired as part of the idled Knik Arm bridge project. The department, in a release, said the contract to remove the Sourdough Lodge and two adjacent houses was made last September. It says the contract complies with an administrative order last December […]