Top U.S. Earners’ Incomes Drop 36%

The top 1 percent of U.S. earners’ pre-tax incomes dropped 36 percent between 2007 and 2009, according to the Congressional Budget Office. Average pre-tax income for all earners dropped during this period.

The last time the CBO looked at these numbers was for 2007. The results showed the top one percent of earners experiencing huge income growth, which caused a stir over “rising income inequality”. 2007 was the peak of the business cycle, so income growth experienced by top earners that year was abnormally high.

The most recent data show that because top earners’ incomes have dropped significantly, income inequality has also dramatically narrowed. Advocates of the “rising inequality” theory will likely remain silent on these most recent numbers, because they do not support their narrative.

The Internal Revenue Service’s total revenue went down from 2007 to 2009, while the effective tax rate for the top quintile earners went up, from 19.4 percent to 21 percent. Meanwhile, tax rates for the bottom two quintiles went from -5.8 percent of income in 2007 vs. -9.3 percent of income in 2009. The IRS actually paid the bottom two quintiles a year-end bonus of nearly 10% of their earnings in 2009.

Now, don’t get me wrong. I’m not making any political arguments or conclusions one way or the other about these government-sourced numbers. What I do say is that if you debate this topic, first understand the facts. Then, go ahead and have a civilized, intelligent discussion.

I’m so tired of political sound-bite debates! Thank you.