No surprise here

Despite significant gains in 2004, the total income Americans reported to the tax collector that year, adjusted for inflation, was still below its peak in 2000, new government data shows.

Reported income totaled $7.044 trillion in 2004, the latest year for which data is available, down from more than $7.143 trillion in 2000, new Internal Revenue Service data shows.

Total reported income, in 2004 dollars, fell 1.4 percent, but because the population grew during that period average real incomes declined more than twice as much, falling $1,641, or 3 percent, to $53,974.

Since 2004, the Census Department has found, the income of the typical American household has grown along with the rise in average incomes but at a slow pace that, until recent months, had barely kept ahead of inflation.

The tax data, while not as up to date, helps spell out whose incomes were most affected in the recent downturn and why.

The overall income declines of that extended era came despite a series of tax cuts that President Bush and Congressional Republicans promoted as the best way to stimulate both short- and long-term growth after the Internet bubble burst on Wall Street in 2000 and the economy fell into a brief recession in 2001.

The tax cuts contributed to a big decline in individual income tax receipts, which fell at a rate 14 times that of the drop in incomes.

In 2004 individual income tax receipts were 21.6 percent smaller than in 2000 — and indeed smaller than they were in 1997, the new I.R.S. report shows. The government collected $831.8 billion in individual income taxes in 2004, down from $980.4 billion in 2000 and $848.6 billion in 1997.

Those figures have risen since then, but rather than pay for themselves through economic growth, the Bush tax cuts, at least through 2004, were financed with borrowed money.

A White House spokesman, Tony Fratto, said the decline in income through 2004 was a predictable result of “what we all know now was a bubble economy with inflated asset values, which is why $7 trillion of equity in the stock markets evaporated.”

Mr. Fratto said that the benefits of lowered tax rates were shown by more recent gains in incomes and tax receipts and the creation of more than 6.5 million jobs since 2003, the year that he contended should be used as the benchmark to assess the value of the Bush tax cuts on incomes, jobs and increased wealth.

Incomes in 2004 did rise above those in 2003, with an overall average gain of 6.8 percent. The average year-over-year increases from 2003 to 2004 ranged from 1.8 percent for the poorest fifth of Americans to a 27.5 percent increase for the top tenth of 1 percent.

But those gains were not enough to make up for the drop in 2001, the further drop in 2002 and the almost unchanged overall income total in 2003, when only the top 1 percent made any significant gains, primarily by selling assets at a profit to take advantage of lowered tax rates on capital gains that took effect that year.

Analysis of the I.R.S. data by The New York Times found that average reported incomes fell or were virtually flat at the end of the period at every level of income except for the poorest 26 million taxpayers, the bottom fifth. Those impoverished taxpayers made less than $11,166 each in 2004 and had an average income of $5,743, up $135 or 2.4 percent, from the year 2000.

I guess the conservatives will laud that $135 increase. Don't spend it all in one place.

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