When wage increases over the last year are combined with this year’s tax rate cuts, American workers are doing far better than they’ve done in years.
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.]
