World News

Thursday 31 July 2014

America's richest get even richer

Published 10/09/2013|18:06

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The top 1% of American earners saw their slice of the cake increase last year

The income gap between America's richest 1% and the rest of the country widened to a record last year.

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The top 1% of US earners collected 19.3% of household income in 2012, their largest share in Internal Revenue Service figures going back a century.

US income inequality has been growing for almost three decades. But until last year, the top 1% share of pre-tax income had not yet surpassed the 18.7% it reached in 1927, according to an analysis of IRS figures dating to 1913 by economists at the University of California, Berkeley, the Paris School of Economics and Oxford University.

One of them, Emmanuel Saez of the University of California, Berkeley, said the incomes of the richest Americans might have surged last year in part because they cashed in stock holdings to avoid higher capital gains taxes that took effect in January.

Last year, the incomes of the top 1% rose 19.6% compared with a 1% increase for the remaining 99%.

The richest Americans were hit hard by the financial crisis. Their incomes fell more than 36% in the Great Recession of 2007 to 2009 as stock prices plummeted. Incomes for the bottom 99% fell just 11.6%, according to the analysis.

But since the recession officially ended in June 2009, the top 1% have enjoyed the benefits of rising corporate profits and stock prices: 95% of the income gains reported since 2009 have gone to the top 1%.

That compares with a 45% share for the top 1% in the economic expansion of the 1990s and a 65% share from the expansion that followed the 2001 recession.

The top 10% have not done badly, either. Last year, they captured 48.2% of income, another record. Their biggest previous take was 46.3% in 1932.

The top 1% of American households had income above 394,000 dollars (£251,100) last year. The top 10% had income exceeding 114,000 dollars (£72,600).

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