Back in the good old days, that is to say the mid-1990s, taxpayers with annual incomes over $500,000 paid federal income taxes at an average effective rate of 30.4%.1 For 2012, the latest year for which data are available, the equivalent figure was 22.0%. The much-ballyhooed January 1, 2013 tax deal that made the Bush-era tax cuts permanent for all except the very well-off will do little to reverse this trend: The deal that passed Congress only restores pre-Bush rates on the last few dollars of earned income, not on the majority of earned income, on corporate dividends, or on most investment gains. Someone has had a very big tax cut in recent years, and the chances are that someone is not you.

In the 1990s taxes on high incomes were already low by historical standards. Today, they are even lower. The super-rich are able lower their taxes even further through a multitude of tax minimization and tax avoidance strategies. The very tax system itself has in many ways been structured to meet the needs of the super-rich, resulting in a wide variety of situations in which people can multiply their fortunes without actually having to pay tax. In general, it is also much easier to hide income when most of your income comes from investments than when your income is reported on regular W-2 statements from your employer direct to the IRS. Whatever our tax statistics say about the tax rates of the super-rich, we can be sure they are lower in reality.

At the same time that their tax rates are going down, the annual incomes of highly paid Americans are going through the roof. In the 1990s the average income of the top 0.1% of American taxpayers was around $3.6 million. In 2012 it was nearly $6.4 million. And yes, these figures have been adjusted for inflation. Thanks to the careful database work of Capital in the Twenty-First Century author Thomas Piketty and his colleagues, it is now relatively easy to track and compare the incomes of the top 1%, 0.1%, and 0.01%. The historical comparisons don’t make for pretty reading.