US Treasury Releases Results Of Income Mobility Study

by Mike Godfrey, Tax-News.com, Washington

14 November 2007

The US Treasury Department has this week released the findings of a study on the income mobility of US taxpayers from 1996 through 2005.

The study showed that, just as in the previous 10-year period, a majority of American taxpayers moved from one income group to another over time. It also recognized that the dynamism of the US economy significantly contributes to income mobility.

The key findings of the study included the fact that the income mobility of individuals was considerable in the US 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.

Of the around 55% of taxpayers who moved to a different income quintile within 10 years. Among those with the very highest incomes in 1996 - the top 1/100 of one percent - only 25% remained in the group in 2005. Moreover, the median real income of these taxpayers declined over the study period.

The study also highlighted that 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 period in question, and median real incomes of all taxpayers increased by 24% after adjusting for inflation.

Finally, the study showed that the real incomes of two-thirds of all taxpayers increased over this period, and the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the high income groups.

Recommended