Monday, August 31, 2009

US Income Distribution

Naked Capitalism today has a guest post by Andrew Kaplan on household income and savings. here are a couple of relevant excerpts.

"The most recent data available (for 2007) showed that the top 14,988 households (0.01% of the population) received 6.04% of income, the highest figure for any year since the data became available. The top 1% of households received 23.5% of income (the second highest on record, after 1928), while the top 10% received 49.7% of income (the highest on record)."

"The fortunate 14,988 had an average income in 2007 of $35,042,705. They had an average federal tax burden, according to Piketty and Saez, of 34.7%, leaving them after tax income of $22.9 million. If you assume a 50% savings rate among this group, you get total savings of $171.5 billion. This is nearly ONE HALF of the total savings for the entire country implied by a savings rate of 4.2% ($365 bn) reported in this month’s Bureau of Economic Analysis data."

This article illustrates growing income inequality and the challenges facing household savings. Most households do not have sufficient discretionary income to save for health care, retirement, and college education for kids.

My personal household spending illustrates this challenge. I make just under $70,000 annually. This year that figure was reduced by 11 days of furlough taken in the spring of 09.

After deductions, including 7% mandatory retirement and health care contributions, my monthly take-home income is about $3,600 when I am not being furloughed. My expenses eat most of that up.
$1700 mortgage payment on a 15 year mortgage
$150 auto insurance -no car payments
$300 average monthly electricity/gas bills (Arizona is HOT in the summer and AC is costly)
$150 monthly water/sewage
$100 phone/cable/cell phone (bundled)
$100 regular medical/dental for RX, braces, allergy shots, et.
Leaves aproximaely $1,100 for food, gas, kid expenses, car repairs, unexpected expenses, recurring expenses (car registration, new glasses, prescription lenses, etc) for a family of 4. Not much left for saving.

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