US inflation-adjusted incomes fell for a third straight year in 2022, but overall income inequality decreased, according to new Census Bureau data.
In a positive development, the poverty rate for the Black population declined to 17.1 percent — its lowest level on record — although it remained the highest among the racial groups counted by the Census Bureau.
The data published Tuesday by the Census Bureau paints a mixed picture of the US economy, with the overall decline in incomes falling more sharply for some people than for others, due largely to the impact of inflation.
Real, or inflation-adjusted, median household incomes in the United States fell by 2.3 percent in 2022 from a year earlier, with nominal gains canceled out by record-high inflation.
It was the third straight year in which real median household incomes declined, underscoring the importance of tackling inflation.
In response to rising inflation, the US Federal Reserve embarked on an aggressive campaign of interest rate hikes last year, lifting its key lending rate up to its highest level for 22 years.
The Fed’s policy has brought inflation down sharply this year, although it remains above its long-term target of two percent.
The Census Bureau found that income inequality fell by 1.2 percent between 2021 and 2022, driven by a fall in real income at the middle and top of the income distribution.
However, inequality actually rises sharply once taxes are factored into the figures.
“The steeper relative declines in post-tax income at the bottom and middle of the income distribution are attributable to the expiration of a number of tax policies,” Cencus Bureau official Liana Fox told reporters.
These tax policies included the Child Tax Credit and Earned Income Tax Credit, she said.
The distinction between pre- and post-tax incomes also had a marked impact on child poverty rates, which declined according to the official figure, but more-than-doubled once tax policies were taken into account.
“This change reflects the expiration of refundable tax credits and the pandemic-era stimulus benefits,” Fox said.
President Joe Biden released a statement blaming Republican lawmakers for refusing to extend the enhanced Child Tax Credit put in place during the pandemic.
“The rise reported today in child poverty is no accident–it is the result of a deliberate policy choice congressional Republicans made to block help for families with children while advancing massive tax cuts for the wealthiest and largest corporations,” he said.
“No child should grow up in poverty, and I will continue to fight to restore the expanded Child Tax Credit to give tens of millions of families the tax relief and breathing room they deserve,” he added.
