Inequality in USA has widened dramatically as top 1% gain hugely. Implications for Ireland?

Inequality has been growing dramatically in the USA according to a new report by the Congressional Budget Office (CBO) on November 25, 2011.  After-tax income for the highest-income households grew more than it did for any other group in the USA between 1979 and 2007. The trend in Ireland is along similar lines. This needs to be reversed in Budget 2011 and it can be done.

(After-tax income is the amount one has after taxes have been deducted and social security payments have been added.)
CBO finds that, between 1979 and 2007, income grew by:

• 275 per cent for the top 1 per cent of households,
• 65 per cent for the next 19 per cent,
• Just under 40 per cent for the next 60 per cent, and
• 18 per cent for the bottom 20 per cent.

The biggest component of the increase in after-tax income for the top one per cent is "business income" as opposed to income from employment. As a result of that uneven income growth, the distribution of after-tax household income in the United States was substantially more unequal in 2007 than it was in 1979
The data support two realities about the USA that need to be repeated constantly.
· Firstly, a system that works well for the very richest has delivered far less for everyone else.
· Secondly, the richest have made huge gains over the past few decades, and now everyone else must pay.

The main findings of the CBO study include:
· For the 1 per cent of the population with the highest income, average real after-tax household income grew by 275 per cent between 1979 and 2007
· For others in the 20 per cent of the population with the highest income (those in the 81st through 99th percentiles), average real after-tax household income grew by 65 per cent over that period, much faster than it did for the remaining 80 per cent of the population, but not nearly as fast as for the top 1 per cent.
· For the 60 per cent of the population in the middle of the income scale (the 21st through 80th percentiles), the growth in average real after-tax household income was just under 40 per cent.
· For the 20 per cent of the population with the lowest income, average real after-tax household income was about 18 per cent higher in 2007 than it had been in 1979.
· The share of total income accruing to higher-income households increased, whereas the share accruing to other households declined. In fact, between 2005 and 2007, the after-tax income received by the 20 per cent of the population with the highest income exceeded the after-tax income of the remaining 80 per cent.

The full text of the CBO report may be accessed here.

Social Justice Ireland's proposals on how Budget 2011 could reverse this trend may be accessed here.