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16 U.S. states where the middle-class is hurting

When it comes to income inequality in America, not all states are created equal.

In some states, the top 1 percent of income earners have captured all of the income gains since the Great Recession officially ended in June 2009, while everyone else saw either no gains or declining income during that time, according to a new analysis of tax data by the Economic Policy Institute, a left-leaning think tank.

For families in middle- and lower-income brackets, the post-recession years have been particularly tough in a number of states, although the report notes that the almost every state has been affected by widening income inequality in the U.S. Yet in 16 states, every dollar of income growth between 2009 to 2012 accrued to the top 1 percent, including some of the country's most populous states, such as California and Florida.

The findings come amid heightened public attention on the growing gaps between haves and the have-nots, with President Obama last week making the economic challenges facing the middle class the main theme of his annual State of the Union address.

"The rise in inequality experienced in the United States in the past three-and-a-half decades is not just a story of those in the financial sector in the greater New York City metropolitan area reaping outsized rewards from speculation in financial markets," EPI noted in the report.

Digging into income data by state provides a fresh look at how income inequality is hitting individual regions of the country, especially since state-wide data might suggest that incomes rose for all residents since 2009. But a closer look at the data shows that the huge gains reaped by the 1 percent in some states overshadowed income losses to the 99 percent during that period.

Take California, the country's most populous state. From 2009 through 2012, overall income for its roughly 39 million residents rose 6.8 percent, the study found. That figure is deceiving, however, given that all of the gains over that period went to California's wealthiest, with the top 1 percent witnessing a 49.6 percent jump in income. All other earners in the state saw their incomes fall 3 percent.

The 16 states where the top 1 percent gained all of the overall increase in income are California, Colorado, Connecticut, Delaware, Florida, Idaho, Louisiana, Massachusetts, Missouri, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Washington and Virginia.

While those states saw all income gains shift to the 1 percent, another 22 states witnessed half or more of income growth going to the top earners during the same period. Among those states are Texas, Illinois, New Jersey, Ohio, Arizona and Michigan.

Such disparities "undermine the economic system's ability to enable economic mobility," said Mark Price, labor economist at the Keystone Research Center and a co-author of the paper with socio-economist Estelle Sommeiller, on a conference call to discuss the research. "Will someone go to college because of the income of their parents rather than their natural abilities? You worry about people's desire to anticipate in the economy when the economy doesn't appear to be providing returns for them or their kids."

Only nine states witnessed income growth for both the top 1 percent and the 99 percent, according to EPI. Those states are Indiana, Mississippi, Montana, North Dakota, Vermont, New Mexico, Kentucky, Alaska and Hawaii.

The reason some of those states may have provided income growth to the 99 percent could boil down to issues such as smaller labor forces. In North Dakota, for instance, its small population has been lifted by economic growth from the oil extraction industry, Price said. States with a more progressive tax system, such as Vermont, might also be helping to buck the trend.

West Virginia was an outlier, with incomes of the top 1 percent declining while the average income of the 99 percent increased, the only state to witness that trend.

The widening income gap is increasingly gaining the attention of policy makers and economists, who are warning that growing inequality is threatening to undermine global economic growth. Oxfam earlier this month warned that the richest 1 percent will own more than half the world's wealth by 2016, while ratings agency Standard & Poor's last year cautioned that America's income gap could dampen long-term economic growth.

The growing gap between the wealthiest Americans and everybody isn't only a recent phenomenon, given that it's been evident since the late 1970s. That's reversed a trend toward broader income distribution that began in the 1930s and 1940s, before hitting a road bump in the late 1970s. Now, the report noted, America's income gap is harkening back to the days of "The Great Gatsby," when a rising tide only lifted the boats of a few.

"The unequal income growth since the late 1970s has brought the top 1 percent income share in the United States to near its 1928 peak," EPI said.

Every U.S. state had large gaps between the average income of the top 1 percent and the 99 percent, with Connecticut and New York showing the largest disparities in the ratio between the incomes of the two groups.

The average income for an American household in the top 1 percent is $1.3 million, while the average income for the 99 percent is $43,713, according to the EPI report, which based its analysis on data from the Internal Revenue Service and research from economists Thomas Piketty and Emmanuel Saez. The threshold for the top 1 percent is higher than figures from the government's Current Population Survey and the American Community Survey, which the study said isn't suited to a state-by-state analysis of income.

Across America, the top 1 percent earned about 29 times what the bottom 99 percent made in 2012, but in Connecticut and New York the ratio stood at 51 and 48.4, respectively. The state with the smallest ratio was Hawaii, where the top 1 percent make 14.6 times the 99 percent.

EPI noted, "The '1 percent economy' is evident in every state."

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