Forget the endpoints (1979 and now). Look at this chart, derived from data published by the CBO:
The purple line tells the story: average pretax income for the top 1%. Notice that the 3 lines below it do the same thing, but at lower magnitudes.
Look at the continuous increase from 1992 to 2000 (the Clinton Administration, but the largest increases are after 1994 and you know what happened then). This is the dot.com bubble. It actually burst in 2000, but the effects lag a bit. And 9/11 added insult to injury. We went into a recession that lasted about 2 years.
Then, the line goes up again. It peaks in 2007, the last full year of data. That coincides with the housing bubble.
I'm waiting for the CBO to publish an update, but it hasn't appeared yet. I expect that line to go down.
Why is this occurring? The top 1% get much more of their income from capital gains than the lower brackets. When the market is rising, they get more capital gains. It's that simple.
Is that unfair? Consider what the top 1% has to do to get those gains: they have to risk their assets. They might realize a gain or a loss. They might lose everything.
Also, consider what would happen if the top 1% didn't risk their assets for those gains. Where would new businesses get their start-up capital? Where would existing business get money to expand? Where would those new jobs come from?
Your's is a common misconception. The truth is that it is simply math. If you look at the top 4 lines and increase each by the same percentage, you end up with the these graphs.
If someone making $2 million increses their income by 5%, that is an increase of $100,000. If Someone making $200,000 increases theirs by 5% it is $10,000. Although each advanced equally by percentage, the income line of the higher earner would rise by $90,000 over the lower income.
People always cry about the gap between the richest and poorest growing as if anything else could possibly happen. Take the person making $2 million that increses by 5%. They are now at $2.1 million. On the other hand lets consider someone making $40,000 and we increase them by 100%. they are now at $80,000. The original gap between them was $1,960,000. The new gap is $2,020,000. The gap has grown by $60,000. Would the person whose income rose from $40,000 to $80,000 really argue that they are worse off?
The gap between the richest and the typical will always grow. Simple math says it must. The question is what opportunity is available within a system for growing income and individual wealth.
interesting, after a slight rise under
reagan, it falls throughout all levels.