Thread: Report Shows: Rich are Getting Richer Fast, Much Faster

Report Says That the Rich Are Getting Richer Faster, Much Faster
Mario Tama/Getty Images
At the New York Stock Exchange. Investments have been a big source of rising wealth.

By DAVID CAY JOHNSTON
Published: December 15, 2007
The increase in incomes of the top 1 percent of Americans from 2003 to 2005 exceeded the total income of the poorest 20 percent of Americans, data in a new report by the Congressional Budget Office shows.

The poorest fifth of households had total income of $383.4 billion in 2005, while just the increase in income for the top 1 percent came to $524.8 billion, a figure 37 percent higher.

The total income of the top 1.1 million households was $1.8 trillion, or 18.1 percent of the total income of all Americans, up from 14.3 percent of all income in 2003. The total 2005 income of the three million individual Americans at the top was roughly equal to that of the bottom 166 million Americans, analysis of the report showed.

The report is the latest to document the growing concentration of income at the top, a trend that President Bush said last January had been under way for more than 25 years.

Earlier reports, based on tax returns, showed that in 2005 the top 10 percent, top 1 percent and fractions of the top 1 percent enjoyed their greatest share of income since 1928 and 1929.

The budget office report takes into account a broader definition of income than tax returns that is known as comprehensive income. It includes untaxed Social Security benefits, welfare, food stamps and part of the value of Medicare benefits, giving a fuller picture of incomes at the bottom than tax data.

Much of the increase at the top reflected the rebound of the stock market after its sharp drop in 2000, economists from across the political spectrum said. About half of the income going to the top 1 percent comes from investments and business.

In addition, Congress in 2003 cut taxes on long-term capital gains and most dividends, which advocates said would encourage people to turn untaxed wealth into taxable income. Some economists have said that the increase in incomes at the top is illusory and is in good part simply converting untaxed assets into taxed income to take advantage of reduced tax rates.

The Congressional Budget Office report made no attempt to explain the increases in income in its annual report on effective federal tax rates paid by people at different income levels.

Asked how much of the increase at the top was from the tax cuts rather than market gains, Peter R. Orszag, the budget office director, said, “I can’t give you an answer to that because we just don’t know.â€

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