November 1, 1993

Typical American Family’s Income Continues to Lag Behind Record Level of Late-1980s

Download Special Report No. 24

Special Report No. 24

Executive Summary The typical American family’s income, after taxes and inflation, still falls below the level reached in 1989 as the economy continues to grow slowly. The growth in family income during the 1980s made possible by the booming economy and cuts in the federal individual income tax rate. But since 1989, the economic slowdown and a rise in state and local taxes and various federal taxes, such as the 1990 increase in the federal gasoline excise, have taken their toll on incomes.

The income of the median or typical family with two income earners, as measured by the Bureau of Census, is used as a starting point to analyze the change in federal, state, and local tax burdens since 1980. This family will earn $1,883 in 1993 but will be left with only $33,807 to spend on food, housing, transportation, and all other items after all taxes arc paid.

While the two-earner median family income has climbed to its current level from $26,879 in 1980, according to the Bureau of Census, most of that gain has been eroded by inflation and taxes. The 93 percent rise in pre-tax income has nearly been matched by a 90 percent rise in total taxes and a 73 percent rise in the general price level. The result: after inflation, after-tax income for the typical family has risen only 15 percent since 1980 and has not risen at all since 1989.