Families have now heard for years that the economy is recovering. Here in Louisiana, an industrial boom along the Mississippi River corridor and in the Lake Charles area is promising tens of thousands of new jobs. But despite the sunny talk, most working families aren’t seeing the results in their paychecks.
That’s because all—literally all—of the income gains in Louisiana in the three years after the recession went to the top 1 percent of households, according to a new analysis of income tax records from the Economic Analysis and Research Network (EARN).
In Louisiana, the “One-Percenters”—households with an average income close to $1 million—saw their incomes grow 25 percent from 2009 to 2012, while everyone else actually lost ground. Combined, the bottom 99 percent of earners (average income: $40,800) saw a 1.3 percent drop in their paychecks. Overall, the total income for all households went up 2.9 percent.
Unequal income growth isn’t unique to Louisiana. It is occurring in every state. But Louisiana is one of 17 states where the top 1 percent garnered all of the income gains post-recession, according to the EARN analysis.
This wasn’t always the case. Prior to 1979—an era of industrial growth and policies that favored the middle-class—working families fared much better when it came to income growth. During economic expansions, the bottom 99 percent captured 86 percent of all the income gains. Post-1979, that number dropped to 41 percent of income gains, as the 1 percent began to take a bigger and bigger piece of the pie.
But even from 1979 to 2007, the year before the Great Recession, income gains were more broadly shared. The 1 percent still did very well, getting one-fourth of all the income gains as their incomes went up 85 percent. But everyone else saw income growth of 30 percent.
But the recovery from the Great Recession has been different. The years 2009 through 2012 are a huge outlier, with all the gains going to the top.
Besides going against basic notions of fairness, rising income inequality can be a hurdle to economic growth and stability. The exclusive accumulation of income to the wealthiest 1 percent could also be hurting state tax collections, leaving fewer resources to pay for higher education, infrastructure and health care. Despite job and overall personal income growth, sales and income tax revenue has consistently lagged behind projections. While this seems like a mystery at first, it makes sense once we know that all the income gains are going to only a few.
Louisiana’s tax structure is regressive, meaning it asks more from low- and moderate-income families than the rich. But with wages stagnant or falling for most workers, families are holding back. If people are spending less, sales tax growth is weaker. And on the income tax side, the wealthy benefit from lucrative income tax loopholes.