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US Income Gap Widens, Richest Share Hits Record

Karey Wutkowski

Washington - The gap between America's richest and poorest is at its widest in at least 25 years, with the wealthiest taking home a record share of the nation's income that exceeds even the previous high in 2000.1012 07

According to recent data from the Internal Revenue Service, the richest 1 percent of Americans earned 21.2 percent of all U.S. income earned in 2005. That is a significant increase from 2004 when the top 1 percent earned 19 percent of the nation's income.

The previous high over the past 25 years, when such data were compiled, was in 2000 when a bull market brought the figure up to 20.81 percent.

The Tax Foundation, a nonpartisan tax research group based in Washington, said the wealthy benefited in 2005 from a healthy, growing economy and higher-than-average price inflation.

The IRS data included all of the 132.6 million tax returns filed in 2005 with a positive adjusted gross income, or AGI, also including people who did not earn enough to owe taxes.

AGI is a figure used to calculate an individual's income tax liability and includes all gross income adjusted by certain allowed deductions, such as moving expenses, health savings account deductions, alimony paid and retirement contributions.


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In 2005, 90.6 million people who filed tax returns paid taxes into the Treasury, and 42 million with a positive AGI used exemptions, deductions and tax credits to reduce their federal income tax liability to zero.

Democratic U.S. presidential candidates have raised the widening income gap as a campaign issue, proposing to raise taxes on wealthier Americans to pay for programs that would benefit lower-income families.

To make the top 1 percent of wealthiest Americans in 2005, a taxpayer had to earn at least $364,657. That figure is an increase from 2004, when the cut-off point stood at $328,049.

In 2005, the top 50 percent of American earners brought in 87.17 percent of the nation's income, also an all-time high for the data available.

The previous high for that figure was also in 2000, when the richest 50 percent of Americans earned 87.01 percent of the income.

© 2007 Reuters

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