CFI Analysis: Growth in median household income offset by pre-recession decrease
Posted September 18, 2014 by Caitlin Schneider
Follow Us On Social Media
Median household income in Colorado is up slightly, latest U.S. Census figures show, with a 2.4 percent increase in 2013 over 2012. Median household income was $57,430 in 2012 and was $58,823 in 2013, according to Census data.
The bad news, however, is that median household income is still well below pre-recession levels. In 2007, median household income was $62,030 in inflation-adjusted dollars, meaning that the most recent figures show incomes have decreased 5.2 percent since 2007.
When you look even further back, you find that median household income in the state has decreased 6.3 percent since the year 2000, when the figure was $62,754. That means there has been essentially no income growth for typical Colorado households in 15 years.
On the other hand, the highest-earning Coloradans are taking home an ever-larger slice of the pie. The state is on the brink of reaching a point at which 20 percent of Coloradans will earn the majority of income in the state.
Right now, the top-earning quintile receives 49.7 percent of all income in the state.
This alarming trend has been going on for decades and has only accelerated. Colorado now has the 8th fastest-growing rate of income inequality in the country.
From the mid-1990s to the mid-2000s, income for the richest 20 percent of Coloradans grew at 13.9 percent. Meanwhile, income for the poorest 20 percent shrank by 11.7 percent. For the middle quintile, income rose just a meager 2 percent during this period, essentially staying flat.
“The reason so many Coloradans feel like they aren’t getting ahead is because that is actually what is happening in economic terms,” said Tim Hoover, spokesman for the Colorado Fiscal Institute. “If the Colorado economy were a person, it would still be wearing flannel, listening to Pearl Jam and watching ‘Friends.’ The economy has essentially been stuck in a time-warp for more than two decades.”
That is, except for the wealthiest. The state’s Gross Domestic Product has risen 22 percent since 2000, but this growth has not translated into economic gains for ordinary people. The income has overwhelmingly been captured by the wealthiest Coloradans.
The Colorado Fiscal Institute believes there are a number of policies, short-term and long-term, that will boost the incomes of hard-working families.
For example, CFI believes the state Earned Income Tax Credit should be allowed to be triggered sooner so that working families can get a fair shot. Right now, the EITC won’t be triggered until the state tops the revenue limit under TABOR, something not expected to happen until 2015 but which is even further delayed when the state keeps adopting additional tax credits, deductions and exemptions that take money right off the top.
CFI also would like to see the State Child Tax Credit triggered, something which will happen when Congress passes the Marketplace Fairness Act (allowing states to require online retailers collect sales tax and giving the state some more needed revenue). And the state must increase its investments in education, from early childhood education to post-graduate instruction. Mountains of research show the unquestioned benefits from early childhood education, and income statistics make it abundantly clear that higher education achievement results in higher earnings.
Finally, and perhaps most importantly, CFI would like to see constitutional reform so that lawmakers’ hands are not tied when it comes to budgeting and tax reform. Under the current system, they cannot make adjustments to the tax system even if they are revenue neutral. Our legislators should have the power to enact balanced, responsible tax policy the way those in other states do.
