Jabs at the "1 percent" became the battle cry of disgruntled Occupy Wall Street protesters and the subtext of much of the U.S. presidential campaign this year, but they were hardly the first to draw attention to the outsized wealth of America's top earners. Much of the credit should go to Thomas Piketty and Emmanuel Saez. Armed with a century's worth of hard data, the two French economists have revealed just how acute income inequality has become in the United States. And the disparity, their research found, has recently reached levels not seen since the eve of the Great Depression.
Piketty, at the Paris School of Economics, and Saez, at the University of California/Berkeley, started their income-tracking project two decades ago. Their deep dive through U.S. Internal Revenue Service tax returns dating to 1913 resulted in their signature paper, first published in 2003 and recently updated. The study's centerpiece is a stark, U-shaped graph showing the top 1 percent's share of total U.S. income bottoming out after World War II, rising after the 1970s, and, by the mid-2000s, nearly matching the record set back in 1928. (After the financial crisis, guess which group recovered fastest -- and most robustly?) Today, that squiggle has become a favorite smoking gun of left-leaning intellectuals who argue that the rich should bear much more of the U.S. tax burden. Piketty and Saez's work is cited in White House budget documents and "helped to point the way for the administration in its pledge to rebalance the tax code," according to Peter Orszag, President Barack Obama's first budget director.
The French duo's suggested remedy is something they say is as American as apple pie: higher income taxes on the very richest. They recommend a rate as high as 83 percent for the top bracket of earners -- much higher than the 30 percent of the proposed "Buffett Rule" and even more than French President François Hollande's proposed 75 percent top tax rate. Piketty, who calls the level of U.S. income inequality today "completely crazy," argued this year that the United States is switching places with Old Europe. "Inequality of wealth and income used to be much larger in France," he told the New York Times. "And very high taxes on the very rich -- that was invented in the United States."
PIKETTY Reading list: Premodern Financial Systems, by Raymond Goldsmith; The Black Book, by Orhan Pamuk; Arthur Young's Travels in France, by Arthur Young. Best idea: Hollande's 75 percent top tax rate, if it were applied in the U.S. and Europe with a broad tax base. Worst idea: Hollande's 75 percent top tax rate, as applied in France with a narrow tax base. American decline or American renewal? Slow, steady decline. More Europe or less? More Europe: The world needs the United States of Europe. To tweet or not to tweet? No tweet so far.