60 million Americans living on less than $7 a day

US income figures show staggering rise in social inequality

By Jerry White
12 December 2006

A recent analysis of Internal Revenue Service tax data sheds further light on the enormous gap that has grown between America’s wealthy elite and the masses of working people over the last quarter of a century. The examination of IRS figures was conducted by the New York Times and reported in its November 27 article, “’04 Income in U.S. Was Below 2000 Level” by David Cay Johnston.

The article begins by noting that total US income in 2004—the latest year for which tax information is available—was $7.044 trillion, down from more than $7.143 trillion in 2000. The decline was attributed to two factors: the stagnation of median household income—which fell by 3 percent, or about $1,600, between 2000 and 2004—and the fact that the earnings of the richest Americans have not yet caught up with the peak reached before the Internet bubble on Wall Street burst in 2000.

Incomes in 2004 rose by an average 6.8 percent but the vast bulk of the increase went to the richest one-tenth of 1 percent of all Americans—living in some 130,500 households with an average income of $4.9 million—who saw their incomes rise by 27.5 percent over the course of one year. During the same period the income of the poorest one-fifth of the population—some 60 million people—rose by only 1.8 percent.

The sharp rise in income for the wealthiest Americans—due in large measure to the Bush administration’s cuts in capital gains taxes, corporate profit rates not seen in nearly 40 years and the recovery of the stock market—has led to a further concentration of wealth in the hands of the super-rich. According to a separate study by University of California-Berkeley economist Emmanuel Saez, the richest one-tenth of 1 percent of Americans took in 9.5 percent of all pretax income, or about $679 billion in 2004, excluding unreported income.

Referring to this elite group, the New York Times article notes, “those very top households, which include about 300,000 Americans, reported significantly more pretax income combined than the poorest 120 million Americans earned in 2004, the data show. This is a sharp change from 1979, the oldest year examined by the I.R.S, when the thin slice at the top received about one-third of the total income of the big group at the bottom.”

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