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Income Distribution
Making Sense of the Latest IRS Income Stats
To understand how wide our economic divide has become, a little imagination can help.
None of us can actually “see” inequality, not in the way we can see a horse or a house. So we rely on numbers to better understand how unequal we’ve become, and in the United States the most foundational numbers come from the tax-return records the Internal Revenue Service keeps.
Tax records have a special attraction for statisticians. You can fib on a research survey that asks you how much money you make. You can’t fib to the IRS. Or, at least if you do fib, you could find yourself sitting behind bars for tax evasion.
Unless, of course, you happen to be fabulously rich. In that case you can hire fancy lawyers and park your assets in offshore tax havens where your fugitive dollars can generate income the IRS can’t see.
Even so, the IRS does see plenty. The annual income stats the IRS releases give us what may be our most revealing annual inequality “snapshot.” The latest edition of these IRS stats has now appeared, covering tax return data through 2017, and analysts have been busily chewing over the new numbers.
Half the nation’s taxpayers, the IRS data show, took home under $41,740 in 2017. At the other end of our income spectrum, meanwhile, the nation’s top 0.01 percent — 14,330 taxpayers in all — reported over $12,899,070 each in income. These awesomely affluent souls grabbed over 5.1 percent of the nation’s income, an income share up 72 percent over the top 0.01 percent’s share in 2002.
Can you visualize all this? Probably not. Too many percentages. Let’s take a different approach to making sense of the newly released IRS income data.
Imagine the United States as a company that employs 10,000 people. Let’s call our imaginary company “Enterprise America,” and let’s apply to the company’s internal compensation the latest IRS income distribution percentages.
Half the folks on the Enterprise America payroll turn out to earn less than $41,740 once we make that application. Middle-managers make much more. Some them have incomes that hit $145,135, enough to gain them entry into the ranks of Enterprise America’s highest-paid 1,000 people.
Enterprise America’s highest-level executives — all ten of them — do considerably better. They each make at least $2,374,937. And the Enterprise America chief executive, the company’s single highest-paid individual, makes much more still, a lofty $12,899,070.
Wait, we have more to our story. Fifteen years ago, our Enterprise America CEO only made $5,891,214. Since then, even after adjusting for inflation, that CEO has seen his pay jump by 37 percent. Over those same years, the typical Enterprise America inflation-adjusted employee paycheck has dropped by 6 percent.
Another marker on what’s been happening within Enterprise America: The company’s CEO now makes 309 times more than the company’s typical employee. Fifteen years ago, the Enterprise America CEO pay topped the pay of the company’s typical employee by only 219 times.
Enterprise America has become a much more unequal place. And so has our real-life United States of America.
Sam Pizzigati co-edits Inequality.org. His recent books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.