Incomes Fell Sharply

U.S. Incomes Fell Sharply in 2009: 

IRS Data * Reuters

U.S. incomes plummeted again in 2009, with total income 
down 15.2 percent in real terms since 2007, new tax data 
showed on Wednesday.

The data showed an alarming drop in the number of 

taxpayers reporting any earnings from a job -- down 
by nearly 4.2 million from 2007 -- meaning every 33rd 
household that had work in 2007 had no work in 2009.

Average income in 2009 fell to $54,283, down $3,516, 

or 6.1 percent in real terms compared with 2008, the 
first Internal Revenue Service analysis of 2009 tax 
returns showed. Compared with 2007, average income 
was down $8,588 or 13.7 percent.

Average income in 2009 was at its lowest level since 
1997 when it was $54,265 in 2009 dollars, just $18 
less than in 2009. The data come from annual Statistics 
of Income tables that were updated Wednesday.

The average tax rate was 11.4 percent, up from 10.5 

percent in 2007, the Internal Revenue Service data 

No income tax was paid by 1,470 of the 235,413 

taxpayers earning $1 million or more in 2009, 
compared with the 959 taxpayers with million-
dollar-plus incomes who paid no income taxes 
in 2007.

Total adjusted gross income reported on tax returns, 

measured in 2009 dollars, was $7.626 trillion, down 
from $8.233 trillion in 2008 and $8.989 trillion in 2007.

Total adjusted gross income was up only slightly from 

the $7.475 trillion reported in 2001, when there were 
10 million fewer taxpayers. Adjusted gross income is 
the amount on the last line of the front page of a 
Form 1040 tax return.

The data from tax returns showed a startling drop in 

the total number of taxpayers reporting any wages. 
A taxpayer, as defined by the IRS, can be an individual 
or a married couple. The data showed almost 4.2 
million fewer taxpayers reported wages in 2009 than 
in 2007, with about 116.7 million taxpayers reporting 
wages and salaries in 2009 -- down from about 
120.8 million in 2007.

Average wages fell, too, sliding $1,106 to $48,917 

from $50,023 in 2007.


The number of tax returns filed fell to 140.5 million, 

down almost 2 million compared with 2007, as millions 
of Americans went from working to having no earned 
income or so little that they did not have to file a 
tax return.

The number of Americans reporting incomes of 

$10 million or more also plunged even more than 
the steep drop in income for the population as a whole.

Just 8,274 taxpayers reported income of $10 million 
or more in 2009, down 55 percent from 18,394 in 2007. 
Compared with 2007, total real income of these top 
earners in 2009 fell 58.6 percent to $240.1 billion, 
but average income slipped just 8.1 percent 
to $29 million.

While the number of people who earned enough 

income to file a tax return fell, the share of those 
filing who paid no income tax rose to 41.7 percent 
of tax returns in 2009, up from 36.4 percent in 2008.

The average income of those filing but paying no 

tax was $14,483.

The share of households filing a tax return but 

paying no income tax results from two key factors:

* One is the drop in incomes because a married 

couple does not pay income tax until they make 
at least $18,300, and families with two children 
pay no income tax until they make more than 
$40,000 under policies started in 1997 and 
since expanded at the behest of Congressional 
Republicans, many of whom complain that too 
many households do not pay income taxes.

* The second reason was that in 2009, nearly 

all working taxpayers received the temporary 
Making Work Pay Tax Credit sponsored by 
President Obama, which saved as much as 
$400 ($800 for married couples) in federal 
income taxes in 2009. The credit continued 
in 2010, but then ended.

Anne Hullinger