By Lawrence Mishel
The 400 American households with the highest incomes also have enjoyed a much faster pace of income growth than the vast majority. And, because tax rates applied to their income have fallen by a third, their after-tax incomes grew substantially faster than their pre-tax incomes. The figure looks at inflation-adjusted pre-tax and after-tax income growth for the 400 top-income families between 1992 and 2007, based on new data recently released by the Internal Revenue Service. It shows that while pre-tax income grew by a staggering 409% over that 15-year period, after-tax income increased even more, by 476%.
The third line in the figure offers some perspective by showing the change in the pre-tax median household income over the same period, which grew just 13.2%. The median pre-tax household income for a family of four in 2007 was $50,233, while the top-earning 400 households earned a median $345 million, almost 6900 times as much income. In contrast, in 1992 the ratio was just a sixth as large, with the top 400 households having 1124 times as much income.