Income and Wealth Distribution

Brookings Institution. Gary Burtless discusses the tax cut for new hires.

The retirement savings of American households took a big hit when the stock market crashed in 2008. Recently, however, a good portion of these losses has been reversed. This fact sheet follows trends in retirement account balances since the beginning of 2005.

Suppose that a taxpayer earns an additional dollar of income. How much tax would she owe on that dollar? A natural way to answer this question would be to look up the taxpayer’s statutory tax rate - the tax rate corresponding to her tax bracket and filing status.

This paper examines the characteristics and circumstances of families vulnerable to sharp income drops and those most likely to recover financially. More than 13 percent of nonelderly adults in families with children will see their incomes fall by half at some point over the course of a year, and about 40 percent fully recover within a year. Those who lose jobs or have an adult leave the family are more likely to have a substantial drop in income and are less likely to recover. This study uses data from the Survey of Income and Program Participation, which collects data every four months and can provide information on short-term income loss.

Data from the 2007 Survey of Consumer Finances show a disturbing reality. Even prior to the current recession, many families did not have enough assets to see them through a modest spell of unemployment or another financial emergency. In 2007, nearly one in three U.S. families were liquid asset poor. Low-income, young, and nonemployed families are more vulnerable to economic emergencies. For example, two-thirds (68 percent) of bottom income quintile families and 47 percent of second income quintile families are liquid asset poor, while such shortfalls affect only 1 percent of top income quintile families.