The wealthiest 1% of Americans earned 21.2% of all income in 2005, according to new data from the Internal Revenue Service. That is up sharply from 19% in 2004, and surpasses the previous high of 20.8% set in 2000, at the peak of the previous bull market in stocks.

The bottom 50% earned 12.8% of all income, down from 13.4% in 2004 and a bit less than their 13% share in 2000. The IRS data go back only to 1986, but academic research suggests the rich last had this high a share of total income in the 1920s.

Now, obviously income inequality has always been around and always will be – that’s the beauty of capitalism. As I’m fond of saying myself, the American system owes everyone equality of opportunity, NOT equality of result.

That being said, the disparity between rich and poor in these statistic disturbes me. And it’s not just the current levels that are disturbing, it’s the fact that they are moving further and further apart over time. Am I the only one that feels this way? And am I wrong for reacting like this?

I think it’s an interesting discussion point. Discuss ;).

Increasing Income Inequality

3 thoughts on “Increasing Income Inequality

  • I guess a good question to ask is:

    what is it about it that should be disturbing?

    I wouldn’t say 21.2% from 19% is a “sharp” increase, and there is little indication it is unprecedented or unique. 13% in 2000, up to 13.4% in 2004, back down to 12.8% in 2006–doesn’t sound that monumental to me. Do you mind linking to the study?

    And does anyone have any numbers on other industrialized countries and how they may compare?

    And more importantly: if the numbers do deserve the “disturbing” moniker is there any way we can simply blame it SOLELY on George W Bush…or maybe terrorists, or…OJ?


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