The United States Census Bureau reported last week that real median income after taxes fell 8.8% from 2021 to 2022. Note that’s real income, figuring everything in terms of 2022 dollars. In raw dollars, median income nationwide increased 5.4% last year, but due to inflation, the median income could buy less stuff in 2022 than it could in 2021.
The Census Bureau breaks down real before-tax median income by state in this spreadsheet. Nationally, real (i.e., measured in 2022 dollars) median before-tax household income dropped 2.3%, from $76,330 to $74,580. In South Dakota, real median before-tax income dropped 15.7%, from $79,680 to $67,180, lower than the median income in 2018. South Dakota’s drop was the largest in the nation—only four other states (Idaho, Kansas, New Hampshire, and Vermont) saw double-digit-percentage decreases.
The Census explains that the decrease in median income stemmed from ending lots of helpful pandemic socialism:
This dramatic difference can be attributed to key changes in federal tax policy.
In 2022, several policies enacted by the American Rescue Plan Act (ARPA) expired, including an expansion of the Earned Income Tax Credit (EITC) for filers without children and full refundability of the Child Tax Credit (CTC) and Child and Dependent Care Tax Credit (CDCTC). ARPA also increased the maximum amount of CTC.
In 2020 and 2021, most households also received Economic Impact Payments (EIP) that were no longer issued in 2022 [John Creamer and Matt Unrath, “End of Pandemic-Era Expanded Federal Tax Programs Results in Lower Income, Higher Poverty,” U.S. Census Bureau, 2023.09.12].
South Dakota’s real median income boomed above the national median thanks to federal assistance during the pandemic. When we knocked those federal supports out from under South Dakota’s paychecks, South Dakota’s real median income crashed back below pre-pandemic levels.
You’d think the strongest economy in America would be able to sustain income gains without federal handouts.