A new study by the treasury department, summarized in a Wall Street Journal article, refutes the long-proselytized talking points of Democratic (and black-sheep Republican) presidential hopefuls such as Mike Huckabee and John Edwards– that the rich are getting richer and the poor are getting poorer. The study, which analyzed income tax returns from 96,000 Americans from 1996 to 2005, shows that upward mobility exists, as it always has in a free economy, and by and large EVERYONE is getting richer (except the richest 1%)…in terms of inflation-adjusted real income.
In fact the poorest people (those in the lowest tax bracket) experienced the greatest gains, with 58% reaching the next higher tax bracket in the ten year period. Nearly 25% of the poorest moved up two tax brackets or more, and 5.8% of the poorest Americans working full-time jobs reached the highest tax bracket. Inflation-adjusted median income for the poorest Americans increased 90.5% in only 10 years.
In the second poorest group (those in the second lowest tax bracket), nearly half moved up at least one tax bracket…while only 17% dropped into the lowest tax bracket. Inflation-adjusted median income for the second poorest Americans increased 34.8% in only 10 years.
Relatively speaking, higher-earning Americans increased their income much less than lower income Americans. The top quintile of earners saw only a 10% increase in inflation-adjusted income over the ten year period. The only group that saw a decline in overall spending power were the richest 1% of Americans. They lost 25.8% of their income. And more than half of them dropped into a lower tax bracket during the period.
Overall these patterns demonstrate two things:
(1) America is a place where the opportunity for wealth creation exists for everyone who is willing to work. The statistics of this new study mirror those of studies measuring the upward mobility of Americans in the 60’s, 70’s, and 80’s. Meaning it’s not any more difficult to get ahead now than it was 40 years ago. In fact, its probably easiser: with the rise of immigrants and young workers flooding the low-income job market in the past 10 years, the data should be skewed against a trend in upward mobility.
(2) Any politician who reads this study, accepts its methodology, and still cries “growing income disparity,” is spewing populist propaganda. Overwhelmingly, the poorest Americans improve their real income and quality of life by a much wider margin than wealthier Americans. And the richest of the rich, those arrogant billionaires than nearly anyone can resent, by and large are able to earn significantly less over time.
The irony – Distributivists (Socialists’ awkward cousin), in the name of creating income equality, propagate tax hikes and other measures that kill the pioneering incentive required for people to increase their wealth in the first place.
America is still the land of opportunity…
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