Inflation-adjusted incomes of the top 0.1% more or less track the S&P 500—also adjusted for inflation—from 1913 to early 1950. The market took off about this time, but incomes did not because of very high top marginal tax rates—up to 94% at its peak—and tough financial regulation. There was also a cultural shift about this time when executives were embarrassed by high pay. For the next 30 years, the 0.1% lashed their wealth to markets that didn’t have any rules, and their incomes took off. Then, stock prices went vertical with the tech bubble in the ‘90s and housing prices the same a decade later—all during an era of declining taxation on capital. Capital gains taxes were cut from 28% in 1996 to 20% in 1997 to 15% in 2003.
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