Highest earners' pay rose fivefold in '09

WASHINGTON — Those top-end Americans earned a combined $38.4 billion in 2009, up from $11.9 billion earned by 131 individuals with wages exceeding $50 million in 2008, according to Social Security Administration data.

Nationally, the average annual wage fell by $384 to $39,269 and the median wage fell by $253 to $26,261 during the worst economic slump since the Great Depression. The 74 top wage earners together made as much as the combined income of the 19 million lowest-paid people in America, who constitute one in every eight workers.

Another statistic of note: One in every 34 wage earners in 2008 failed to earn a single dollar in 2009.

The Social Security Administration statistics, released Oct. 15, come as Congress faces a debate after the Nov. 2 elections over whether to extend Bush-era tax cuts for all or some Americans. Tax cuts are scheduled to expire Dec. 31.

The government figures first were reported by David Cay Johnston, a columnist on www.tax.com, a website sponsored by Tax Analysts, a nonprofit tax-information organization based in Falls Church, Va.

The data reveal a pattern of income changes that is consistent with other studies, such as an income-tax data study by economist Emmanuel Saez of the University of California, Berkeley, that showed top income earners sustained a less-damaging shock in this recession than in other downturns.

The Obama administration has emphasized growing income inequality to make its case for ending tax cuts, enacted in 2001 and 2003, for couples earning more than $250,000. Republicans have countered that any tax increase will stifle entrepreneurship and job creation.

Democrats delayed a vote on extending the tax cuts until after the elections. Analysts predict that Republicans will gain control of the House and say they have a small shot at the Senate.

In Washington state, a similar debate is under way on Initiative 1098, which would create a tax rate of 5 percent on annual taxable earnings exceeding $200,000 for individuals and $400,000 for couples, and a 9 percent tax rate on earnings of more than $500,000 for individuals and $1 million for couples.

The Social Security data didn't offer details on the 74 top earners. Johnston, a former New York Times reporter who won the Pulitzer Prize in 2001 for exposing inequities in the tax code, said those income earners most likely were Wall Street traders who earned bonuses or corporate executives cashing in deferred compensation that accumulated over the years, or even highly paid professional athletes.

Johnston blamed federal economic policies since the early 1990s for the widening gap in wealth. He noted that the nation's tax system — manipulated, he contended, by politicians seeking to extract campaign donations — encourages U.S. manufacturers to close domestic factories, fire workers, then use cheap labor in China for products that are sent back to the United States, creating enormous downward pressure on wages.

He also noted that government policies have reduced the share of private-sector workers in unions by more than two-thirds, resulting in less money for ordinary Americans to fuel the U.S. economy.

The 74 people who earned more than $50 million pay a 35 percent marginal rate, plus a 2.9 Medicare tax. Higher income and Medicare tax rates, if they take effect, would cost someone who earned the $519 million average about $36 million in additional taxes by 2013.

According to the Tax Foundation, the top 1 percent of households, those with adjusted gross incomes of more than $380,354, paid 38 percent of all federal income taxes in 2008. The bottom 95 percent, those with adjusted gross incomes of less than $159,619, paid 41.3 percent.

The figures count only income subject to Medicare taxes, such as wages and tips. Income from investments isn't included.

Since 1997, the first year in which the Social Security Administration began tracking wages of people earning more than $50 million, the average pay for that category had exceeded $100 million once, in 2000, when 91 people averaged $111.6 million.

Overall, the Social Security Administration said 150.9 million Americans reported wages in 2009, down 4.5 million from the previous year. That number was fewer than 2005, when 151.6 million Americans reported wages, and only slightly ahead of 2004, when 149.4 million Americans held at least one paying job.

Unemployment has hovered at close to 10 percent for more than a year.

Seattle Times staff

contributed to this report.