The Middle Class – Part 3 of 6

A little more light is shed on the implications of the US Census Bureau’s data if one considers the US Internal Revenue Service data. To its credit, the IRS acknowledges the adjusted gross income (AGI) it uses is defined as that from IRS Form 1040, Line 41. Therefore, we have a standard definition of income. The IRS also uses a more informative income bracket break-down that categorizes incomes greater than the US Census Bureau limit of $100,000.

Unfortunately, the IRS will only release its income data as a comparison of “Number of
Returns”, which includes returns filed singly and jointly; without stating how many of each were filed. And while the IRS uses income ranges of $5,000 for incomes below $30,000 or $60,000 (depending on which version of the data one has); the income ranges increase as incomes increase, thus giving a visually misleading inference of what the middle income might be.

Instead of thirty-five income brackets up to “$100,000 and over”, as used by the US
Census Bureau, the IRS uses twenty-two or nineteen income brackets (depending on the version of the data) up to “$10,000,000 or more”.  But, like the US Census Bureau, there are more income brackets at the low end of the income spectrum than at the high income end. While the middle bracket on the US Census Bureau table is “$40,000 to $42,499” the middle bracket on the IRS table is “$50,000 under $55,000” or “$50,000 under $75,000” (depending on version).

In both cases, one is led to the visual impression that the middle income bracket may be the middle of the middle class. And, one can be led to believe the following idea:

“Since the US Census Bureau median income is $26,197, any income over $26,197 is ‘above average’ and, since the US Census Bureau mean is $49,445, any income around $49,445 is middle class and the middle class is doing better than most”.

Both the US Census Bureau and the IRS tables support this inference. It’s almost as if the US Census Bureau data establishes expectations and the IRS data shows those expectations are surpassed.

But why did the IRS revise its earlier table?

IRS Individual Complete Report (Publication 1304), Table 1.1 Before & After

A possible answer might lie in what the ” # returns” column seemed to indicate in the earlier version. The first three AGI ranges show about 12,000,000 returns. Then the number of returns declined from the $15,000 to $60,000 AGI and then jumped up significantly for $60,000 to $200,000 AGI.

This makes it appear the “middle class” AGI returns are fewer in number while “low” and “high” income AGIs are greater in number. Therefore this table might imply a dramatic income inequality with a shrinking middle class.

The revised table divides the lowest AGI range, so it no longer has the second greatest number of returns, while combining several “middle income” brackets, so that nearly all AGI ranges have no less than 10,000,000 returns. Also, the visually middle AGI range (“$50,000 under $75,000”) has the greatest number of returns.

While this revision somewhat implies “middle class” is from $50,000 to $75,000 (contradicting the US Census Bureau by 250-300%) it also resolved the implication that there’s a great income disparity and a shrinking “middle class”.

It appears the IRS made a value choice of the ‘lesser of two evils’; in that, “yes, the middle class makes more than we’d prefer you to believe but, no, the middle class is not shrinking…in fact, they’re the largest group and they have better than expected incomes.”

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The Middle Class – Part 2 of 6

Quick “Facts” About the 2010 Census:

308,745,539 – total population

$26,197 – median (middle) individual income (50% earned less; 50% earned more)$38,337 – mean (average) individual income (see below)

$49,445 – median household income                                                                      $67,530 – mean household income (see below)

1.797 – mean number of income earners per household

Normally, to get the mean (average) income, one would add all the incomes together and divide by the number of income earners. The government manipulates the data, to
achieve a low mean, in the following ways:

–      The US Census Bureau “plugs-in” $250,000 for all incomes greater than $250,000 for the sake of “privacy”; the higher income isn’t used to establish the mean
income,

–      Various US Census Bureau publications use different populations of earners (ie. All earners, full-time, year-round, part-time, seasonal, etc.) so that a consistent comparison among its various publications and data tables can’t be made,

–      Various US Census Bureau publications use different definitions for ‘income’, ‘income earner’, ‘wage’, ‘wage earner’, and ‘household’, again, preventing comparisons
among its publications and data tables.

