David Cay Johnston, writing in the New York Times about the latest available data from the IRS, says things are going well for a few Americans, but not as well for many, many more:

The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.

The Bush administration is not so troubled, however, claiming:

...its tax policies, despite cuts that benefited those at the top more than others, had not added to the widening gap but "made the tax code more progressive, not less." Brookly McLaughlin, the chief Treasury Department spokeswoman...

Good point. Our (nominally) progressive tax code is designed to reduce these disparities in income. The Bush administration argues that the 2001-2003 tax cuts did exactly that. A closer look at the data, however, reveals that this simply isn't the case. The Center on Budget and Policy Priorities dispatches that diversion in a report released this week:

In sum, [the] new study shows that the federal tax system has become much less progressive over the past several decades, and the 2001 and 2003 tax cuts have continued this trend. Over much the same several decades, pre-tax income inequality has grown as well. Thus, during a period in which economic forces have been generating increased pre-tax inequality, changes in the tax system have exacerbated rather than mitigated the widening of the income gap.

So there you have it. Pre-tax income inequality is growing, and thanks to the Bush tax cuts, post-tax income inequality is growing.

Via Brad DeLong, this from income trend expert and Berkeley professor Emmanuel Saez

The IRS has released yesterday the preliminary stats for year 2005 which I have used to extend my [and Thomas Piketty's] series [on the top income share by tax return unit] to 2005, posted at: http://elsa.berkeley.edu/~saez/TabFig2005prel.xls

2005 shows a very large increase in income concentration: the top 1% gains 14% in real terms from 2004 while the bottom 99% gains less than 1% (when including capital gains). The [previous] record peak of 2000 is surpassed even though 2005 is less of a high capital gains, high stock option year than 2000. By 2005, it looks like top incomes are showing strongly along all components: wages, business income, dividends, and capital gains.

The striking thing about 2003-2005 is the huge increase at the top with quasi-stagnation below the top 1%. In the late Clinton years, the top gained enormously but at least the bottom was also making progress...

I downloaded the data and combined it with the Census Bureau's and put together this illustration. While the bottom 80% of income earners in the U.S. saw their shares of income decline, the top 0.01% saw their share quadruple.

(click to enlarge)