US Inequality Hits New Record Highs

Greg Ip is all over the inequality beat today, with a whole series of datapoints from the IRS:

• New data from the Internal Revenue Service shows that in 2005, the richest 1% of tax filers earned 21.2% of all income, exceeding the previous high set in 2000, at the peak of the stock market boom.
• The IRS data show that the median tax filer's income -- half earn less than the median, half earn more -- fell 2% between 2000 and 2005 when adjusted for inflation, to $30,881.
• Taxes fell far more relative to income for the top 1%: Their average tax rate dropped to 23% in 2005 from 27.5% in 2000.

There's no doubt that all of these trends were extended in 2006, and might yet get even more extreme in 2007, as well, depending on this year's Wall Street bonuses. But don't worry, President Bush is on the case:

In an interview yesterday with The Wall Street Journal, President Bush said, "First of all, our society has had income inequality for a long time. Secondly, skills gaps yield income gaps. And what needs to be done about the inequality of income is to make sure people have got good education, starting with young kids."

No, George, it's not about education. It's about your tax cuts for the rich, which, incidentally, have helped add another $550 billion to the total Federal debt over the past 12 months. The inequality at the height of the dot-com bubble was unsustainable and not deliberate. The inequality today is only getting worse, and it's the result of a fiscal policy targeted squarely at the ultrarich. Although this kind of inequality, too, is unsustainable in the long term. If you continue to tell people who are getting poorer that in fact they're getting richer, eventually they realise that you're bullshitting them. And the consequences are not generally pretty.