I.R.S. Says Americans' Income Shrank for 2 Consecutive Years

[Rose Siding]

The overall income Americans reported to the government shrank for two consecutive years after the Internet stock market bubble burst in 2000, the first time that has effectively happened since the modern tax system was introduced during World War II, newly disclosed information from the Internal Revenue Service shows.

The total adjusted gross income on tax returns fell 5.1 percent, to just over $6 trillion in 2002, the most recent year for which data is available, from $6.35 trillion in 2000. Because of population growth, average incomes declined even more, by 5.7 percent.

Adjusted for inflation, the income of all Americans fell 9.2 percent from 2000 to 2002, according to the new I.R.S. data.

While the recession that hit the economy in 2001 in the wake of the market plunge was considered relatively mild, the new information shows that its effect on Americans' incomes, particularly those at the upper end of the spectrum, was much more severe. Earlier government economic statistics provided general evidence that incomes suffered in the first years of the decade, but the full impact of the blow and what groups it fell hardest on were not known until the I.R.S. made available on its Web site the detailed information from tax returns.

http://nytimes.com/2004/07/29/business/29tax.html?hp

[mdunionman]

1. Anti Union Republicans

Of course. The Republicans want to starve the workers off of the jobs. They want break all of the unions. This election is a must win. All Union Brothers must vote Kerry/Edwards, this election is all about survival. It is good vs. evil. If it looks bad, Bush will cancel the election and try to declare martial law, we must be ready. Me and my brothers in Baltimore are ready. They stole this country once and the y will never do it again. The protests must be big fast and angry. This is our LIBERAL, UNION, WORKERS COUNTRY. It does not belong to the CEO/thief's, Management/losers, and republican racists. Power to the people! Union Till I Die

[leesa]

5. I am pleased that in my working class far RW community there are lots of

Union signs springing up. I think they are learning who is the pidgeon and who is the bird of prey.

[aquart]

2. What's the percentage if they exclude CEOs?

[papau]

3. Capital Gains is a voluntary tax in terms of the rich.

So it looks like they pulled some tax losses out so as to wait for Bush's lower tax rates.

David Cay Johnson is a good tax media person - here he sticks to the obvious facts and does not try to explain how there was a real drop in non-rich income as unions become less effective, ee wages become more "bonus" based, and indeed wage cuts are accepted as jobs become scarce.

On the other hand, there is no data on the how the wealth of the rich grew in these years. It appears to me that a deferred tax liability was created as the rich took their buried losses so as to have a real dollar improvement in their situation. One creates such a liability when you feel that lower rates in the future and new off shore deals will make it go away.

I do not see that the rich sufferred at all from these numbers.

The employees do appear to have been screwed by the Bush expansion that began 11/1/2001. Indeed it appears that Bush stat playing is the basis for the "Bush recovery".

[TahitiNut]

4. And corporate profits have never had it better.

[leesa]

6. Interesting how closely linked it is to 9-11

It would be nice to see some detail of this time frame.

[TahitiNut]

9. Well, the figures are produced quarterly

You can look at 'em here ...
http://www.bea.gov/bea/dn/nipaweb/TableView.asp?SelectedTable=53&FirstYear=2003&LastYear=2004&Freq=Qtr

Minor quarter-to-quarter variances can be misleading, but longer term trends are unmistakable. You're quite correct that the change between the 3rd quarter of 2001 (including 9/11) and the 4th quarter of 2001 is the point at which corporate profits veered upwards and employee income headed for the tank. It is, however, also the point at which the Federal government started its new fiscal year - one whose budget Bush/Cheney and the Repugnant Congress raped and plundered.

[havocmom]

23. TahitiNut, were did you get graph/numbers?

Cu I would like to send them out to several people who are gonna insist on knowing what the source is. If you can help me rub their noses in some good stat source, I would be much obliged.

