Recent Tax Policy Choices Have Widened Disparities; More Cuts Could Do the Same
Martin Luther King Day is a good occasion to think about disparities in income and wealth, and the policy decisions that contribute to the growing chasm between the rich and poor. We need to think carefully about which policy choices can reduce that gap, which will make it wider, and what the failure to address the problem means for the economy.
A new report issued by the Working Poor Families Project examines the widening economic gap. Their analysis of Census Bureau data found that the current economic recovery is leaving many working families behind. The number of working families who were low income (below 200% of the poverty level) grew to 10.4 million in 2011, which was 32% of all working families, and they included 23.5 million children.
In Wisconsin, there were 174,000 low-income working families in 2011, comprising 29% of all working families in our state. Read more
The income disparity between Wisconsin’s richest and poorest families continues to widen, according to a new report by the Center on Wisconsin Strategy (COWS) and the Wisconsin Budget Project. The analysis finds that Wisconsin’s richest residents have experienced dramatic increases in inflation-adjusted income since the mid-1990s, while middle- and lower-income Wisconsinites saw their incomes stagnate or decrease.
Between 1996 and 2010, the bottom 40% of Wisconsin earners experienced an average decrease of $2,407 in their adjusted gross income, measured in 2012 dollars. The top fifth of income tax filers saw an increase in earnings of more than $17,000 over this period. The top 1% of filers experienced tremendous gains, with incomes that grew an average of $168,773 per tax return, an increase of more than $12,000 per year between 1996 and 2010, as shown in the table below.
Table 1: Income Per Tax Return of the Poorest and Richest Wisconsinites
Change in adjusted gross income, 1996-2010, in 2012 dollars
|Bottom 40%||Top 20%||Richest 1%|
|Income in 1996||$16,002||$130,997||$595,497|
|Income in 2010||$13,595||$148,824||$764,270|
|Average change per year||-$172||$1,273||$12,055|
The new analysis follows on the heels of a report last week by Center on Budget and Policy Priorities and the Economic Policy Institute, which found that income inequality has been widening in Wisconsin and across the county since the mid-1970s, though Wiscosnin’s gap remains smaller than all but five other states. Read more
New Data Show Many Wisconsinites Haven’t Benefited Yet from the Slow Economic Recovery
Two years into the nation’s slow recovery from the Great Recession, Wisconsin’s working families are finally beginning to experience some signs of an improving economy. But the new Census Bureau figures released today (from the American Community Survey) reveal that the gradual economic gains have not been evenly distributed and have yet to benefit many of Wisconsin’s most vulnerable households. For example:
- Median household income was $50,395 last year, almost 8% below the 2007 level ($54,737).
- Median income for Black households in the state was just $24,399 in 2011, less than half the $52,444 earned by White households.
- Wisconsin’s child poverty rate was 18.2% in 2011, which represents an improvement from 19.1% in 2010, yet that difference was not statistically significant, and the rate remains far above the 13.4% level in 2008.
- The Black child poverty rate (49% in 2011) was nearly four times the rate for White children in Wisconsin.
Day 5 of a 5-Part Series on Income Inequality in Wisconsin
The gap between rich and poor in Wisconsin has widened in recent decades. A growing share of total income in Wisconsin is going to the top 1 percent of earners, while middle class and working class Wisconsinites have experienced stagnant or declining incomes.
The growing income inequality is eroding Wisconsin’s middle class. Middle class Wisconsinites are finding it harder to get by economically, as their incomes shrink.
The growing divide isn’t limited to Wisconsin. The share of the nation’s income going to the bottom 60 percent of households was the lowest on record last year, according to newly-released figures from the Census Bureau, and the share going to the top 20 percent was the highest on record. Jared Bernstein of the Center on Budget and Policy Priorities says that for many households, income growth has been “a spectator sport.”
The income figures for Wisconsin that we’ve highlighted this past week only go up to 2010. Read more
Day 4 of a 5-Day Series on Income Inequality in Wisconsin
Top earners in Wisconsin have seen enormous growth in incomes since the mid-1990s, while most Wisconsinites have experienced a decline in their incomes.
The difference in income trends between top earners and the rest of Wisconsinites is stark. The incomes of the top 1 percent of Wisconsin earners soared to more than $764,000 per tax return in 2010, a gain of 28 percent since 1996. Over that same period, the bottom 80 percent of earners experienced a three percent decline in their income per return, to $24,800, as shown in the chart below.
The trend of flat or declining incomes for many Wisconsinites is confirmed by new figures released yesterday from the Census Bureau. Median family income in Wisconsin was about $52,000 in 2010-11, down 10.7 percent, or more than $6,000, from 2000-01 when adjusted for inflation. WCCF’s press release on the new income figures and other figures can be found here. Read more
Day 3 of a 5-Day Series on Income Inequality in Wisconsin
The economic gains of recent decades have gone mainly to the top earners in Wisconsin. The result is that middle and working class Wisconsinites have largely missed out on the economic growth that has occurred since the mid-1990s.
The economic gains of the last two decades have not been equally distributed across the income spectrum. The total income earned by Wisconsinites increased by $22 billion between 1996 and 2010 in current dollars. Of that gain, only 19 percent went to the bottom 80 percent of earners. The other 81 percent went to the top 20 percent of earners in Wisconsin, as shown in the chart below. Nearly a third of the increase in income in Wisconsin between 1996 and 2010 went to the top 1 percent of earners.
This unequal distribution of economic gains has accelerated over the last decade. Read more
Day 2 of a 5-Day Series on Income Inequality in Wisconsin
If many Wisconsinites feel like they are falling behind economically, that’s because they are.
Since the mid-1990s, the incomes of middle class and working class people in Wisconsin have stagnated or decreased, while the top earners enjoyed substantial increases in income, as shown in the chart below.
The modest gains made by people in the middle of the income spectrum in Wisconsin are dwarfed by the gains made by the top one percent. Earners in the middle 20 percent and the 4th 20 percent experienced about a ten percent increase in income between 1996 and 2010, as shown in the chart below. The total income of the top one percent, in contrast, grew by more than 40 percent over this period, after adjusting for inflation.
One of the concerning things this chart shows us is that the total income of the bottom 40 percent in Wisconsin actually decreased between 1996 and 2010, by five percent. Read more
Day 1 of a 5-Day Series on Income Inequality in Wisconsin
It’s getting harder for middle-class and lower-income families in Wisconsin to make ends meet, in part due to the recent trend of policy changes that benefit well-off Wisconsinites at the expense of working class families. Substantial cuts to tax credits for working families, changes that reduce access to health insurance, and diminished educational opportunities have hit middle and lower-income families hard. Meanwhile, the Legislature has cut taxes for high earners and corporations.
These changes come on top of growing income inequality in Wisconsin. In recent years, the income of the top one percent of earners has soared, while the incomes of middle class and working class families have stagnated or decreased. By making budget cuts that undercut support for middle-class and lower-income Wisconsinites, the Legislature has made it more likely that the trend of growing income inequality will continue.
In Wisconsin, most of the income flows to the biggest earners. Read more