Income gap between US rich and rest at record high

The income gap between the richest 1 per cent of Americans and the other 99 per cent widened to a record margin in 2012, an analysis of tax filings showed.

The BBC reported the top 1 per cent of US earners accounted for 19.3 per cent of household income, breaking a previous record set in 1927.

Income inequality in the US has been on the rise for around three decades, with the pre-tax incomes of the top 1 per cent of households rising 19.6 per cent as against a 1 per cent increase for the rest of Americans.

The analysis showed that the top 10 per cent of richest households represented just under half of all income in the year.

According to Emmanuel Saez at the University of California, Berkeley, one of the economists who analysed the tax data, the rise may have been in part due to sales of stock to avoid higher capital gains taxes in January.

According to Saez's analysis despite recent policy changes aimed at lessening income inequality, the measures were relatively small as against "policy changes that took place coming out of the Great Depression".

He added, it therefore seemed unlikely that US income concentration would fall much in the coming years.

Income that was counted in the analysis included wages, private pension payments, dividends and capital gains from sale of stocks and also other assets, but did not include unemployment benefits or public pension benefits, known as Social Security.

The study showed that while the crash of 2007-00 hurt the top earners, benefits from increasing corporate profits and stock prices since then had largely gone to the richest.

The top 1 per cent of US households drew income over $394,000 last year, while the top 10 per cent pulled in income in excess of $114,000.

The richest Americans had not accounted for as large of a slice of total wealth since 1927, when the group claimed 18.7 per cent, USA yesterday said. The analysis used data from Internal Revenue Service.

Saez who is a top researcher in the topic of wealth and income inequality, won the John Bates Clark medal last year.

The most promising economists under the age of 40 are considered for the award for the medal. The medals has earlier been awarded to Paul Krugman of Princeton University, Lawrence Summers and Steve Levitt, co-author of "Freakonomics."

Saez found in a separate analysis that the top 1 per cent of earnings posted 86 per cent real income growth between 1993 and 2000, even as the real income growth of the bottom 99 per cent of earnings rose 6.6 per cent.