Although the national economy is showing surprising growth in jobs, household wealth has not returned to the level seen just before the start of the 2007 housing bust that lead to the “Great Recession.” Since then, income inequality, however measured, continues to widen. In 2018, the average cost of basic expenditures exceeded the after-tax income of households who made under $50,000. (Please see the graph and short article, “23,000 Payday Loan Centers and an Average Credit Card Debt of $10,300: Welcome to Low Income America where Average Expenditures on Basics Exceed Average Income by 340%. under “Data Points.”) Is it any wonder that high-interest, small loan operations continue to operate? Or that credit card debt is again on the increase? Is it any wonder there are more visible homeless in the streets of Bellingham than before the start of the Great Recession?
So, how is Whatcom County faring in terms of income inequality? Let’s start with the bad news.
Using publicly available, aggregated 2019 income tax data, which is the most recent year available and does not disclose information about individual filers, we can get at least a glimpse, if not the full picture, of income inequality in the county.
In Whatcom County in 2019, there were 111,450 tax returns filed, of those, 5,680 (5.1%) reported an Adjusted Gross Income (AGI) of $200,000 or more. This “high-income” group accounted for 30.5% of the total gross income for the entire county, which was $8.077 billion. The “low-income” group of 105,770 tax returns accounted for the remaining 69.5% of this income. Breaking it down, the Adjusted Gross Income for the 5,680 "high-income" tax filers averaged out to $434,205 for that tax year. For the 105,770 people in the “low-income” group, that year’s average income was $53,049.
The bad news in terms of income inequality? In 2019 in Whatcom County, the high-income group, the top 5.1 percent, earned 8.2 times more than the remaining 94.9% of the low-income group. This is income inequality.
But there is more bad news: Our two neighboring counties aren’t doing much better. The spread of the inequity in Skagit County is only slightly lower: the high-income group earned 8.03 times as much as the low-income group. In Island County the high-income group earned “only” 7.22 times as much. The second lowest in the state was Snohomish County, where the high-income group earned 5.9 times as much as the low-income group. Snohomish also did better because fewer of its 2019 tax returns - 7.7 percent - made up its high-income group. The average Adjusted Gross Income of Snohomish’s high-income group was $369,359, compared to their low-income average of $62,933.
The “good” news? Whatcom County fared better than the state as a whole, where the 8 percent in the high-income group reported an average AGI of $488,948. Statewide, our high-income AGI is 8.5 times higher than 92% of our low-income tax filers from 2019. The low-income group had an average Adjusted Gross Income of $57,360.
But the greatest disparity in the state is in San Juan County, our neighbor out in the Salish Sea, where the average 2019 Adjusted Gross Income, for the 9.4 percent in the high-income group, is $648,198. This is 13.82 times higher than the average AGI reported by 90.6 percent of their low-income filers, at $46,891 for the year. San Juan County has the highest ratio of income-inequality of all 39 counties in the state, exceeding even Yakima County, where the ratio is 12.54.
Income inequality is alive and well in Washington State, and although Whatcom County is doing slightly better than the state and many counties, it’s not by much.
It is highly likely that income inequality is more extreme than this “glimpse” has shown. There are two reasons. First, there are people with incomes below the minimum required to file, so they are not picked up in the IRS data. Second, as reported regularly in the news, the wealthy among us may not follow the income reporting rules even though they tend to be stacked in their favor, so this undeclared income, like that of the very poor, is not picked up in the IRS data. These omissions make it difficult to get a good view of the true extent of income inequality, as do other approaches, all of which have different shortcomings. But while tax filings have shortcomings when it comes to measuring the extent of income inequality, taxes themselves are usually the means of alleviating it.
If you are poor, you are probably not likely to ask why income inequality is a social problem worth considering; if you are wealthy you might find answers in the book, The Spirit Level: Why Equality is Better for Everyone (2009), by Kate Pickett and Richard Wilkinson. They argue that for each of 11 major health and social problems, outcomes in more equitable countries such as Finland, are better than in more unequal wealthy countries such as the United States. The 11 major social and health issues Pickett and Wilkinson identified are: (1) physical health; (2) mental health; (3) drug abuse; (4) education; (5) imprisonment; (6) obesity; (7) social mobility; (8) trust and community life; (9) violence; (10) teenage pregnancies; and (11) child well-being.
Overall, how do you think Whatcom County is doing in terms of these 11 issues? Which, if any, of these problems do you find are particularly troublesome in Whatcom County? Do you believe they could be alleviated by reducing income inequality? If so, how?