Emmanuel Saez

Economist Emmanuel Saez has done excellent work on the (mal)distribution of wealth and income. Now he and others who created The World Top Incomes Database have concluded that the benefits of the recovery from the Great Recession have gone almost completely to the top one percent.

The richest folks took a heavy hit during the recession, in percentage terms worse than those further down the income ladder. But once gross domestic product started its upturn in the summer of 2009, it was the richest who enjoyed most of the improvement, 93 percent of it, in fact. You can see the comparisons with previous recessions and recoveries in the table below.



In 2010, average real income per family grew by 2.3% [...] but the gains were very uneven. Top 1% incomes grew by 11.6% while bottom 99% incomes grew only by 0.2%. Hence, the top 1% captured 93% of the income gains in the first year of recovery. Such an uneven recovery can help explain the recent public demonstrations against inequality. It is likely that this uneven recovery has continued in 2011 as the stock market has continued to recover. National Accounts statistics show that corporate profits and dividends distributed have grown strongly in 2011 while wage and salary accruals have only grown only modestly.

Saez and Peter Diamond have written a paper that offers at least a partial remedy for the income and wealth inequality that has been growing for more than 30 years. They call it "The Case for a Progressive Tax." Not exactly the word the one percent ever wants to hear applied to taxes. It's not the easiest read, but in a nutshell, the authors say the current top income marginal tax rate across all taxes and all income is about 42.5 percent. They argue that it ought to be 73 percent and ought not to give special breaks for capital gains compared with wage-earned income. Paul Krugman took a look at their paper and had a few comments about it here

Of course, the mouthpieces of the one percent regularly decry any push for a truly progressive marginal tax rate as that nasty old class warfare. They view garnering 93 percent of the improvements in a battered economy by the richest one percent of the population as the natural order.