PS, my daughter loves your sig line (when traffic is down on the board and sig lines show up)

[TahitiNut]

25. I do these myself based on data published ...

... by BLS (Bureau of Labor Statistics), CPS (Current Population Survey), CBO (Congressional Budget Office), BEA (Bureau of Economic Analysis), and other Federal statistical resources. I actually do relatively little to the data other than depict it in graphical form (using Microsoft Excel). (The one with the most actual analysis is the distribution of Individual Income and calculation of the associated Gini coefficient which I've posted elsewhere.) I update most of the graphs with each release of updated data - sometimes with improvements to increase legibility. I'm currently adding a notation at the bottom of each graph that shows a URL where the data are obtained.

The reason I do this is because I find most such data reported in the news and press releases to be wildly biased and incomplete. It's really astounding how biased and selective such published data can get. Since a major part of my career has been devoted to analytical pursuits, I rely on my own analytical viewpoint. (And yes, I do have a liberal point-of-view.)

I posted the link to the source of the data I graphed above in post #9.

The starting point for looking at published Federal statistics is the FedStats site at http://www.fedstats.gov (We pay for this so we might as well use it.)

An excellent site for such statistics (even though they're mostly out-of-date) is http://www.nationmaster.com/index.php

High-level URLs for the sources I use most frequently are ...
BLS (Bureau of Labor Statistics) - http://www.bls.gov/
CPS (Current Population Survey) - http://www.bls.census.gov/cps/cpsmain.htm
CBO (Congressional Budget Office) - http://www.cbo.gov/
BEA (Bureau of Economic Analysis) - http://www.bea.gov/


Thanks for the generous words, mom .. and kudos for having such an intelligent daughter. :silly: :dunce:

[havocmom]

29. Thanks for the sources

Yep, I told the young pup to ALWAYS read posts by TahitiNut as they will contain great info. She has only posted a couple times but has lurked for years. (Perhaps she wants to keep an eye on her ol mom?)

[papau]

33. Thanks for doing the heavy lifting from the econ data - excellent work

:toast:

:-)

[TahitiNut]

39. Thank you, but the 'heavy lifting' is more ProfessorGAC's territory.

I do the light stuff ... which sometimes might cause ProfessorGAC to grind his teeth due to its superficiality and inadvertent occasional inaccuracies.

For example, I take BEA's reported National Income figures and take the annual "Corporate Profits" figures and the annual "Corporate Taxes" figures, and then express the latter as a percentage of the former and show the result graphed over the years and call it the 'Average Corporate Tax Rate'. While relatively fair, this is a pretty (technically) sloppy use of the term 'average tax rate,' part of which is due to the fact that the taxes paid in a particular year aren't necessarily against the profits reported within that same year. (There are some technical issues regarding realization, recognition, and deferments.) An analysis of corporate tax returns might come up with somewhat (but not hugely so) different numbers. Unfortunately, that far more detailed and specific data are not available as early as the national economic numbers. (The IRS takes much longer to produce comprehensive statistics.) I feel quite confident, however, that the numbers I've portrayed are materially accurate for the non-accounting purposes here.

:toast: :hi: (From the above, you can see I'm a nerd at heart.)

[papau]

43. Acct'g firm current deferred tax recommended %'s for FASB reserves

would a fun post.

But one we will not see!

The fact that the Acct'g firms tells folks to commit tax fraud, and then recommend at how many cents on the dollar to settle with the IRS for the purpose of a "tax reserve" that is added to their paid tax reserve, to which is added the remainder of 35% of the reported FASB earnings, so that they can say they pay 35% of earnings as tax.

I would love to see the total dollars that the accounting firms are telling the companies they can expect to not pay because of the great fraud or tax planning schemes that the accounting firms have SOLD (tax avoidance advice is not cheap) to the corporations.

But that is a study (taxes owed by corporations under the code/law, but in excess of the taxes paid plus new "tax reserves" set up by the accounting firms under FASB for the SEC filings) that we will not see in my lifetime.

They then run through earnings under "other" the monies that they do not pay - but only when they feel like disclosing - most likely when the tax audit is closed for a past year.

Of course, a list of "Tax reserves" versus tax eventually paid to the IRS on Audit would show the Billions being given the corporations by softer than even the acct'g firms expected IRS audits!

But that is another study we are not about to get anytime soon!

