Commentator Robert Reich says increased tax revenue greases the wheels of economic growth
Commentator Robert Reich says increased tax revenue greases the wheels of economic growth - 
Listen To The Story

One of the things you've heard President Obama say a lot these days is that the wealthy aren't paying their fair share of taxes. Republicans, of course, disagree. A new analysis by the Tax Policy Center says that the tax bills of the wealthy are as high as they've been since 1979. So who were the one percenters in 1979?

Let's imagine that it's 1979 and you are a one percenter. You're driving down the coast in your Lamborghini, Donna Summer's hit "Bad Girls" is blasting out of your state-of-the-art tape deck and you are making $220,000 in 2010 dollars.

According to Steven Kaplan, who was a bright-eyed 19-year old at Harvard in '79, that put you right at the cutoff of the top one percent of the income distribution.

Today Kaplan is a professor at Chicago Booth. He says at that time most top earners worked as executives and managers at companies like General Motors and Exxon. 16 percent worked in the medical profession, 7 percent were lawyers and 8 percent worked in finance.

Fast forward to today and for the most part these percentages haven't changed much. What has changed significantly is the rate at which the incomes of the top one percent have grown compared to the rest of the country -- especially for those in finance.

"Financial professionals in the top one percent in 2005 were getting about 3.5 times as much of the nation's income as they were back in 1979," says Jon Bakija at Williams College. He's one of the authors of the paper, "Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data."

According to estimates by the Congressional Budget Office, tax rates for the wealthy have actually gone down since 1979. "Federal taxes were about 35 percent of income for people in the top one percent of the income distribution in 1979," says Bakija.

In 2009 -- the last year data is available, the effective rate was around 29 percent. That was before January's increase in the top rate.

“I think the best compliment I can give is not to say how much your programs have taught me (a ton), but how much Marketplace has motivated me to go out and teach myself.” – Michael in Arlington, VA

As a nonprofit news organization, what matters to us is the same thing that matters to you: being a source for trustworthy, independent news that makes people smarter about business and the economy. So if Marketplace has helped you understand the economy better, make more informed financial decisions or just encouraged you to think differently, we’re asking you to give a little something back.

Become a Marketplace Investor today – in whatever amount is right for you – and keep public service journalism strong. We’re grateful for your support.

Follow David Weinberg at @@randomtape