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Income mobility in America

Free Market Foundation

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Just as in the previous 10-year period, a majority of American taxpayers move from one income group to another over time, according to a study by the Treasury Department on income mobility of U.S. Taxpayers from 1996 through 2005.

The Treasury Department also recognises that the dynamism of the U.S. economy significantly contributes to income mobility.

The key findings included:

  • Income mobility of individuals was considerable 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 per cent of taxpayers moved to a different income quintile within 10 years.
  • Among those with the very highest incomes in 1996-the top 1/100 of one per cent-only 25 per cent remained in the group in 2005; moreover, the median real income of these taxpayers declined over the study period.
  • The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).

    Economic growth resulted in rising incomes for most taxpayers over the study period:

  • Median real incomes of all taxpayers increased by 24 per cent after adjusting for inflation.
  • Real incomes of two-thirds of all taxpayers increased over this period.
  • Median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the high income groups.

    Source: Income Mobility in the U.S. from 1996 to 2005, U.S. Department of the Treasury, November 13, 2007.

    For text: http://www.treasury.gov/press/releases/reports/incomemobilitystudyfinal.pdf

    For more on Economic Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=17

    FMF Policy Bulletin/ 20 November 2007

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