[TahitiNut]

44. Omigawd... someone else that reads FASB?

:evilgrin:

I actually gave up on that over 10 years ago when I worked for a Federal contractor that had to do the arcane (shell game) cost accounting shenanigans that Sam requires. Prior to that, as an Internal Auditor (Operational Analysis focus), I tried to familiarize myself with FASB (on top of GAAS and GAAP) and damned near went nuts. Being adjacent to and friendly with the Tax and IP Legal staff, however, convinced me that being a little bit nuts is a minimum requirement.

From my experience it's absolutely correct, however, that deliberate violation of laws and regulations is a "business decision" based solely on the financials and a "risk analysis." One of the (Fortune 50) corporations I worked for replaced their entire Internal Audit Department twice in 10 years (I was part of the 2nd wave) before they got one that was "tame" and "cooperative." (Their outside auditor was already "tame.") As a small example, they liked the idea that they could load product on trailers parked on the back lot and count it as shipped (thus, booking a receivable and operating profit) rather than mere inventory.

It'd be fascinating to see a thorough public analysis of the games played with R&D "tax credits" (welfare, actually), too.

[papau]

45. Good Grief - I started and ran the Sun Life of Canada US Tax Dept

and as you say - replacement to remove "tame" is an ongoing event.

The Talent on DU always makes one wonder if we shouldn't incorporate as a "Consulting" firm!

I enjoyed your post - but I suspect the rest of DU did not have the laugh I had at "business decision" and "risk analysis."

:-)

[Jackpine Radical]

7. Must be because they stopped believing in hell.

[oscar111]

8. middle class income?

someone needs to seperate out the very rich and tell how much of an income fall hit the middle class.

talk of typical and avearage does not clearly group the middle class away from the rich. Perhaps it intends to, but if it really is doing that it is unclear.

middle class is all below 70 000, in my book. includes the poor. ie, all dem voters.

[mdunionman]

10. Middle class is below 120K for family

My wife and I are both union workers. We both earn over 50K, but we are middle class workers. I ain't no high class republican. I guess it may depend on area

[Wright Patman]

16. It dang sure does

In my area of Texas you'd be the wealthy elite and firmly ensconced near the apex of the top one percent of income.

[Nimrod]

20. Ouch

That hurts to hear. Last year I grossed about $26,000, and I work in a white-collar corporate environment in a high responsibility position.

If I made $50k I'd consider myself fabulously wealthy. No BS.

Then again, my company effectively stripped me of all my capital gains just because they legally could. Thank you for the GREAT tax cut, Mr Pres.

[havocmom]

24. Heard a speech yesterday on TV showing how "average" can mislead

I believe it was Governor Mitt Romney of Mass speaking. He said that when one takes the average height between himself and Shaq O' Neal, one comes up with 6'1". The governor is considerably shorter than that. He used the point to illustrate just how misleading "average" can be.

You are right, we need to see the figures for real people, with the top 1% left out.

[TahitiNut]

26. This data is abundant, but the terms are very ambiguous.

Terms like "rich" and "middle class" are undefined and, as such, loved by politicians. Indeed, because of the changing value of the dollar, even an understanding based on one year will change for every other year.

Furthermore, we fail to distinguish between 'income' and 'wealth' tending to default to 'income' because the data are far more available. Yet even then, using 'income' tends to obfuscate what 'wealthy' actually is. For example, I would probably not regard an individual with income of about $70,000/year as wealthy if that income came almost solely from wages and salary. But if that income were from dividends and investment gains, I'd tend to view that person as 'wealthy'. What obscures this even more is that unearned income (capital gains, dividends, etc.) is often derived from AGI (for tax purposes) and that can be far smaller than gross income due to the masking of such figures by the reporting methods used.

That said, for 2001 ...
People with incomes of $250,000 and above constituted about 0.5% of all adults (over the age of 15) but accounted for 8.3% of all individual income, earned and unearned.
People with incomes of $70,000 and below were 92% of the adult (over 15 years old) population, but accounted for only 65% of all individual income.

Here's a graph of individual income distribution for 2001 ...

[TahitiNut]

11. Kick

(Duplicate avoidance kick.)

