Top 1% Income Share
Share of total pre-tax income going to the top 1% of earners
“The rich started getting richer in 1971 when money was divorced from gold.”
The top 1% income share actually hit its lowest point in the late 1970s, then surged starting in the early 1980s — a decade after the gold standard ended. The timing points to Reagan-era tax cuts, deregulation, and financialization rather than monetary policy.
Perspectives
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Policy, technology, and markets reshaped income distribution
The rise in top income share was driven by tax cuts, financialization, technology, and globalization, with monetary policy playing an indirect supporting role.
The data shows a clear regime change around 1980, not 1971. Multiple reinforcing factors — lower taxes on high incomes, financial deregulation, stock-based compensation, globalization — all pushed in the same direction. The gold standard ending was one of many institutional changes in this era.
Causal Factors
Tax policy changes
30%Top marginal rates fell from 91% (1960s) to 37% today. Capital gains preferentially taxed at lower rates. These directly increased after-tax income concentration.
Financialization of the economy
25%Finance sector profits grew from 10% to 30% of all corporate profits. Financial assets are concentrated among the wealthy.
Winner-take-all markets
20%Technology and globalization created markets where small advantages yield enormous rewards (tech, entertainment, sports, finance).
Executive compensation growth
15%CEO-to-worker pay ratio grew from 21:1 in 1965 to 344:1 in 2022, driven by stock options and performance bonuses.
Declining labor power
10%Weaker unions, lower minimum wage (in real terms), and reduced worker protections shifted bargaining power away from labor.
Data Source
Key Events
Nixon Shock
Dollar decoupled from gold — but inequality FELL for the next 8 years
Reagan tax cuts
Top marginal rate cut from 70% to 50%, then to 28% in 1986
Capital gains cut
Capital gains tax rate reduced from 28% to 20%
Bush tax cuts
Dividends and capital gains taxed at 15%, further benefiting top earners
Financial crisis
Brief dip in top income share due to capital losses
TCJA
Tax Cuts and Jobs Act reduces corporate rate from 35% to 21%