Today's Article
The difference
between the paltry
wages of workers and
the massive income
collected by capital
owners is quite clear.
between the paltry
wages of workers and
the massive income
collected by capital
owners is quite clear.
The American Spark
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Growing Income Inequality Becomes Clear On U.S. Tax Forms
By Cliff Montgomery - Jan. 26th, 2012
The difference between the paltry income earned by U.S. laborers and the massive amounts of money
collected by owners of capital has been documented in a Congressional report, quietly released in December
2011.
Congressional Research Service (CRS) studies are crisp, easy-to-understand reports especially created for
U.S. legislators. They are relatively short and are tailored for the non-specialist.
Thus these reports can help almost anyone better understand complicated matters.
So it’s perhaps telling that the CRS studies are not officially released to the general public, even though they
are unclassified documents--and even though the public’s tax dollars paid for them (making U.S. citizens the
actual owners of these reports).
But The American Spark has obtained a copy of this informative report, and now provides you with the
possibility of obtaining your own.
Below, The Spark also provides essential quotes from the study:
“Social scientists and philosophers have been concerned with issues surrounding the distribution of income or
income inequality for over 200 years—the economist and philosopher Adam Smith discussed these issues as
early as 1776.
“Academic writers have been writing on income inequality measurement issues for at least a century. Policy
makers have also long been interested in income inequality issues; for example, the issue came up in Senate
debate in 1898.
“Bills have been introduced in the 112th Congress that address the issue of income inequality by affecting the
income of workers and taxpayers in different parts of the income distribution.
“In the second session of the 112th, Congress will likely debate the scheduled expiration (at the end of 2012)
of the 2001 and 2003 Bush tax cuts, which could affect income inequality.
“This report examines changes in income inequality among tax filers between 1996 and 2006. In particular, the
role of changes in wages, capital income, and tax policy is investigated.
“Inflation-adjusted average after-tax income grew by 25% between 1996 and 2006 (the last year for which
individual income tax data is publicly available). This average increase, however, obscures a great deal of
variation.
“The poorest 20% of tax filers experienced a 6% reduction in income while the top 0.1% of tax filers saw their
income almost double.
“Tax filers in the middle of the income distribution experienced about a 10% increase in income.
“Also during this period, the proportion of income from capital increased for the top 0.1% from 64% to 70%.
“Income inequality, as measured by the Gini coefficient, increased between 1996 and 2006; this is true for
both before-tax and after-tax income.
“Before-tax income inequality increased from 0.532 to 0.582 between 1996 and 2006—a 9% increase. After-
tax income inequality increased by 11% between 1996 and 2006.
“Total taxes (the individual income tax, the payroll tax, and the corporate income tax) reduced income inequality
in both 1996 and 2006.
“In 1996, taxes reduced income inequality by 5%. In 2006, however, taxes reduced income inequality by less
than 4%. Taxes were more progressive and had a greater equalizing effect in 1996 than in 2006.
“Three potential causes of the increase in after-tax income inequality between 1996 and 2006 are
changes in labor income (wages and salaries), changes in capital income (capital gains, dividends, and
business income), and changes in taxes.
“To evaluate these potential reasons for increasing income inequality, a technique to decompose income
inequality by income source is used.
“While earnings inequality increased between 1996 and 2006, this was not the major source of increasing
income inequality over this period.
“Capital gains and dividends were a larger share of total income in 2006 than in 1996 (especially for high-
income taxpayers) and were more unequally distributed in 2006 than in 1996. Changes in capital gains and
dividends were the largest contributor to the increase in the overall income inequality.
“Taxes were less progressive in 2006 than in 1996, and consequently, tax policy also contributed to the
increase in income inequality between 1996 and 2006.
“But overall income inequality would likely have increased even in the absence of tax policy changes.”
“Income inequality has been increasing in the United States over the past 35 years.
“Several factors have been identified as possibly contributing to increasing income inequality.
“Some researchers have suggested the decline in unionization and a falling real minimum wage as the primary
causes.
“Others have argued that rising returns to education and skill-biased technological change are the important
factors explaining rising inequality.
“Still others argue that ‘winner-take-all’ markets—markets where the rewards are few but large with more and
more people competing for these rewards—have spread. In an elaboration of this argument, some have
argued that ‘public officials have rewritten the rules of American politics and the American economy in ways
that have benefited the few at the expense of the many.’
“Tax policy, especially the Tax Reform Act of 1986, has also been identified as a possible cause for rising
income inequality.
“Many analysts agree that the likely explanation for rising income inequality is due to skill-biased technological
changes combined with a change in institutions and norms of which a falling minimum wage and declining
unionization are a part.
“Research suggests that changes in tax policy do not have much impact on the longer-term trend or rate of
change in inequality, but can have a one-time affect on the level of income inequality.”
