Source: US Treasury

An analysis of 2005 tax data published by the US Internal Revenue Service (IRS), shows that Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.

David Cay Johnston writes in the New York Times that while incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of the tax statistics show.

The combined income of all Americans in 2005 was slightly larger than it was in 2000, but because more people were dividing up the national income pie, the average remained smaller. Total adjusted gross income in 2005 was $7.43 trillion, up 3.1 percent from 2000 and 5.8 percent from 2004.

The New York Times says that total income listed on tax returns grew every year after World War II, with a single one-year exception, until 2001, making the five-year period of lower average incomes and four years of lower total incomes a new experience for the majority of Americans born since 1945.

The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.

These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.

Nearly half of Americans reported incomes of less than $30,000, and two-thirds make less than $50,000.

The Citizens for Tax Justice organisation says that the IRS data shows that the special low tax rates on capital gains and dividends, enacted or expanded under President Bush, reduced income tax payments by $91.7 billion in 2005. Almost three quarters of those tax reductions went to the 0.6 percent of taxpayers reporting 2005 adjusted gross incomes in excess of $500,000.

• The 67 million tax filers who reported adjusted gross incomes of less than $30,000 — half of all filers — received virtually none of the benefits of the capital gains and dividends tax breaks.

• In contrast, the 0.6 percent of all filers with reported incomes above $500,000 received 73.4 percent of the total tax reductions, saving an average of $81,204 each.

• Most amazing, the 13,776 tax filers with adjusted gross incomes in excess of $10 million — a mere 0.01 percent of all filers — received 28.2 percent of the total tax savings. Their average tax break was $1,876,280 each.

“Few if any special tax breaks are so narrowly focused on so few taxpayers,” noted Robert S. McIntyre, director of Citizens for Tax Justice, which compiled the IRS data. “When half a percent of all tax filers gets three-quarters of the benefits of a tax subsidy, you can bet that the politicians who voted them this largesse probably know most of them personally.”