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Carving Up Our Economic Pie


Pie season is here. Pumpkin, apple, cherry, whatever you like. We can use edible pie charts — and some chocolate — to see how our national economic pie is being carved up more unfairly.

Let’s look first at income distribution.

Take two pies — one for 1979, the other for 2003 (using the latest IRS data).

Divide the 1979 pie into 10 equal slices. If the slices were eaten according to the distribution of income in 1979:

— The richest 1 percent of taxpayers would get one slice.– The rest of the top 20 percent would get four slices.– The other 80 percent of taxpayers would split five slices.

Now, divide the 2003 pie into 10 slices.

— The richest 1 percent would get nearly two slices.– The rest of the top 20 percent would get a little over four slices.– The other 80 percent would split four slices.

In 1979, the top 20 percent of taxpayers had about as much income as the other 80 percent combined. In 2003, the top 20 percent had 60 percent of the income, leaving just 40 percent for the rest. The richest 1 percent nearly doubled their share.

Let’s look more closely at the upward shift in income.

In 1979, the bottom 40 percent of taxpayers had about 15 percent more combined income than the richest 1 percent. In 2003, the richest 1 percent had twice the income share of the bottom 40 percent.

The richest 1 percent share of reported income jumped from 9.6 percent in 1979 to 17.5 percent in 2003. The bottom 40 percent share fell from 11.3 percent to 8.8 percent.

Pulitzer Prize-winning journalist David Cay Johnston puts the growing gap between the very rich and everyone else in stark perspective. He examined the income reported on tax returns of the top 0.01 percent — about 14,000 households with at least $5.5 million in income.

From 1950 to 1970, for every additional dollar earned by those in the bottom 90 percent, those in the top 0.01 percent earned an additional $162.

From 1990 to 2002, for every additional dollar earned in the bottom 90 percent, those at the top brought in an extra $18,000.

If you are feeling financially down this holiday season, you’re not alone. Average workers have been earning less after inflation, not more. Average hourly earnings dropped 5 percent, adjusting for inflation, between 1979 and 2004 — while domestic corporate profits rose 63 percent.

The share of national income going to wages and salaries is at the lowest level since 1929 — the year that kicked off the Great Depression. The share going to after-tax corporate profits, which heavily benefit wealthy Americans through increased dividends and capital gains, is at the highest level since 1929.

Income gaps in the workplace have become increasingly outrageous, as seen in the growing gap between worker pay and CEO pay. We can demonstrate it with a pile of chocolate.

Give 1 piece of chocolate to your worker stand-in and 44 pieces to your CEO stand-in. That was the 1980 ratio of average full-time worker pay to average pay among CEOs in Business Week’s survey of major corporations.

For the equivalent 2004 ratio, give 1 piece of chocolate to the worker and 362 to the CEO.

As the Center on Budget and Policy Priorities reports, federal policy is contributing “to a further widening of income disparities between the most affluent households and other Americans.” Households with incomes over $1 million will receive an average tax cut of $103,000 this year — an increase of 5.4 percent in their after-tax income.

The congressional majority is done crying crocodile tears over Katrina and the shameful inequality it exposed.

They’re working overtime to stiff the have-nots with more budget cuts so they can keep stuffing the pockets of the haves with more tax cuts. The budget knife is dropping on Medicaid, education, child care, food assistance and more– even public health, despite loud warnings we are unprepared for bird flu and other threats.

Tell your senators and members of Congress what you think about their priorities, and make your voice count when you vote next November.

Holly Sklar is co-author of “Raise the Floor: Wages and Policies That Work for All Of Us” (www.raisethefloor.org). She can be reached at [email protected] (c) 2005 Holly Sklar

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