[dbt]

12. Kick

(duplicate duplicate avoidance kick)

[cthrumatrix]

13. but NOT corp. profits.... awol's tax cut is a sham...and our deficit is a

disaster

[rfkrocks]

14. tax cuts for the base

MCmanufacturing jobs for the rest-drunken sailor Bush hates the middle class

[UpInArms]

15. the recession that they blame

for this is caused by the policies of this mal-administration and its henchmen.

[Maeve]

17. The rich get richer and the rest get shafted

CEOs get raises in the double digit range, the middle class sees wages stall, many get laid off...yeah, Dubya's done a bang-up job on the economy!

[truthspeaker]

18. yeah, but I got a $37 tax cut so everything's OK!

[gratuitous]

21. You got a tax cut?

Then you're buying the next round. Suddenly, I'm feeling thirsty.

[truthspeaker]

28. too late, I spent it all on increased prescription copays

[nolabels]

38. Adjusted for inflation, the income of all Americans fell 9.2 percent from

Yea, they cut the taxes out after after they stop paying you for the unemployment insurance.

My contention is that biggest problem America has it the need for career counselors.

After all who in the hell ever told this guy he could have good career as a U.S. President anyway


http://soupnazi.org/misc/

[0007]

19. More wealth for corporations and that's what junior is all about.

Big business and the aristocracy indeed love junior.

Please take the hoods off the heads of the lower crust Mr. Kerry

[TahitiNut]

27. Not only more wealth for corporations, but far, far lower taxation.

[Lydia Leftcoast]

22. My income fell two consecutive years in a row

before stabilizing in 2003. :-(

My 2000 income was wonderful, my highest ever, but it fell by $16,000 in 2001 due to a loss of U.S. customers, and then fell again in 2002.

Irregular income is one of the major disadvantages of self-employment, although I have hopes for rebuilding my income by recruiting more Japanese customers.

[Lorien]

31. From $147,000 to $48,000

in four years! Yep, I'm self employed too, and my customers are large US corporations. They've sent a lot of my work overseas and laid off thousands of their in-house people in the past three years (which have become my competition). They know the job market is tight, so they demand smaller and smaller invoices, and more "freebies". I know it's just a matter of time before ALL of it heads overseas. What do we do then?

[gasperc]

36. wow, curious were you GOP and switch to DEM?

that's a sharp switch, my income has stagnated since 2001

[Lorien]

42. Lifetime Democrat

raised by liberal Dems, too.

My primary client is Disney. That should tell you something.

[William Bloode]

30. Don't i know it!

Due to increased outsourcing of jobs in my area falling income is the norm. We are seeing dramatic changes here. I made more money in 1990 than what most jobs offer here now. All that is left are mostly service jobs paying $6-7hr no benefits. Compared to $9-12hr with full benefits, of bygone days.

The picture is so dull here fast food restaurants are actually closing. I have never been so embarrassed as when i actually got so desperate i went to apply at several fast food places, and was turned down flat!

Worst of all my wife was just laid off from her low paying service job. Well at least we have time for the beach now.......that is if we had the money lol!

[nolabels]

32. Thank you WALL MART

Remember it's not what you spend, it's what they keep


http://www.unbrandamerica.org/flag_gallery.html

[papau]

34. Kick for a great thread

:-)

[truthspeaker]

35. meanwhile pay for CEOs has DOUBLED

This thread inspired my today's blog entry:

www.truthspeaker.org

[Rose Siding]

37. Their pay hikes doubled

More than doubled for S&P 500 CEO's. They got a raise of more than 22%That's bad enough.

snip>
The compensation for all CEOs, a total sample of 1,429 companies, show median pay increases of 15 percent, up from 9 percent increases in 2002. The median is the pay increase at which there are the same number of pay increases that are greater and that are less.

http://money.cnn.com/2004/07/28/news/economy/ceo_pay/index.htm?cnn=yes

[TahitiNut]

40. But those obscene CEO increases are INCLUDED in the overall decline.

Which merely emphasizes how bad it is for the "bottom 99%."

[Tight_rope]

41. Yes...Many of us are broke and we thank Bush for that!