CBO Report Looks At Top Earners

A new report from the Congressional Budget Office shows that the top 1 percent of earners more than doubled their share of the nation's income in the past three decades. Melissa Block talks to NPR's Scott Horsley about the findings.

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MELISSA BLOCK, HOST:

Well, that Congressional Budget Office report that David mentioned has provided new ammunition for protestors whose signs declare: We Are The 99 Percent. The study found that the richest 1 percent of Americans more than doubled their share of national income in the last 30 years. And the vast majority of the population is getting a smaller slice of the economic pie.

NPR's Scott Horsley joins us now with more. And, Scott, when it comes to income inequality, how unequal are we?

SCOTT HORSLEY, BYLINE: Well, Melissa, we are getting more unequal. More and more of the income is being concentrated in the top tier. If you go back to 1979, which was the starting point for that CBO study, at that point, the top 20 percent - the richest 20 percent of households - were collecting about 43 percent of all the income in the country. Now, that's over half.

And a lot of that increase was the very tippy top - the 1 percent at the top of the income distribution. As their share of national income has soared, the share for everyone else - the other 80 percent - has gone down.

BLOCK: And, Scott, did the Congressional Budget Office explain what's behind this tilt toward the wealthiest Americans?

HORSLEY: Well, they did. They said that a lot of the increase in inequality can be chalked up to just structural changes in the economy. And economists have offered a lot of theories for why there's bigger and bigger returns to the top earners now.

There's the winner-take-all phenomenon, where superstar performers in various fields get a bigger reward, while average performers get less. There is a the decline of unions, which used to give ordinary workers more bargaining power. Globalization keeps wages in check for a lot of people. And at the same time, we've seen pay for top executives soar. So, there's a lot of that sort of economic background factors.

But at the same time, we also are seeing government policy play a role. The government is now less aggressive than it used to be in taxing the rich and giving money to the poor, with various aid programs. And so, that has added to the inequality.

BLOCK: How does this report, do you think, inform the debate here in Washington and beyond, on the campaign trail?

HORSLEY: Well, President Obama and Senate Democrats have called for higher taxes on the top earners. President Obama also often praises this as, you know, the people who've done very well in this economy can afford to give more. And the CBO study does give some weight to that argument, that they certainly have the means to pay higher taxes.

We saw a study by The New York Times and CBS that found two out of three Americans support higher taxes on millionaires. At the same time, Americans are often skittish about redistributionist tax policies. Remember, when President Obama told Joe the Plumber he wanted to spread the wealth around, and the buzz saw of criticism that followed?

BLOCK: Yeah. And Republican presidential hopefuls are picking this up, as well, in their message on the campaign trail.

HORSLEY: That's right. And they're, of course, pushing in the opposite direction. We've seen a variety of flat tax proposals and flatter tax proposals coming from the GOP. Those would have the effect of accelerating this trend towards inequality. Several of the GOP candidates have also floated the idea of reducing or eliminating taxes on capital gains and dividends.

Now, one of the things that the CBO found is that that earnings on investment plays a smaller part in the top earners' bank accounts than it used to. But it is still a significant part of what the top earners make. And so, if you did away with taxes on dividends and capital gains, that would amount to a windfall for those who are already disproportionately well off.

BLOCK: OK, NPR's Scott Horsley. Scott, thanks very much.

HORSLEY: My pleasure.

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