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home : most recent : census/demographics November 15, 2018


10/15/2018 9:00:00 AM
OPINION: Watch for alligators in the statistical swamp

Morton J. Marcus is an economist formerly with the Kelley School of Business at Indiana University.  His column appears in Indiana newspapers, and his views can be followed on a podcast: https://mortonjohn.libsyn.com.

Allow me to put a few numbers before you to illustrate the problem with facts. I’m not referring to “fake facts” which is what real facts are called by the ideologically unbalanced. Some of these people are on the light-weight left and even more are on the degenerate right.

The latest figures from the IRS based on income tax returns are for 2016.  In 2004, a dozen years earlier, the United States had 133 million individuals and households filing the 1040 income tax return. In 2016 that figure was up to nearly 150 million, a 12.6 percent increase. But it is money, not the number of returns, that counts and the Adjusted Gross Income (AGI) entered on those forms rose by 51 percent.

As we look closer into the data, we find that returns showing AGI of $200,000 or more rose by 125 percent in numbers and 109 percent in dollars between 2004 and 2016. The $200,000+ bracket accounted for 2.3 percent of all returns in ’04 and 25 percent of AGI. It’s a lot of money for a small minority.

By 2016, the $200,000+ bracket doubled to 4.6 percent of tax filers and had 35 percent of AGI. Still a robust domination of income recipients. But the average return in this bracket fell by 7.4 percent, from $554,000 to $514,000.

It would be easy to cite at this point the figures for the under $50,000 group and then do the same for Indiana federal tax filers. However enchanting (or horrifying) more data would be for you, we need to bring inflation into the discussion.

From 2004 to 2016, the Consumer Price Index (CPI) rose by 27 percent. Since wages generally move with prices, the incomes reported in 2016 needed to be 27 percent higher than in 2004 to sustain the same buying power. That $554,000 needed to become $704,000 instead of falling to $514,000. The real loss in 2016 buying power was not $40,000, but $190,000. Where are the tears for the afflictions of the rich?

Bracket creep distorts the data. A taxpayer may have earned $45,000 in 2004 and $55,000 in 2016 and thereby be classified in a higher income bracket. But in 2016 s/he needed $57,200 to retain the buying power of 2004.

With inflation, lower brackets will lose membership while higher brackets grow unless the brackets themselves are adjusted. This is not possible with these data unless done by the IRS itself or its contractors.

We can use the data to confirm some things we do know well. In 2004, the average AGI for Hoosier taxpayers was 12 percent ($6,000) below the national level. By 2016, our situation had deteriorated to 16 percent ($10,900) below the nation.   

Seems working hard hardly works in this “State that Works.”






Editor, John C. DePrez Jr.; Executive Editor, Carol Rogers; Publishers: IBRC and IAR


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