Like what you're reading so far? Then why not order a full year (52 issues) of The American Spark
e-newsletter for only $15? A major article covering an story not being told in the Corporate Press will be
delivered to your email every Monday morning for a full year, for less than 30 cents an issue. Order Now!
By Cliff Montgomery - Jan. 26th, 2012
The difference between the paltry income earned by U.S. laborers and the massive amounts of money
collected by owners of capital has been documented in a Congressional report, quietly released in December
2011.
Congressional Research Service (CRS) studies are crisp, easy-to-understand reports especially created for
U.S. legislators. They are relatively short and are tailored for the non-specialist.
Thus these reports can help almost anyone better understand complicated matters.
So it’s perhaps telling that the CRS studies are not officially released to the general public, even though they
are unclassified documents--and even though the public’s tax dollars paid for them (making U.S. citizens the
actual owners of these reports).
But The American Spark has obtained a copy of this informative report, and now provides you with the
possibility of obtaining your own.
Below, The Spark also provides essential quotes from the study:
“Social scientists and philosophers have been concerned with issues surrounding the distribution of income or
income inequality for over 200 years—the economist and philosopher Adam Smith discussed these issues as
early as 1776.
“Academic writers have been writing on income inequality measurement issues for at least a century. Policy
makers have also long been interested in income inequality issues; for example, the issue came up in Senate
debate in 1898.
“Bills have been introduced in the 112th Congress that address the issue of income inequality by affecting the
income of workers and taxpayers in different parts of the income distribution.
“In the second session of the 112th, Congress will likely debate the scheduled expiration (at the end of 2012)
of the 2001 and 2003 Bush tax cuts, which could affect income inequality.
“This report examines changes in income inequality among tax filers between 1996 and 2006. In particular, the
role of changes in wages, capital income, and tax policy is investigated.
“Inflation-adjusted average after-tax income grew by 25% between 1996 and 2006 (the last year for which
individual income tax data is publicly available). This average increase, however, obscures a great deal of
variation.
“The poorest 20% of tax filers experienced a 6% reduction in income while the top 0.1% of tax filers saw their
income almost double.
“Tax filers in the middle of the income distribution experienced about a 10% increase in income.
“Also during this period, the proportion of income from capital increased for the top 0.1% from 64% to 70%.
“Income inequality, as measured by the Gini coefficient, increased between 1996 and 2006; this is true for
both before-tax and after-tax income.
“Before-tax income inequality increased from 0.532 to 0.582 between 1996 and 2006—a 9% increase. After-
tax income inequality increased by 11% between 1996 and 2006.
“Total taxes (the individual income tax, the payroll tax, and the corporate income tax) reduced income inequality
in both 1996 and 2006.
“In 1996, taxes reduced income inequality by 5%. In 2006, however, taxes reduced income inequality by less
than 4%. Taxes were more progressive and had a greater equalizing effect in 1996 than in 2006.
“Three potential causes of the increase in after-tax income inequality between 1996 and 2006 are
changes in labor income (wages and salaries), changes in capital income (capital gains, dividends, and
business income), and changes in taxes.
“To evaluate these potential reasons for increasing income inequality, a technique to decompose income
inequality by income source is used.
“While earnings inequality increased between 1996 and 2006, this was not the major source of increasing
income inequality over this period.
“Capital gains and dividends were a larger share of total income in 2006 than in 1996 (especially for high-
income taxpayers) and were more unequally distributed in 2006 than in 1996. Changes in capital gains and
dividends were the largest contributor to the increase in the overall income inequality.
“Taxes were less progressive in 2006 than in 1996, and consequently, tax policy also contributed to the
increase in income inequality between 1996 and 2006.
“But overall income inequality would likely have increased even in the absence of tax policy changes.”
“Income inequality has been increasing in the United States over the past 35 years.
“Several factors have been identified as possibly contributing to increasing income inequality.
“Some researchers have suggested the decline in unionization and a falling real minimum wage as the primary
causes.
“Others have argued that rising returns to education and skill-biased technological change are the important
factors explaining rising inequality.
“Still others argue that ‘winner-take-all’ markets—markets where the rewards are few but large with more and
more people competing for these rewards—have spread. In an elaboration of this argument, some have
argued that ‘public officials have rewritten the rules of American politics and the American economy in ways
that have benefited the few at the expense of the many.’
“Tax policy, especially the Tax Reform Act of 1986, has also been identified as a possible cause for rising
income inequality.
“Many analysts agree that the likely explanation for rising income inequality is due to skill-biased technological
changes combined with a change in institutions and norms of which a falling minimum wage and declining
unionization are a part.
“Research suggests that changes in tax policy do not have much impact on the longer-term trend or rate of
change in inequality, but can have a one-time affect on the level of income inequality.”
Like what you're reading so far? Then why not order a full year (52 issues) of The American Spark
e-newsletter for only $15? A major article covering an story not being told in the Corporate Press will be
delivered to your email every Monday morning for a full year, for less than 30 cents an issue. Order Now!
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