by William McBride
July 03, 2012
Who are the rich? It depends who you ask and when. Numerous reports have pointed to the growth in high incomes over the last few decades. However, at least among the highest income earners, the fortunate 400, there has been no growth in wages since 1992. Rather, virtually all of the growth is from pass-through business income and capital gains. The volatile nature of this income, particularly capital gains, means that high-flier status is fleeting. Most members of the fortunate 400 remain so for just one year, likely because of the sale of one big asset, such as a family farm, business, or stock. The fortunate 400 pay a lot of income tax—about enough to fund the National Science Foundation and the Department of Interior, which includes the National Park Service. At the peak in 2007, they funded the State Department. Taxes have doubled, in real terms, since 1992. Likewise, the fortunate 400’s share of income taxes paid has doubled to 2 percent—almost the share paid by the bottom 69 million filers.