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Income Mobility in U.S., 1996 to 2005

Between now and the November 2008 election, Americans will hear about John Edwards’ “Two Americas” (the rich and the rest of us) during the primaries or the general election in one socialist project or another from the liberals. Consequently, it behooves taxpayers to be prepared with the facts.

Last week, the U.S. Treasury Department released an “income mobility” study (press release and complete study (requires Adobe)). “The study examines income mobility of individuals over the past decade (1996 through 2005) using information reported on individual income tax returns.” According to the report summary:

“While many studies have documented the long-term trend of increasing income inequality in the U.S. economy, there has been less focus on the dynamism of the U.S. economy and t he opportunity for upward mobility. Comparisons of snapshots of the income distribution at points in time miss this important dimension and can sometimes be misleading.”

Several of the key findings include:

  • “There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within 10 years.
  • “About 55 percent of taxpayers moved to a higher income quintile within 10 years.
  • “Among those with the very highest incomes in 1996 – the top 1/100 of 1 percent – only 25 percent remained in this group in 2005. Moreover, the median real income of these taxpayers decline over this period.”

Treasury concluded by noting, “The degree of mobility in the overall population and movement out of the bottom quintile in this study are similar to the findings of prior research on income mobility.” Afterall, don't most people just want the opportunity to advance. Want socialism, then move to Europe. Want even more socialism, move to the Scandanavian countries.

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