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Average Incomes Shrink Since 2000 Peak

By DAVID CAY JOHNSTON,

The New York Times

Posted: 2007-08-21 14:12:28

Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.

While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.

The combined income of all Americans in 2005 was slightly larger than it was in 2000, but because more people were dividing up the national income pie, the average remained smaller. Total adjusted gross income in 2005 was $7.43 trillion, up 3.1 percent from 2000 and 5.8 percent from 2004.

Total income listed on tax returns grew every year after World War II, with a single one-year exception, until 2001, making the five-year period of lower average incomes and four years of lower total incomes a new experience for the majority of Americans born since 1945.

The White House said the fact that average incomes were smaller five years after the Internet bubble burst should not surprise anyone.

The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.

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These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.

People with incomes of more than a million dollars also received 62 percent of the savings from the reduced tax rates on long-term capital gains and dividends that President Bush signed into law in 2003, according to a separate analysis by Citizens for Tax Justice, a group that points out policies that it says favor the rich.

The groups calculations showed that 28 percent of the investment tax cut savings went to just 11,433 of the 134 million taxpayers, those who made $10 million or more, saving them almost $1.9 million each. Over all, this small number of wealthy Americans saved $21.7 billion in taxes on their investment income as a result of the tax-cut law.

The nearly 90 percent of Americans who make less than $100,000 a year saved on average $318 each on their investments. They collected 5.3 percent of the total savings from reduced tax rates on investment income.

The I.R.S. data showed that the number of Americans making less than $25,000 a year shrank, down by 3.2 million, or 5.5 percent.

Nearly half of Americans reported incomes of less than $30,000, and two-thirds make less than $50,000.

The number of taxpayers making more than $100,000 grew by nearly 3.4 million and accounted for more than two-thirds of the growth in the number of returns filed in 2005 compared with those in 2000.

The fact that average incomes remained lower in 2005 than five years earlier helps explain why so many Americans report feeling economic stress despite overall growth in the economy. Many Americans are also paying a larger share of their health care costs and have had their retirement benefits reduced, adding to their out-of-pocket costs.

The White House noted that during the same five years, income tax rates have been cut under a series of laws sponsored by President Bush. Mr. Bush has delivered a steady stream of upbeat assessments of the economy, saying last fall, for example, Im pleased with the economic progress were making.

Tony Fratto, a White House spokesman, attributed the drop in average incomes to the significant wrenching hits that our economy took in 2001 and 2002, so no one should be surprised that what a bubble economy created in the late 1990s and 2000, where economic data were skewed, would take some time to recover.

Mr. Fratto said the fact that nearly all of the growth in incomes was among those in the upper reaches of the income ladder and that the majority of investment tax breaks went to those making more than $1 million is not a very interesting story.

There is no question that you will always have distributional concerns with a tax rate, a broad-based tax rate, at the very top of the income scale, Mr. Fratto said.

He said the more significant issue was the reduction in taxes for middle-class Americans that Mr. Bush won from Congress.

Robert S. McIntyre, the director of Citizens for Tax Justice, said that even though he expected a few very wealthy people to reap most of the tax savings generated by lower tax rates on dividends and capital gains, the size of the savings still takes your breath away.

He said the tax savings at the top, combined with lower average incomes after five years, shows that trickle down doesnt work.

2007-08-21 09:08:39

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lodrdevot 10:24:00 PM Aug 27 2007

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investag8ting 09:01:50 PM Aug 21 2007

or eventually we'll have anarchy. .....

yep! I can't waitt to see the poor eat the rich!

Marasegal5 10:46:29 AM Aug 24 2007

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I'm sure that the numbers are skewed somewhat, the media is controlled by owners who are associated with certain political parties.

Certain things are obvious and that is that people (middle class) in America feel that they work harder just to get by. There are so many things wrong with our country, which isn't surprising because we are considered such a young country when compared to the rest of the world. Our politicians think they know so much and our society is so manipulated by the media.

Are we free? Is this a democracy? Everyone has there own beliefs and opinions. Do your beliefs reflect your environment?

I really like what Ron Paul is saying.

investag8ting 08:35:20 AM Aug 22 2007

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gerrod, Don't worry there is no way a Republican will win the 2008 election for President, unless they rig the election. But if they try that this time the Americans will insists they are investigated. Americans have learned a lot in these last 7 years. We've learned to be skeptical, we've learned to verify, and we've learned to investigate, unfortunately we've,also, learned even when they are found guilty they can get a free get out of jail card. The American people are watching closely, and there is only so much corruption we can stand. Remember we can call our congressmen if we feel injustice is going on, and pressure them to pass bills to make things fair or right again.

investag8ting 08:25:38 AM Aug 22 2007

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By the way if you have less than $2 million in investments in todays market you are not considered wealthy and you surely have no infuence over how the markets go.

retfla2 08:22:41 AM Aug 22 2007

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AOL headline wrong again. 54% report that their average income has INCREASED since 2000!

investag8ting 08:21:27 AM Aug 22 2007

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Actually most rich people didn't get rich working the old fashioned hard way. Most of the top 3% inherited their wealth, and others in the top 3% got wealthy with an idea they patented or stole from someone else. Then they got money from investors to make this idea come into realty. How did these ideas go from dream to realty, the main (idea) guy paid a lot of people a little money to manufacture the items. Then they moved their company overseas to get their product made by even cheaper workers, and to avoid taxes. That's how most of the top 3% got their money, they were born into it, or they used workers to make their money. They did very lilttle sweating themselves.

csacts 10:42:00 PM Aug 21 2007

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cshadowaria, study history; you will discover how most rich people became rich, including the "opportunity" of prohibition where much money was made on the spirit blackmarket. Some of us realize that hard work does not produce riches. Were that so, how many American slaves would have been rich as a result of their hard labors?

"cshadowaria 09:22:32 PM Aug 21 2007

Cscrat , Alot of rich people get rich cause they worked very hard for it and in a country called the United States everyone has the oopurtunity to come up work hard and get rich Just because you havnt come up yet dont hate those who have just get off your lazy butt and go get rich , like i said if your american you do have that oppurtunity. Think man think!"

investag8ting 09:01:50 PM Aug 21 2007

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Too many minimum or lower paying jobs are becoming more prevalent. There is a huge gap between the rich and the poor, and the middle class is disappearing. There needs to be some way to bring back balance or eventually we'll have anarchy.

swapsshuup 07:53:00 PM Aug 21 2007

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One household $75000,(25000,50000) 2005. Two households average income $37500, 2006. Same two people someone moved! (My daughter, I'm retired) Aren't stats great!
2006 3 households avg income $55000.(25k,50k,90k) 2007 2 households avg income $ 82500 daughter got married! one 140k Me haven't changed 25k! aren't stats great still the same 165k! did not bring in any low paying workers to drive down the wages or the stats! Of course there was infation and their was adjustments in my retirement!

gerrod12 05:16:39 PM Aug 21 2007

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mrbret foon is stupid becausewhy would you vote republican after reading this. Right now that's who running our government and they are doing the worst job ever by any administration. I guess you just the a sick person that like to see people struggle because you know inflation is skyrocket and wages are going down.

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