Bush tax cuts, stock market widen income gap

[chuam]

NEW YORK (CNNMoney) -- The rich have gotten richer, thanks to the stock market and the Bush tax cuts, a recent report has found.

Growth in income from capital gains and dividends has widened the divide between the wealthy and the poor in recent years, according to the non-partisan Congressional Research Service. It supplanted wage inequality as the primary driver of the growing income gap, which helped spur the Occupy Wall Street movement last fall.

After-tax income for the top 1% of taxpayers soared 74%, on average, between 1996 and 2006. The top 0.1% benefited even more, nearly doubling their income over that decade.

By comparison, the bottom 20% of taxpayers saw their income fall by 6%, while the middle quintile experienced a meager 10% gain.

But "income" means something very different for the rich than for the poor.

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High-income people benefited in particular from the stock market boom in the late 1990s and from companies enjoying strong profit growth and paying out healthy dividends more recently, said Harry Holzer, professor at the Georgetown Public Policy Institute.

In 1996, the top 1% of taxpayers relied on wages for 34.4% of their income. A decade later, that number had fallen to just over a quarter, the report found. Meanwhile, income from capital gains and dividends grew by nearly 7.5 percentage points to 38.2% of earnings.

The Bush tax cuts, which lowered rates on both income and capital gains, also helped fuel the growth in income inequality, according to the report. The difference in tax rates paid by the poor and the rich narrowed, with the Top 0.1% of American taxpayers seeing their average tax rate fall by about a quarter.

"It made the tax system less progressive, one more thing favoring the wealthy," Holzer said.

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Just what happens to the Bush tax cuts, which expire at the end of the year, remains to be seen. They were the subject of a heated partisan battle at the end of 2010, with Democrats favoring increasing rates on wealthy Americans to help narrow the deficit.

Republicans, meanwhile, staunchly opposed any tax hikes on the rich, saying it would hurt job creation and weaken the economy.

This year, the two parties will likely lock horns again over taxes as they fight for control of the White House.

Last month, President Obama came out swinging against the GOP in a speech in December, blasting the party for exacerbating inequality by supporting the Bush tax cuts.

"We know it doesn't result in a prosperity that trickles down. It results in a prosperity that's enjoyed by fewer and fewer of our citizens," he said.

http://money.cnn.com/2012/01/03/news...lity/index.htm

["Yard-Sale Josh"]

Man you really hate all those successful people don't you?

[caver95]

I don't think it is about hating successful people. I just want a level playing field. I hate the people that pay to play in government. The elected asshats in congress may get elected because of the people, but the people writing the legislation are the lobbyist and they don't have the good of all in mind when they are writing it.

[ROCKHIND]

jealousy + no ambition + sense of entitlement..............

[ocean_314]

Clinton cutting the capital gains tax, not the Bush cutting the income taxes for everyone including the top earners is why those people at the very top are so wealthy.

Clinton redistribution of the wealth scams did just that redistributed huge amounts of wealth from the middle class and pension funds to those very wealthy people who only pay capital gains.

The green energy scam is doing the same thing as i type. Taking huge amount of taxpayer money and giving it to those Wall Street criminals that you liberals love to hate.

So why are you ;liberals all jumping up and down supporting the green energy scam and the further enrichment of the top 1%????? With your tax dollars?????

[riplipper]

Good grief......number manipulation much??????
Income went down 6% from 96 to 06 for the bottom 20%????????
Someone please explain that to me.....Minimum wage did not go down in those years....So again, explain this to me....

Crap....The Mexicans cutting grass around here went from $30 to $40 a week per yard in that time frame for sure....thats a 33% increase in revenue....Not sure how it equates to income but it sure as hell doesn't equal negative 6%

By the way.....the terms "the rich get richer" and "it take money to make money".......they were around before I was born....its a fact of life, so for god sake get over it and go make your own fortune if you really want more money......