Mercatus Center Research Fellow Veronique de Rugy examines the income dynamics of taxpayers with millionaire status using data calculated from IRS tax returns from 1999 through 2007. The data represent 675,000 taxpayers who were millionaires at some point during this period.
In contrast to popular sentiments about the rich getting richer and poor getting poorer, this week’s chart shows that most millionaires are not millionaires for long. In other words, the majority of people in the top 0.17% of the income distribution (millionaires) also face substantial downward income mobility over time.
The data reveal that, after one year, roughly half of those who were millionaires at some point between 1999 and 2007 remain. After the second year, 15% or roughly 102,000 millionaires remain. This decreasing rate of remaining millionaires persists, and only about 6% or 38,000 millionaires remain after the ninth year.
One of the primary catalysts for the Occupy Wall Street movements is the idea that disparity between top earners and everybody else is widening. However, economic mobility and transiency of the millionaire income group is high. Many top earners are likely to lose their membership in the millionaire’s club.
Count me in that group. Had more then $1M in 2007. Lost is all in the crash of ’08. Now can’t even pay my tax. Flat broke.
Question: If one of the wealthiest men on the planet, worth multi-billions, known to spend hundreds of millions on lobbying and think-tanks to promote the radical interests of his ever sprawling empire, walked up and tried to convince you that widening wealth/income disparity in the United States was a myth, would your reaction be to: a) unquestioningly repeat everything he tells you as Gospel; b) consider the source, and investigate the claims as best you can; c) spit in his face and tell him to have a nice day?
Personally, I opt for ‘b’. Which is why when I see an opinion piece from one Veronique de Rugy, who’s apparently only ever earned a livelihood working for right-wing think tanks (Mercatus, Cato, Atlas, etc.) founded and funded by the notorious, Billionaire Koch Brothers, I am extremely skeptical, to say the least.
Turns out Veronique, on behalf of the Koch Bro’s, did no new research; she just clipped a graph off of someone else’s study done a year and a half ago, added her own unique spin, and called it a ‘publication’.
Spin: ”In contrast to popular sentiments about the rich getting richer and poor getting poorer, this week’s chart shows…”
Study: ”There is little doubt that the gap between rich and poor has grown over the past several decades… The trend is even more dramatic as one focuses on yet higher-income taxpayers: The share of income reported by the top 1 percent of taxpayers rose from 10.0 percent in 1980 to 23.5 percent in 2005.”
As far as some food for thought regarding the intense ‘debate’ regarding wealth/income disparity (focusing here on just income [wealth is far worse]), I offer the following:
Income Inequality in the United States
Data from the Department of Commerce and Internal Revenue Service indicate that income inequality has been increasing since the 1970s, whereas it had been declining during the mid 20th century.
A CBO study in 2011 found that the top 1% gained the most (about 275%) in the period between 1979 and 2007, and all lower quintiles lost their share of national income.
As of 2006, the United States had one of the highest levels of income inequality, as measured through the Gini index, among high income countries, comparable to that of some middle income countries such as Russia or Turkey, being one of only a few developed countries where inequality has increased since 1980.
The distribution of income in the United States is becoming increasingly unequal. In 2010, the top 20% of Americans earned 49.4% of the nation’s income, compared with the 3.4% earned by Americans living below the poverty line (roughly 15% of the population). This earnings ratio of 14.5 to 1 was an increase from the 13.6 to 1 ratio in 2008 and a significant rise from the historic low of 7.69 to 1 in 1968. Looking back even further to 1915, an era in which the Rockefellers and Carnegies dominated American industry, the richest 1% of Americans earned roughly 18% of all income. Today, the top 1% account for 24% of all income.
[...] Millionaire Downward Mobility [...]
I’ve managed to keep about the same amount of wealth dollar wise, it’s worth a lot less then it was 10 years ago.
I’ve now left the United States and will be giving up my U.S. citizenship early next year, of course I have to pay a 30% expatriation tax to buy my freedom but I figure it’s the best thing to do at this point.
http://www.irs.gov/businesses/small/international/article/0,,id=97245,00.html
The U.S. needs to stop looking at millionaires as if they are billionaires.
There are hundreds a day, like Rick; and I suspect it will be worst in time…
Sorry, I forgot to add, that my small, little, dinky business is down 40% since 2007 and we have perhaps two to three years before we are kaput..
[...] Millionaire Downward Mobility [...]
This implies that the money the millionaires had, assuming the facts are correct, just disappeared. What is more likely is that another millionaire was created from the lost wealth. It would be helpful if the study said where the money went to.
The study (referenced) is not talking about wealth or net-worth, but incomes. For earners in this bracket, capital gains made up about 70% of incomes in peak years, vs. 30% in low years. So, while one might have made the millionaire’s (income) club in 1999 by cashing in those tech stocks, their income would quickly be ‘reduced’ to a lower level in years where cap gains were not realized, or where realizations where negative.
You might also consider the likelihood that 2 or 3 years in the top 1% of income earners in the U.S., could easily set you up for life, and lead to a subsequent life-style change that didn’t necessitate the effort or risk often required to earn such sums.
B.