In the first chapter of Winner-Take-All Politics: How Washington Made the Rich Richer — and Turned Its Back on the Middle Class, Paul Pierson and Jacob Hacker write that during the post World War II years, annual incomes for all Americans grew at pretty much the same rate. But in the 1970s, something changed, and the incomes of the top one percent starting growing faster than everybody else’s — so much so that the share of pre-tax income received by that group grew from 9 percent (in 1979) to 19 percent (in 2007).
Hacker and Pierson wondered what the economic outcome would have been for the bottom and middle classes if the deregulation and tax code changes they describe in their book not taken place and incomes had continued to grow at the same rate for all income groups (but no faster or slower overall than they actually did after the 1970s). They called this fictitious world “Broadland” and, borrowing a word coined by Robert Frank, described the world we really live in as “Richistan.”
If household incomes had grown at the same rate for all Americans after 1979, someone in the top 1% (whose average household income in 2011 was approximately $2,043,622*) would see their pre-tax income cut in half. But what would happen to you?
Plug in your pre-tax household income to get an idea of what your income would be in Broadland.*
* Calculations based on data from the Congressional Budget Office, using its measure of “comprehensive household income” (pretax cash income plus income from other sources). The CBO’s income categories are based on comprehensive household income adjusted for household size—that is, income divided by the square root of the household’s size. The CBO reports income thresholds and average incomes for each of five equally sized categories, or “quintiles,” as well as for the top 10 percent, top 5 percent and top 1 percent. We compute Broadland income by first determining what income group ranking your income (adjusted for household size and deflated to 2007 dollars) fell within in 2007—the last year of the CBO data. We then calculate how much more household income would have grown in this income group if income gains between 1979 and 2007 had been equal across all income groups. This addition (or reduction) in income is added to your current (“Richistan”) income to produce your Broadland income. Finally, we inflate this value to express it in 2011 dollars. Special thanks to emberactive.com, Stuart Craig and Jacob Hacker.
