## Friday, March 08, 2013

### Interesting U.S. income factoid

There is an IRS website where they publish the tax statistics for the last few years, back to about 1996.  I analyze the numbers from time to time, trying to get a better understanding of income distribution in the United States.

http://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-Returns-Publication-1304-%28Complete-Report%29

I use: Table 1.2: All Returns: Adjusted Gross Income, Exemptions, Deductions, and Tax Items

For any year between 1996 and 2010 take the total adjusted gross income, 8,030,842,945,000 dollars in 2006 and divide that by the number of returns, 138,394,754 returns in 2006.  This gives us the mean or average income, \$58,028.52.

Double that number, so \$116,057.04.  About 90% of familes in the United States make less than this number.  How do we know?

Insert two columns before column B, the number of returns.
In cell C9 type: =(E10*1000)/D10  (This is the mean income)
In cell C10 type: =SUM(\$D\$10:D10)
Now select C10, left click on the lower right corner to drag the cell down and drag it down to C28.
This gives you a running total of how many returns are submitted.  For 2006 the number 122,241,449 should be in cell C20 showing that there are 122,241,449 returns under \$100K.

In cell B9 type: =D9/100
In cell B10 type: =C10/\$B\$9
Now select B10, left click on the lower right corner to drag the cell down and drag it down to B28.
This gives you a running percentage of families earned the amount or less than the amount shown in column A.  For 2006 B20 should show 88.33

If you earn more than double the mean you are in the top 10% of income in the United States.  My wife and I were in that 10% for many years and I never thought of us as particularly well off.  Kind of scary.

Essentially this proves politicians are full of shit.  "middle class" can't be more than what 90% of people in the States earn.

I will believe the economy is doing better when less than 80% of people in the United States earn less than twice the mean income.