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InsiderOnline Blog: January 2012

The Rich Are Getting Richer, and So Are the Poor

The fact that the top 1 percent of income earners have a larger share of national income today than they did 20 years ago doesn’t mean what the grievance peddlers think it means. The comparison involves mostly different sets of people, explains Veronique de Rugy:

Using IRS data, the Tax Foundation has shown that of the 675,000 taxpayers who reported $1 million in pre-tax income at some point between 1999 and 2007, only about half remained millionaires just one year later […]. A tiny 6 percent, or 38,000 people, retained their millionaire status for all nine years. In other words, most top earners are likely to lose their membership in the millionaires club.

And things look rosier at the bottom of income distribution, too. The same Tax Foundation analysis showed that about 60 percent of households that were in the lowest income quintile in 1999 had moved to a higher quintile by 2007. And about one-third of those in the lowest quintile moved to the middle quintile or higher. While it may be difficult to rise literally from rags to riches, there is still plenty of opportunity for Americans to climb up the income ladder.

So if upward mobility is so common, why are there still plenty of poor people in this country? In a recent video about income mobility hosted by the Institute for Humane Studies, economist Steven Horwitz of Saint Lawrence University explains: “Immigrants and young people entering the labor force come into that income distribution at low levels of income. They become the new poor when the old poor slowly move their way up.”

More: “For Richer and for Poorer,” Reason, February 2012.

Posted on 01/13/12 01:27 PM by Alex Adrianson

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