During the last 90 years the U.S. has experienced large changes in the share of the total national income controlled by the richest households. The (pre-tax) share of the richest 0.01% of households, for example, was under 1% in the late 1970’s, but over 5% in the late 1920’s and in the years 2005 and 2006.

Over the same period, income tax rates on high incomes varied greatly. The top income rate fluctuated between over 90% (1950’s and early 1960’s) and under 40% (1920’s and 1987 to the present day).

As is evident in the chart below, those two phenomena are strongly negatively correlated over time. The correlation factor is about -74%. Of course, correlation does not imply causation, but even if high tax rates on high incomes do not directly translate to smaller (pre-tax) income for the rich, the correlation supports the notion that inequality in income is determined to a large extent by public policy rather than by an “impersonal phenomenon, the market price”.

Data: Income data are from Thomas Piketty and Emanuel Saez, “Income Inequality in the United States, 1913-1998”; updated version and updated data files available at Saez’s website. Tax rate data are from “Personal Exemptions and Individual Income Tax Rates, 1913-2002”, an IRS publication.

The aim of this post is to provide some particulars for the proposal for democratic media which I made:

Using public funds, “media sections” (TV and radio channels, newspapers, book publishers, etc.) are created and sustained. The media sections are controlled by citizen-editor boards, a role that would rotate within the entire population. Each citizen-editor board has a budget and complete control over a section – i.e., over a certain part of the public media – in the same way that present-day editors and media outlet owners have today.

Read the rest of this entry »