Posted by Lending Club :: February 6, 2008 @ 7:44 am

The Congressional Budget Office recently released updated data on the effective tax rates of various income levels from 2004 to 2005. Also included in the report are the average incomes for each fifth of the American population. The data shows that, while all incomes increased, those of the most affluent Americans increased by the largest percentage.

The numbers were presented in both pre-tax and post-tax amounts. As each income group has significantly different tax rates (25.5% for the top fifth and 4.3% for the bottom fifth), the post-tax numbers yield the most accurate comparison. Data from 2004 was inflation adjusted to be equivalent to 2005 dollars, so the reported amounts show the true value gain.

It is interesting to note that most Americans saw roughly the same percentage increase. The poorest 20%, who are in the most need of increases, saw an increase greater than the next 60%. The richest 20% saw their incomes increase much more significantly than any other group. This increase comes despite their huge tax burden. The average American in the top 20% paid nearly 4 times more in taxes ($59,100) than the lowest 20% earned ($15,900 pre-tax).

While people with different political views will interpret the data differently, one thing should be clear: the top 20% are clearly doing something better with their money. Their increases must be coming from more then just rising wages or the percentage increase would be more consistent across other groups. It’s safe to say that investments are playing a large role in the increases of the top 20%.

Despite where you fall on the chart, you too can make better use of your money. You don’t have to be rich to get access to investment opportunities with very healthy returns. For as little as $500, you can start a person-to-person loan portfolio that Lending Club’s matching technology creates for you. With annual portfolio performance currently above 12%, there are not likely to be many comparable investments with similar risk.