Sunday, February 01, 2015

Ted Cruz says top 1 percent earn more of national income than any year since 1928

"Today the top 1 percent earn a higher share of our national income than any year since 1928." — Ted Cruz on Tuesday, January 20th, 2015 in an interview with Fox News

By Alex Wilts on Friday, January 30th, 2015 at 6:35 p.m.

Texas Sen. Ted Cruz made a claim about the top 1 percent and 1928 in this January 2015 Fox News interview. Barack Obama and U.S. Sen. Ted Cruz, R-Texas, lately have aired similar concerns about the future of working-class Americans, though they differ over what to do.

In his January 2015 State of the Union address, the Democratic president said he wants to work with Congress to offer free community college to students while creating other education, child care and retirement savings programs to help the middle class. Funding, he’s proposed, would come from a $320 billion tax increase on the nation’s highest earners and financial institutions including investment banks.

After Obama’s speech, Cruz told Fox News he was disappointed with Obama’s goals to increase government spending and taxes, which he described as hurting hardworking Americans.

Then Cruz said the country’s rich and powerful "have gotten fat and happy" on Obama’s watch. "Today the top 1 percent earn a higher share of our national income than any year since 1928," Cruz said.

Take that, Mister President!

And was Cruz right?

Cruz cites West Coast economist

By email, Cruz spokesman Phil Novack indicated Cruz does not agree with Obama, who said in his speech he wants to reduce the top 1 percent’s after-tax income. Novack said Cruz, rather than increase taxes on the wealthy, believes the only way to "jumpstart the economy is by championing pro-growth policies like energy development and a flatter, simpler tax structure."

And, Novack said, Cruz drew his comparison to 1928 from a report by the Pew Research Center citing research by Emmanuel Saez, a University of California, Berkeley economics professor who studies wealth and income inequality.

Saez helps steer the World Top Incomes Database, sponsored by the Paris School of Economics, a research center and conglomerate of French universities offering graduate degrees and post-graduate fellowships in economics.

The database, in place since 2011, shows the distribution of top incomes for more than 20 countries using data from millions of tax returns collected over about 100 years. By email, Saez said he and economists including Thomas Piketty built the database from sources including public-use files of individual tax returns. The public-use micro-files are blurred to preserve each payer’s confidentiality, Saez said.

A closer look

To check on changes over time for ourselves, we built a chart from the database.

The resulting data, covering 1913, the earliest checkable year, to 2012, shows 1928 and 2012 to be the top two years where the top 1 percent of the richest Americans (the richest of the rich) earned the greatest share of the nation’s income, which the government breaks down into 15 categories including wages, salaries and self-employment income plus income from dividends and interest.

In 1928, the top 1 percent of earners, then comprised of about 1.2 million residents, together held 19.6 percent of the nation’s income. In 2008, the year Obama was elected president, the top 1 percent possessed nearly 18 percent. The 1 percent collectively saw its share of the nation’s income escalate nearly 5 percent through the first three years of Obama’s presidency. And in his fourth year, 2012, the 1 percent (nearly 314 million residents) controlled 19.34 percent. According to the database, that was the greatest share these wealthiest Americans had held since 1928, as Cruz said. (No. 3 goes to 1927, when the top 1 percent had 18.7 percent of U.S. income.)

Top 15 years the richest American taxpayers had the greatest share of U.S. income: 1913 through 2012

Year
Top 1% income share
1928
19.6
2012
19.34
1927
18.68
1916
18.57
1929
18.42
2007
18.33
1914
18.16
2006
18.06
1926
18.01
1913
17.96
2008
17.89
2005
17.68
1936
17.64
1917
17.6
1925
17.6
Source: "The World Top Incomes Database," 2011 (accessed Jan. 30, 2015)

(More here.)

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