WSJ: Income Gap Shrinks in Slump at the Expense of the Wealthy

[steven johnson]

A shrinking income disparity between the wealthiest and poorest in the US is coming because the wealthy are seeing their incomes drop. This may have a number of consequences: lower tax revenues, fewer luxury goods sold and less charitable giving -- Not as may expensive vacations and private schools for the wealthy. The greatest effects in income are thought to be in the financial sector and possibly CEO salaries if Obama has his way.

The deepest downturn in the U.S. economy since the Great Depression may finally shrink the gap between the very best-off Americans and everyone else.

The top 1%'s share appears to be falling fast. Mr. Saez and other economists expect income going to the top 1% of taxpayers -- currently, those with about $400,000 a year -- will drop to somewhere between 15% and 19% of all income by 2010. That still would leave income distribution more top-heavy in the U.S. than in many other countries.

Less income flowing to the top could have broad effects, from the amount of revenue the government collects to the kinds of cars piling up on dealers' lots. For instance, the top 1% of earners will pay 36% of all federal individual income taxes this year, according to an estimate from the Tax Policy Center, a Washington think tank. If their income softens, so will federal revenue, making budgets harder to meet.

The country has seen large shifts in income distribution before. In the 1930s, top earners were battered by the bursting of the financial markets, and New Deal regulation and taxes helped narrow the gap further. The top 1% of U.S. families had 23.9% of pretax income the year before the crash of 1929. By the time World War II ended, their share was less than 13%, where it stayed for some 35 years, professors Saez and Piketty calculate.

Income Gap Shrinks in Slump at the Expense of the Wealthy

[The Velveteen Ocelot]

1. OH NOES!

:nopity: :nopity: :nopity:

[Zoeisright]

2. Gee, maybe they can only have seven houses instead of six.

My heart bleeeeds for them.

NOT.

[DebbieCDC]

3. Poor wealthy!

Should we take up a contribution for them? :cry:

[Eric J in MN]

4. Are they excluding capital gains from income? NT

NT

[stevebreeze]

12. not likely, in fact it is probably cap gains income that is suffering

in the current economy. Thing is there is no reason to believe that the income of the rich will be far more resilient then the incomes of the rest of us when the GDP starts to grow.
We need a far more progressive tax system, and to stop letting the rich buy elections. We need public financing for elections.

[mucifer]

5. we should all send the wealthy all our money.

[girl gone mad]

6. I think we just did. n/t

[ixion]

7. oh yeah... I feel such pity for the top 1%

:eyes:

[northernlights]

8. my heart bleeds for them

:nopity: :nopity: :nopity: Too bad a I can't afford healthcare to get help for my bleeding heart.

(On a serious note, I do feel for the people who live off of them. I think my adjunct biology professors, who founded and run a private "science-centered" high school, may be feeling the pinch.

[wuvuj]

9. It IS different this time....

The U.S. consumer has retrenched. And this is where the problem lies — and where the next phase of this crisis will likely come to roost. The U.S. consumer is repairing his balance sheet — saving more, spending less.

The easy credit days that induced the consumption boom from U.S. consumers has dried up. In fact, the scarce credit that is available is, by and large, being shunned by the consumer. It's clear that consumer attitudes have been damaged. And it's glaringly evident in the credit report released by the Fed this week.

While the extent of this fall in credit was largely ignored by the media, take a look at this chart to see from a historical perspective just how dramatic this drop really is ...



http://www.moneyandmarkets.com/strong-currencies-%E2%80%94-not-welcome-3-35414

[Indenturedebtor]

10. WOW! Go us. Who needs cheap plastic crap and a life of financial slavery anyways!

"If only the "consumer" would start buying cheap plastic crap again... DAMN YOU CONSUMER!"

[notesdev]

11. But what about ASSETS?

That's where most of the wealth is at the high end, it's not about income.