Socialist Senator Bernie Sanders says that because wages went up 2.7% in the last 12 months and inflation was up 2.9%, workers fell behind. Without others considerations he would be correct.
According to Andy Pudzer, former CEO and author of “The Capitalist Comeback: The Trump Boom and the Left’s Plot to Stop It,” there are other ways they’ve benefited to the extent that they’re now enjoying take-home pay increases not seen in years.
Over the last year most of those unintentional part-time workers have been reduced by 700,000 because they found full-time jobs which, over-all, increased by 3 million.
Those already working full-time had more opportunities to work overtime at time and a half. The Bureau of Labor Statistics says this added 0.3% to wages for a combined income gain of 3% or slightly above the inflation rate.
And most importantly none of the above takes into consideration the tax rate changes under the new law.
With a median household income in 2017 of $60,900, a married couple with no children taking the standard deduction and personal exemptions would have taken home about $51,100 before the tax rate changes.
Under the new law this couple will fare much better. With the 3% gain in wages, increasing pre-tax income to $62,700, this couple’s take home pay will now grow to $53,600, an gain of $2,500 given their new tax rate of 12% and standard deduction of $24,000. (See detail below).
It ultimately means this couple will have nearly 5% more disposable real income than they had last year.
And if they had a child? Given the increased child tax credit, this same couple would see their take home pay increased by 5.5%.
[DETAIL: The median household income in 2017 was $60,879. A married couple with no children taking the standard deduction of $12,700, personal exemptions of $8,100 would have taxable income of $40,079 placing them in the 15% bracket. After income taxes of $5,079 and payroll taxes of $4,657, they would have kept $51,143 in take home pay.
With this year’s 3% income increase, that same couple would now be earning $62,705. And with the tax law changes increasing the standard deduction to $24,000 (no personal exemption), taxable income would be reduced to $37,705. Now applying new income tax rate of 12%, their tax liability would be $4,264 and payroll taxes paid would rise to $4,797 resulting in tax home pay of $53,644 an increase of $2,501.]