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?
Comments by Readers
Jon Humphrey
Feb 09, 2022Excellent article David! I also think the statistics are skewed in favor of the very wealthy by the fact that the threshold for what we consider low-income is too low. Above you state, “the year’s average income was $53,049.” For the low-income group, but I’ve lived here under 2 mayors now and both are hell bent on allowing the cost of the basic necessity of housing to skyrocket. This is on top of constantly raising property taxes. As John Kerry said, many moons ago, “they are doing everything right and can’t get ahead.” He was referring to people like myself and my family who work hard, are well educated, do not waste our money, etc. We have done everything right our entire lives, but as George Carlin says, “they want to make things hard on young people.” Well now those young people are middle-aged, and the outlook doesn’t look much better for the upcoming generation. Especially when you factor the impacts of climate change in. So the low-income threshold, IMHO, should be $65,000.
Still, neither the Democratic or Republican parties produce candidates that do right by anyone but the top 10%. They subscribe to magical thinking that the totally made-up system of the economy will regulate itself and randomly produce justice and equality. On top of that, many Americans support fools like Shewmake (who doesn’t believe in a minimum wage) through Trump because they believe they can get rich if they just do what the very wealthy tell them to. But that doesn’t work because the cost of necessities keeps going up and, as you noted, the gap keeps getting wider. I shouldn’t just pick on Sharon, the entire city council, PUD, Port, mayor, etc. do next to nothing for average workers. I would refer to my articles on public broadband here again which would have helped address virtually all of our social and economic concerns and didn’t even cost much. Hell, we have an existing network.
Still, even better jobs can’t beat an out of control government hell-bent on not taxing the wealthy while attacking the middle class and poor. (aka The Linville and Fleetwood administrations).
It’s funny to think that as Anthropologists continue to study hunter/gatherer societies that most working-class people would have had more and had to work less by sharing the land and resources. By allowing the very things we need to survive to have been privatized we have put the nails in our own coffins. The wealthy can always raise our taxes on necessities, the cost of the necessities themselves, make their systems benefit themselves more than us, etc. So as working-class people we need to stop pretending that the system that the Corporate Democrats and Republicans support will ever be just. It is simply not designed to be just to most of the population. Time for something new. At the very least, a powerful Independent party. Oh, and to stop voting for “Economists.” People that believe in made up things like the economy can’t be making rational or logical decisions on behalf of the rest of us.
Also, yes, I believe that the 11 items you list all are having an effect. I’d add (12) the digital divide.