Report: America's income inequality is on par with Russia's

The lopsided fortunes of America's richest and poorest citizens are now on par with Russia's after three decades of rising income inequality, according to a new report from economists Thomas Piketty and Emmanuel Saez. 

The U.S.'s widening gap between the rich and poor is partly due to less progressive taxation, the World Inequality Report 2018 said, a finding that may spark additional debate about the current Republican tax reform effort, which critics say will reward the wealthy and corporations far more than the middle class or lower-income households. 

The share of American national income controlled by the country's top 10 percent of earners stood at 47 percent in the U.S. and Canada last year, compared with 46 percent for Russia. Europe's share of income held by its top 10 percent of earners stood at 37 percent, by comparison. 

Yet in 1980, the United States and Western Europe had similar levels of inequality, the researchers found. At that time, the top 1 percent held about 10 percent of income. Fast forward to 2016, when the balance had shifted considerably, with the top 1 percent in Europe holding a 12 percent income share, compared with 20 percent in the U.S.

"From a broad historical perspective, this increase in inequality marks the end of a postwar egalitarian regime which took different forms in these regions," the report noted. 

It added, "The income-inequality trajectory observed in the United States is largely due to massive educational inequalities, combined with a tax system that grew less progressive despite a surge in top labor compensation since the 1980s, and in top capital incomes in the 2000s."

The World Inequality Report 2018 is based on a massive, interactive collection of data compiled by an international team of researchers that includes Piketty and Saez.

At the same time, the share of global income going to the bottom 50 percent rose slightly, to just under 10 percent, thanks to gains in populous, fast-growing China and India.

However, the bottom 50 percent of Americans saw their income share sink from more than 20 percent in 1980 to 13 percent in 2016, it said.

The report includes two charts illustrating the trends: In the U.S., the income share of the top 1 percent surpassed that of the bottom 50 percent in the mid-1990s and has risen since, the two lines crossing in a big "X." In Europe, the two lines have remained parallel, with the top 1 percent's income share remaining well below that of the bottom 50 percent.

The authors of the report said the data it analyzes were collected from a wide range of government sources over 15 years. One of the aims of the study is to push governments to be more transparent about financial data to ensure that debates over inequality and the policies that affect incomes and wealth are well informed.

"Economic inequality is widespread and to some extent inevitable," they said in the report's summary. "It is our belief, however, that if rising inequality is not properly monitored and addressed it can lead to various sorts of political, economic and social catastrophes."

While incomes for the top 10 percent of wealthiest people have soared over the past four decades, the gains have been most dramatic in India, Russia and the United States. In the Middle East, Brazil and sub-Saharan Africa, inequality remained stable at very high levels, forming an "inequality frontier," the report said.

The fact that inequality expands at varying rates shows that policies on taxes and other issues can make a difference, it said.

The report said that the transfer of public wealth to the private sector has left governments without the resources needed to invest enough in education, health and other measures to help counter inequality.

"While national wealth has substantially increased, public wealth is now negative or close to zero in rich countries," it said.

Following Europe's example in adopting policies to benefit middle and low income earners could help counter the trend toward extreme inequality, it said.