State income gap widens

April 16, 2008

The richest five percent of North Carolina families earn 12 times more than the poorest fifth, and 4.3 times more than the middle fifth, a new study says.

Income inequality in North Carolina has increased precipitously over the last 20 years, says "Pulling Apart," a joint report by two Washington, D.C.-based research organizations based on modified census data.

Between 1987 and 1989, and between 2004 and 2006, inflation-adjusted income after federal taxes has grown nearly 60 percent for the richest 5 percent of the state's population, the report says. 

In contrast, that income has growth 9.9 percent for the poorest fifth and 9.6 percent for the middle fifth.

"The benefits of two decades of economic prosperity have bypassed all but a handful of families," John Quinterno, research associate at the NC Budget & Tax Center, says in a statement. "A skewed income distribution leads to stagnating living standards for most families despite overall economic growth."

The Center on Budget and Policy Priorities and the Economic Policy Institute, co-sponsors of the report, attribute the growing income gap to a decline in the purchasing power of the minimum wage, weakening unions, hamstrung social insurance systems, and trade policies the report labels "low-road."

As an antidote, the report promotes progressive income taxes and the more aggressive use of refundable tax credits.

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