Monday, September 15, 2008

Census Data Show Significant Income Mobility

One way to quantify income mobility is to examine how many people remain in the same tax bracket over time. We compared the returns of tax filers in the lowest tax rate bracket (zero) in 1987 with their returns in 1996. Only one third of the tax filers were still in the zero tax bracket and two thirds had moved up: 25% were now in the 10% bracket, 32% had moved up to the 15% bracket and 9% were in the 25%, 28%, 33% or 35% brackets. And that was following them for a decade, not a generation.

From 1996 to 2005, we have the income mobility data for income quintiles. Of those filers who were in the lowest 20% in 1996 and who also filed in 2005, 42.4% remained in the bottom 20% but 57.6% had moved up to a higher quintile: 28.6% were in the next highest quintile, 13.9% were in the middle quintile, 9.9% were in the second highest quintile, and 5.3% were in the highest quintile.

The data also show downward mobility among the highest income earners. The top 1% in 1996 saw an average decline in their real, after-tax incomes by 52% in the next 10 years.

~Art Laffer and Stephen Moore in today's WSJ


At 9/15/2008 1:48 PM, Blogger juandos said...

Well dang! Laffer and Moore are just raining on Obama’s rhetoric...LOL!

At 9/15/2008 11:40 PM, Anonymous Anonymous said...

"Prosperity was assisted, too, by ... stimulants to purchasing, each of which mortgaged the future but kept the factories roaring while it was being injected ... People were getting to consider it old-fashioned to limit their purchases to the amount of their cash balance; the thing to do was to 'exercise their credit' ... 15% of all retail sales were on an installment basis ...It was fun while it lasted."
Only Yesterday, an informal history of the 1920's, F.L.Allen (published 1931).

At 9/17/2008 2:18 AM, Anonymous Anonymous said...

Most of us start out in the zero income tax bracket: someone in high school working part time is usually in the zero bracket.

When that high school kid graduates and takes a full time job - even at minimum wage - he moves up into the 10 percent bracket.

So it is entirely unremarkable that "only" one-third of zero-bracket filers were still in the zero bracket nine years later.

Add in a second job or a seniority raise and you're in the 15 percent bracket.

Get a promotion or a few more years on the job and you're likely in the 25 percent bracket.

And there is (obviously) downward mobility as well: Many older workers near retirement will drop down a bracket or three when they retire. A 1987 retiree in the zero or 10% bracket had a high probability of being dead (and thus no longer counted in the data) by 1996.

I work full time at minimum wage; I am in the 10 percent marginal bracket. For those who measure income mobility by quintiles, I am in the second income quintile. All that was required of me to move up one quintile was to go from part-time to full-time employment.

But I'm sure not feeling any upward mobility.

At 9/17/2008 1:30 PM, Blogger juandos said...

"But I'm sure not feeling any upward mobility"...

New job is in order or maybe you need to start your own business...

"15% of all retail sales were on an installment basis ...It was fun while it lasted."
Only Yesterday, an informal history of the 1920's

The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation's banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being...


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