Paul Caron has shared a portion of David Cay Johnston’s article, “Who’s Getting Richer? Hardly Anyone,” in which he cites recent data showing Americans earning 4.6% more income in 2014 than 2013, but then explains how this is misleading. The vast majority of Americans are just getting by, or beginning to go under water, largely due to government policies. Some of Johnston’s notable findings include:
- Income per American reported on tax returns in 2014 was $30,320, or $693 less than in the year 2000.
- Wages, salaries and bonuses account for about 70 cents on each dollar of income that American report on their tax returns.
- Ten percent of all the increased pay earned by everyone in America was awarded to just 130,500 people, who each earned $1 million or more in salaries and bonuses in 2014, Social Security Administration data show. Put another way, one worker in about 1,200 got a dime out of each dollar of higher pay nationwide.
- Wage gains in 2014 were heavily weighted to the top 15% of workers. Those making more than $75,000 collected 93% of all the increased pay in 2014, compared to 2012-13.
- The 135 million workers making less than $75,000 got an average raise of just 7 cents an hour before taxes, not that anyone would notice.
- Slightly more than half of America’s workers made less than $30,000; their average 2014 gross pay was $1,050 per month.
- While the IRS reported that capital gains rose 34% by comparing 2014 to 2013, when 2012 and 2013 are averaged the 2014 gains were up only by a fraction of 1% (remember that 2013 had lower-than-normal income because wealthy Americans pushed as much income as possible to the lower-tax year of 2012).
- Capital gains are the most highly concentrated major source of income, with 58% of gains being reported by those making $1 million or more – and more than half of that by the roughly 13,000 households making $10 million or more annually.
- Dividends rose at more than three times the rate of wages. Since 2000, dividends paid to stockholders have increased 90% in real terms.
- Income from capital – dividends and capital gains – is going to a shrinking portion of taxpayers. The share of taxpayers reporting capital gains fell from 12% in 2000 to 8% in 2014; dividends declined from 26% of taxpayers to 19% over the same years.
Find the full post here: TaxProf Blog
Posted by Allison Trupp, Associate Editor, Wealth Strategies Journal