THE share of the richest 1% in total pre-tax income
has increased in most OECD countries over the past three decades. This
rise is the result of the top 1% capturing a disproportionate share of
overall income growth over that timeframe: up to 37% in Canada and 47%
in the United States, according to new OECD analysis.
Even in countries which have a history of a more equal income distribution,
such as Finland, Norway and Sweden, the share of the top 1% increased by 70%,
reaching around 7-8%. By contrast, top earners saw their share grow much less
in some of the continental European countries, including France, the Netherlands
and Spain.
But the incomes of the poorest households have not kept
pace with overall income growth, with many no better off than they were in
the mid-1980s. Stripping out the richest 1 percent of the population leaves
income growth rates considerably lower in many countries - which is why so
many people have not felt their incomes rising in line with overall economic
growth.
The crisis put a temporary halt to these trends – but it did not undo the previous
surge in top incomes. On average, real incomes of the top 1% increased by 4%
in 2010, while the lower 90% of the population saw their real incomes stagnate.
Tax reforms in almost all OECD countries over the past 30 years have substantially
cut top personal income tax rates, the average rate in OECD falling from 66%
in 1981 to 43% in 2013. This reduction has been closely associated with rising
top income shares. Other taxes which play a role for top incomes were also
lowered: the average statutory corporate income tax rate declined from 47%
to 25% and taxes on dividend income for distributions of domestic source profits
fell from 75% to 42%.
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