In its Current Population Survey (CPS) Annual Social & Economic (ASEC) Supplement [PINC-1], the US Census Bureau breaks-down incomes under $100,000 into thirty-four ranges of $2,499 and combines the data for everyone making “$100,000 and over” into a single category.

2009 US Census CPS ASEC

The middle category is the range “$40,000 to $42,499”. The 2009 CPS ASEC survey states the median income to be $26,197 and the mean to be $38,337; almost 50% higher. Statistically, because of the nearly 212 – 250 million incomes used in the equation, the median and mean should be no more than the 2-3% margin of error plus the standard deviation. This 50% discrepancy should be unacceptable to anyone considering this data.

The total of all incomes is never given in US Census Bureau publications. The total
of all incomes within an individual income bracket is also never given. Statistically, such an omission is completely unacceptable. Instead a ‘weighted aggregate’ of $8,107,886,645 is given and this is due, in large part, to the plugging-in of $250,000 for all incomes over $250,000.

Also, it must be assumed, that because 33,000,000 people with no incomes are part of the data table they were used to figure the median though they contribute nothing to the aggregate total of all incomes; thus reducing the mean and median.

It is in the governments best interests, for the sake of ‘domestic tranquility’ and the public’s best interest, for the sake of personal pride, that everyone believes these artificially low median and mean incomes; which are often used to infer middle of middle class income levels.

The Middle Class – Part 1 of 6

The people and government of the US are co-conspirators in perpetuating the ambiguity, if not myth, of what is middle class. For most people there is no ambiguity. Middle class is what they are. Whether it’s by virtue of their income, education, or values and outlook; most people will say they are middle class. The government supports these assumptions and beliefs in a number of ways:

–      The US Census Bureau manipulates perception by manipulating the data it publishes: the way the data is organized to create the greatest amount of distraction from the wealthiest, by excluding data it knows but doesn’t want the public to know,
and by not being consistent  from one publication to the next

 –      The IRS and other government agencies manipulate perception, much like the US Census Bureau, in that the data used by one agency’s publication is inconsistent from that of other agencies, as well as, from itself from one publication to another

 –      Despite the frequent use of the term “middle class”; the people, the government, the media, economists, and everyone else refuses to clearly define to what ‘middle class’ refers.

Why the ambiguity?

The most obvious answer to this question is, “to ensure domestic tranquility”.

By not defining ‘middle class’ the government allows people, of nearly all incomes, to enjoy the misperception they are in it. An official definition would surely rob many of them of this fallacy and may cause discontent within and on both sides of the middle class income range.

An official definition would also preclude politicians from seeking broad support for legislation which clearly benefits only a particular class. For by defining ‘middle class’ the government would, by implication, be defining the others.

Some might argue that defining ‘middle class’ would be the first step toward restrictive social castes and the institutionalization of “untouchables”, the privileged, or a nobility. In response, one could point-out US history toward minorities, the handicapped, or the under-privileged. One could also consider the histories of South Africa, India, or any number of societies with or without legal discrimination and the move toward a more equal society. In making such comparisons it becomes obvious simply defining what already exists will not change the nature of it nor cause it to arise in a people not already predicated toward it.

Is Eternal

To say something, concerning humankind, “is eternal” is a conceit. But until it is proven as such let’s assume otherwise.

It is fair to speculate that every notable society pondered its eternality or its ending. Endings of this sort may seem rather debatable given that every generation of a society experiences its own time as a gradual unfolding of events; rarely, if ever, an ending and a new beginning.

The cumulative impact of these events is rarely clear at the time, if ever. In hindsight, the turning point toward a society’s failure to endure can be better seen even if not clearly. It’s rarely a single, major event but, rather, a series of minor ones that begin and perpetuate a deterioration as a cumulative affect.

It is interesting to read contemporaneous accounts of events that happened in the past. Some of these events might be all but forgotten now, except by historians or as blithe footnotes in the collective consciousness. But, at that time, the events may have seemed monumental. It is equally interesting to note that just the opposite is often as true; seemingly minor events take on historical importance or rememberance only long after the event has occured.

History is, in many ways, remembered eternally, though often in the unanticipated.