Income Gap and Marginal Tax Rate 1917-2006

by Catherine Mulbrandon on July 13, 2008

From the Nation. The top graph shows the average income of the top o.o1% compared to the bottom 90%. The higher the peak the bigger the gap between the two groups. In 2006 you would need an income of over $10 million to make it into the top 0.01% while your income would have to be less than $100,000 to be in the bottom 90. The second graph shows the marginal tax rate over the same time period. Here is graph I created plotting similar data.

{Click on the image to take a closer look}
magnifying glass

[tags]Income Inequality, United States, Marginal Tax Rate[/tags]

Tagged as: Income - Share of, Line Graph, Pitketty & Saez, Tax Rates, United States

  • http://WWW.VIVZIZI.COM George

    It is any surprise that the Bush family so fond of Hubert Hoover that they name family members after him should recreate his policies which gave us the huge wealth disparities of the 20′s and the resulting great depression?

    Worse by allowing those same people to own the media they were able to miseducate a whole generation of voters to get them to support the policies that had already been proven to be disastrous.

    Now a whole generation will need to relive the depression as the bush’s abandon the USA for their wealth haven’s in the middle east.
    The USA may never recover this time.

  • 1ConcernedCitizen

    do you think it was an accident?

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  • http://www.techborder.com/ David

    Nice work Catherine. Compared with the DOW (DJIA), it seems like tax hikes don’t hurt the economy. I know charting alone may be a narrow view, but with charts, claims that less tax on the super rich boosts the economy are mute.

    See if you can detect a trend from the overlaying charts.
    Hi resolution: http://www.techborder.com/mylife/economics/extremeinequalitychart1917-2006_with-dow.pdf
    Low Resolution: http://www.techborder.com/mylife/economics/extremeinequalitychart1917-2006_with-dow.png

    Sources:
    http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average
    http://stockcharts.com/charts/historical/djia1900.html
    http://www.visualizingeconomics.com/2008/07/13/income-gap-and-marginal-tax-rate-1917-2006/

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    Общеизвестно, что человек может вечно смотреть на три вещи: как горит огонь, как течет вода и как работает другой человек.

  • JC

    So, you are implying that you want to take from the rich and give to the poor; exactly what President Obama is now doing to catastrophic proportions? Disney world for liberals! There are a lot of bad people in corporate boardrooms and executive suites that have raped and pillaged with impunity for the last twenty years or so. No question about it. But what about those of us that have gone to college and graduate school, worked hard, saved and built businesses? Why do you want to punish me for achieving the American dream? Why do you want to steal the money I have worked for and spend it on pie-in-the-sky social programs; programs that been shown to be failures since the LBJ years? What’s my incentive for success if I don’t get to enjoy the spoils?

  • Brad

    JC for every one of you there are ten who did the exact same thing and got screwed. Screwed. You republicans just dont freaking get it.

  • Yossarian

    Uhhhhh? What caused what?

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  • dani

    One question…when the income gap narrows and the income of the top earners is brought down by high income tax rates, what happens to the incomes of the lowest earners. Does a smaller gap necessarily mean more prosperity for all, or less prosperity overall?

    When the rich are brought down, are the poor any better off? Does the percentage of population in poverty decline during these periods?

  • http://n/a john

    no one should want to bring the “rich” down. It’s not a question of absolutes but one of adjustments. And if you pay attention to history you will see that too large a gap just like too small a gape is not a good thing. and if you have taken a business or civics course in collage you will know that one of the functions of government is to redistribute wealth.

  • Jesse

    I do believe that the GDP is a better gauge of how tax rates effect the economy. It appears that any time the economy is on the rise, the opportunity to the wealthy (risk takers and innovators) has higher returns than the rest. This does not make a moral truism that making money is bad or evil. It simply exhibits that if you take risk, you can achieve reward, particularly in times of blooming economy. Interpretation of “wealth gaps” sounds like more of an emotional evaluation than a technical one. It’s a measure several phases removed from the object that you are trying to evaluate. One that is used to establish moral equivalencies and intellectually dishonest altruisms. (i.e. the wealthy only get there through acts of evil.)

    You should question anyone who would feel comfortable making such broad, sweeping generalizations as that. As we said in physics for such obvious fallacy, “They are discredited upon inspection.”

  • http://www.marypetruska.com Mary Petruska

    I’ve been sending this link out for the past couple of years –
    The GRAPH is so graphic. I am an artist – I believe in the power of a visual.
    This one is SO great. Is it you’s? Can I use it to reissue a postcard I did in 2000 showing Wall Street and the World Trade Centers looming over the Lower East Side of NYC, entitled
    “Feudalism – if it looks like it – maybe it is…” I handed out 1,000′s of them randomly – on subways and at openings – until they blew up the towers. Then… people would have bought it – for the towers – but not read it… Can we communicate? Can we get this message out together?
    I can’t attach anything here – I can send you a visual of what I want to print – if you respond.

  • Stanley Walton

    I can understand your concern with a disincentive to succeed, but I don’t think someone earning 30 million a year should be paying 23% while I earn $250k and pay 25%. Just as I shouldn’t be paying a lower percentage than someone earning significantly less than me. Of course, the million dollar man is probably giving a lot to charity and effectively uses tax shelters. However, while giving to charities is a good thing, it doesn’t do anything for this out-of-control deficit that we have.

    I believe in a progressive tax system that requires the uber wealthy to pay a higher tax rate than the wealthy and so on right down to the poor. Of course, this is not a recent idea or even one thought up by FDR, but rather dates back to Jefferson, Adam Smith, Lincoln and so forth.

  • http://www.facebook.com/people/Chris-Papas/1653106482 Chris Papas

    I’m amazed that you start the graph in 1917, the year the War Revenue act went into effect.  Why not start in 1900, 13 years BEFORE the Income tax.  Sadly you’ll find that the gap was SHRINKING, but you already know that, thus you start the graph in 1917.

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