While the graph in my previous post compared the Top 0.1 percent in different countries, here I made a direct comparison between the US Top Marginal Tax Rate and the Top 0.1 percent income share since 1913. This time just focusing on the United States.
{Click on the graph to take a closer look}
Again the effect by the two World Wars is there but what I wanted to emphasize is the relationship between the share of income going to the very wealthy and the change in the top marginal income tax rate.
The income data can be found on Emmanuel Saez’s web site. I found the marginal tax rate for the United States in the SOI Bulletin Historical Table A at the IRS site via truthandpolitics.org
Technorati Tags: income distribution, marginal tax rate, US income distribution, US income inequality, income inequality
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Is the implication of the income work that you cite, then, that the other 99.9% of the population accounts for the rest of the 100% of the income or are other entities also accounting for the rest of the income that is being made?
Thanks, and great site.
Shankar
(Also feel free to email me an answer to the question above)
Eric Says:
Have you looked at the fact that when the marginal rate is confiscatory that it makes income sheltering alternatives much more attractive? I would bet that during the 70% years much more of the wealthy’s income was wrapped up in private corporate entities and was not reported as personal income. Once the rates came down, you will likely see a major shift of this to LLC structures that are taxed as personal income, as there is not the same incentive to carry the overhead of the structure. Also, many of the income gap analyses I have seen, such as CBO’s, have an alarming tendency to allocate ALL corporate earnings to individuals, based on REPORTED capital gains. Of course, a good chunk of corporate equity is owned by people in their IRA/401K’s, and is not subject to capital gains, while the wealthier have income-tested out of many of those benefits and tend to report a much higher % of capital gains as theirs is not tax sheltered. Have you done some analysis on these effects?
Like the site!
Eric