Excluding returns with an AGI over $1.5 million, total adjusted gross income increased slightly from 2000 to 2002.

Those with AGIs over $1.5 million had their combined AGI decrease from $697 billion to $363 billion, presumably from taking capital losses on stocks. They make up 0.1% of all returns filed.

Was the bubble a good thing or a bad thing? I forget.

My kids love playing with bubbles.

It was good while it lasted.

Mr. Judd;

Do you realize that money from cashing in stock options almost always counts as income, not capital gains? The market decline would therefore directly impact income as reported to the IRS. For instance, my AGI dropped by about half in those years precisely for this reason. I very strongly doubt Tom L's contention that the AGI numbers were affected by capital losses, since you can only write off $3K/year for those.

AOG:

It depends how sharp your accountant is. If you can get the IRS to grant you trader status, you can mark to market (i.e., take losses against ordinary income with no $3K limit, and without actually selling stock).

Anyway, regardless of why AGI fell among those with seven-figure incomes, my main point is that AGI grew for the other 99.9% of us. The article doesn't make that clear.

Capital Gains and Losses flow through AGI (subject to the $3000 loss cap). My personal experience is that the stock market has knocked down the reported AGI on the 15 or so returns I am reponsible for during the last couple of years. This is true even though the portfolios were very conservative and avoided big losses. I am not suprised by this report.

I need to learn to read articles in the NYTimes more carefully. The overall imperative of the rag is to destroy George Bush by any means possible. And David Johnson who writes their tax articles is certainly among their leading liberals. So the headline "I.R.S. Says Americans' Income Shrank for 2 Consecutive Years " certainly seems to play into the theme of economic destruction the Democrats have been pushing since January 20, 2001. And the theme of middle class immiseration is trumpeted early in the article :

But now, with many more ordinary employees joining high-level executives in having part of their compensation dependent on stock options and bonus plans, a volatile and relatively unpredictable new element has been introduced to the incomes of millions of workers. "Risks used to be confined largely to executives and business owners with large incomes," said Edward N. Wolff, an economist at New York University who studies wealth and income. "But now for many people with more modest incomes their earnings are more volatile," Mr. Wolff added, leaving them more vulnerable to losing pay they count on to meet regular expenses like mortgage payments, car loans and day-to-day living costs.

But read on. first the data betrays the thesis. The chart (you have to click it separately on the web site) "For the Wealthiest, the Biggest Declines" shows that the pain has been reserved entirely for the $200K and higher brackets, yes, the ultra rich who are going to pay for John Kerry's deficit reduction and health insurance expansion plans.

Furthermore, Johnson's analysis exposes the shabbiness of Kerry's claims about taxation:

Falling incomes, rather than tax cuts, appear to count for the greatest share of the decline in income taxes paid. That is because the higher one stood on the income ladder the greater the impact was likely to be from the stock market crunch.

At the same time many of those whose incomes fell the most - those reporting $200,000 to $10 million in income - paid at the highest rates, which meant that the drain on revenues was even greater when their incomes shrank.

You can not tax your way to prosperity. Increasing tax rates will not increase revenues. Ronald Reagan tried to tell the Democrats, George Bush has tried. The numbers back them up. its a pity they won't believe it when they see it.