Most Californians Saw Decrease in Income Growth: Study

When it comes to income in California, most of the state's residents actually saw a decrease in growth while the top 1 percent saw an astronomical increase, according to a recently released study.

In fact, income disparity in California is the second-worst in the nation and that disparity may be growing more skewed, according to the Center on Budget and Policy Priorities. The top 5 percent of the state's households brought in almost 17 times as much as the bottom 20 percent last year, the a nonpartisan research and policy institute said.

California ranked third on the same CBPP study in 2012.

The institute based its conclusion on 2015 household income data from the Census Bureau’s American Community Survey. More information about the study’s methodology as well as the full, state-by-state results can be seen here.

According to the study, California’s average household incomes in 2015 included:

• Top 5 percent of residents - $369,940
• Middle 20 percent of residents - $67,538
• Bottom 20 percent of residents - $22,110

The top 1 percent of California households saw a whopping 148 percent growth in their average income since 1979. The rest of the Golden State – the 99 percenters – actually saw a 3-percent decrease in income growth over the same period, according to the study.

Nationwide, the average income of the richest five percent of families ($325,928) dwarfs that of the poorest 20 percent ($22,014) and middle-income families ($66,165).

According to the study, the 10 states with the largest disparities are New York, California, Connecticut, Louisiana, Massachusetts, Illinois, New Jersey, Florida, Georgia and Texas.

But even if you’re not living in one of these states, odds are good that the wealth is unequally distributed in your hometown as well, the study claims.

“The concentration of incomes among the wealthiest residents is striking in every state, even without taking capital gains income — which is heavily concentrated among the richest households — into account,” the CBPP wrote.

WHAT IS CAUSING THE DIVIDE?

The study offered three main reasons why the income gap has grown so disparate, which are discussed in greater detail here:

• Wages have become more unequal
• Investment income has become a bigger slice of the economic pie
• Government actions — and in some cases inaction

State policymakers may be limited in what they can do about the income gap, the study claims, but they do have the power to make things better … or worse.

“For example, virtually all states collect more taxes from moderate- and lower-income families, as a share of their income, than high-income families. This increases inequality by reducing after-tax incomes more deeply among low- and middle-income families than high-income families.”

The study's authors offered the following suggestion:

“The mechanisms by which state tax systems ask less of the wealthy than of poor and middle-income families have developed over time, often through closed-door negotiations resulting in special tax breaks that benefit a relative few. To reverse these trends, states should avoid actions — such as cutting income taxes or raising sales taxes — that worsen inequality by shifting taxes further to lower-income residents. Instead, they should ensure that high-income earners pay their share and lower-income earners don’t face increased tax responsibility.”

Patch editor Eric Kiefer contributed to this story. Photo via Shutterstock