Income Mobility in the United States: New Evidence From Income Tax Data

While many studies have documented the long–term trend of increasing income inequality in the U.S. economy, there has been less focus on income mobility and the potential opportunity for upward mobility. Data from panels of individual income tax returns suggest that there was considerable income mobility in the U.S. economy over the 1987–1996 and 1996–2005 periods. Consistent with prior mobility studies, the data show that over half of taxpayers moved to a different income quintile and that roughly half of taxpayers who began in the bottom income quintile moved up to a higher income group by the end of each period. By contrast, those with the very highest incomes in the base year were more likely to drop to a lower income group and the median real income of these taxpayers declined in each period. Economic growth resulted in rising incomes for most taxpayers over both time periods. Initial position in the income distribution and changes in marital status were found to be associated with the largest upward or downward movements through the income distribution.