Last year was a good one for everyone’s income. But it was a much better year for the richest of the rich.
According to a new analysis by economist Emmanuel Saez, Americans in the bottom 99 percent of the country’s income distribution saw their take home pay rise 3.9 percent in 2015 over 2014’s levels, adjusted for inflation, the best increase they’ve seen in 17 years. But the top 1 percent of the country far outpaced them: the wealthy’s income grew by 7.7 percent last year, reaching a new high.
While the past two years have been good for the majority of Americans’ income growth, they still haven’t fully recovered from the recession. For the bottom 99 percent, incomes fell 11.6 percent during the height of the recession from 2007 to 2009. Afterward, they grew just 7.6 percent between 2009 and 2015 — not enough to make up for the downturn. Incomes for the 99 percent have only recovered about 60 percent of what they lost.
But the rich are doing great. The incomes of the 1 percent grew 37 percent between 2009 and 2015. They captured more than half of all the income growth in the country over that period, leaving just 48 percent to spread out among the bottom 99 percent of families.
The top 10 percent of American earners took home more than half of all income last year, the highest share ever except for 2012.
And in fact, income inequality is now at the highest level the country has ever recorded in its entire history. While most data only goes back to the turn of the 20th century, economists Peter Lindert and Jeffrey WIlliamson used tax records, directories, and historical accounts to go back even further. They found that in the country’s earliest post-colonial history, inequality was quite low and much lower than countries across the Atlantic.
As the country’s economy rapidly expanded in the 1800s, inequality rose alongside it. Even so, at the heights of that era’s inequality, it never reached the levels we see today.
“We went from one of the most egalitarian places in the world to one of the least,” Williamson told the Washington Post. “What happened?”
Many factors have contributed to growing income inequality, but a lot of them have to do with taxes. Since the late 1990s, income inequality has been driven by the rich getting more and more of their money from returns on investments, something the less well off are less likely to benefit from, and that money is taxed at a lower rate. Overall, taxes and public programs are doing much less than they used to to mitigate the growth of income inequality as taxes have been lowered on the rich while lawmakers have withered the social safety net.