The District’s FY 2014 Comprehensive Annual Financial Report is now out, and it is filled with lots of interesting information.
Here is one bit: The top fifteen private employers in the District account for 11.3 percent of the employment. You see on the top of the list hospitals and universities–the same employers we saw in similar positions ten years ago. However, two entities in today’s top ten were nowhere near the top back in 2004. Booz Allen & Hamilton, Inc., which occupies the ninth place on the list, was ranked 113th in 2004. Allied Barton Security Services, LLC, which is in the tenth place, was not even ranked back then.
A recent post in the New York Times blog The Upshot discusses 529 college savings plans and what it means to be middle class. The author, Josh Barro, writes:
“…the idea that $200,000 is a normal, not-rich family income, at least along the Acela corridor, has taken hold.”
So what does our tax data say? A household making $200,000 could certainly be seen as rich. Among people paying local income taxes in D.C. in 2012, an income of $200,000 would put a person in the top 10 percent of all taxpayers. It is more than four times the median taxpayer income of $46,000.
On the other hand, if you’re married and have dependents you might see things differently. The median income for D.C. taxpayers in this group in 2012 was $143,000. A couple making $200,000 would fall somewhere between the 60th and 70th percentile of the income distribution. If you’re married with kids and so are your peers, you might well conclude that an income of $200,000 is close to the middle of your peer group.
District income tax forms offer taxpayers three ways to contribute to causes important to the District. These include funds that pay for the Statehood Delegation, cleanup of the Anacostia River, or programs for drug use prevention, especially for the youth. We look at the District tax data to figure out who gives to these funds.
The income gap in American cities has gotten a lot of attention, with stories in the New York Times and reports by the Brookings Institution and D.C. Fiscal Policy Institute focusing on this issue. This got us thinking about how D.C.’s tax system affects the city’s income gap. To what extent does the income tax system help close the gap?
We looked at data from people filing income taxes in D.C. in 2011 to see how the local tax system affects residents’ incomes. We excluded from our analysis filers with no tax liability, since these filers generally report large losses, from either their businesses or rental properties. We also excluded part-time residents. We found that people on the low end of the income distribution—the bottom two deciles, or tax filers with federal adjusted incomes under $15,600, on average–receive tax credits from the D.C. income tax system. Meanwhile those in the middle and upper income deciles see a decrease in income since they owe D.C income taxes. To calculate the income tax’s effect on an individual taxpayer we totaled any local income tax credits the taxpayer received (including EITC, the property tax credit, and other refundable credits) and subtracted local income taxes they owed.
So, does the D.C. income tax system help close the city’s income gap? Yes. The gap in average income between the poorest and richest ten percent of residents is about $459,000 before taxes. After taxes it’s $432,000. That’s a reduction of $27,000, or about 6 percent.
A roughly 6 percent reduction in the income gap might seem small, but D.C.’s income tax system is progressive—the percent of income paid towards taxes increases with income. In fact, D.C.’s income tax system is somewhat more progressive than the average of 51 cities across the country we studied in our 2012 Tax Rates and Tax Burdens report. Our report found that for a family with an income of $25,000, D.C.’s income tax burden is less than the 51-city average. For families at income levels of $50,000, $75,000, $100,000, and $150,000, the income tax burden is higher in D.C. than the 51-city average.
To learn more about D.C.’s income gap and the tax system’s effect on it, read our D.C. Economic and Revenue Trends report for April 2014. In it we have a more in-depth analysis of taxes’ effect on income.
We are often asked about the structure of the labor market and earnings of those who work in the District. The best data source for this is BLS’s State Occupational Employment and Wage Estimates, which we recently used when the Council of the District of Columbia was discussing increasing the minimum wage.
Here is what we found out about the District workers:
Of the approximately 626,000 workers in the District in the May of 2013, close to 80 percent make $20 per hour or much more. These are people in the sectors typically thought of as professional and business services; they are, lawyers, economists, architects, engineers, computer scientist or specialists, or are in business, finance or management occupations.
Which workers earn $20 per hour or less? They are mostly in the service sector, working in food preparation or service, in retail, personal care, transportation, grounds maintenance, or healthcare support. For example, a quarter of the 48,000 employed in food services in the District earn less than $10 per hour and three quarters earn less than $20. These workers constitute 67 percent of those who earn less than $10 per hour in the District. The second largest group among these low-earners is those in sales-related businesses—approximately 2,500 of the 25,000 workers in sales related jobs earn less than $10 per hour. In addition, occupations such as social workers, grounds maintenance, construction, security, and administrative support generally command more than $10 per hour, but a substantive share of the workers in these areas earn $20 or less. For example, 90 percent of workers in grounds and building maintenance positions earn less than $20, and a quarter of construction, security and administrative workers have similar salaries.
Recently we released a study by my colleagues Ginger Moored and Lori Metcalf on whether first-time parents leave the city at rates faster than the rest of D.C. residents, and if this behavior has changed over time. Today, we are releasing another study on what kind of economic or demographic characteristics play a role in residents’ decisions to leave or stay.
We tracked the behavior of D.C. residents who filed income taxes for the first time in 2004. We found the following:
- The District’s population is transient. Only 23 percent of the tax filers who first filed in 2004 remained on the tax rolls in 2012.
- People tend to stay if there is a change in the family structure. Singles tend to leave and those who change their filing status, for example, because of a marriage, tend to stay.
- Family dynamics matter beyond marriage. We have shown elsewhere that the first child plays an important role in the decision to move out of the city. A second or a third child increases the probability that families will stay.
- The District attracts high-income residents. Among those who were in the highest income quintile when they arrived in the city in 2004, 41 percent were still found on the tax rolls. Only a quarter of filers who were in the lowest income quintile, however, were still on the tax rolls in 2012.
Read the paper for more...
This is the new blog of the Office of Revenue Analysis–the group within the Office of the Chief Financial Officer responsible for revenue estimates, fiscal impact statements, and various studies on the District’s economy. We come across a lot of data in our work. Most of our work goes into the revenue estimates and the fiscal impact statements, but sometimes interesting bits of information we glean get lost in the relatively big projects. In this blog, we will share with the public our research on the economic and demographic trends that are taking shape in our city. Hope you follow us!