See how average incomes have changed in your Connecticut ZIP code

Back • Publication Date: April 30, 2024 • Fiscal & Economics

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Analysis of IRS data reveals who makes the most money in Connecticut — and how that’s kept up with inflation

In 2021, the median income in Stamford’s Glenbrook neighborhood as reported in IRS tax filings was about in line with Connecticut’s average statewide.

But unless that Glenbrook household saw a big enough boost in income the past few years to keep ahead of inflation, they likely have seen a dent to the bottom line of their household budget – and they are not alone, advocates say.

In a CT Insider analysis of income reported to the IRS across Connecticut ZIP codes, gains vary widely. In a portion of Greenwich’s “backcountry” estates and bywaysmedian income popped by nearly $470,000 over nine years to nearly $1.2 million for roughly a two-thirds increase.

In Hartford’s South End, median income rose by less than $2,000 over the same stretch for a 5 percent bump, and some locales like Torrington, Bristol and Norwich saw even slimmer gains.

Average income reported to the IRS by ZIP code

In many areas of Connecticut, the gains in average income between 2013 and 2021 have not kept pace with the increased cost of living.

And a handful of communities saw median income slide, which politicians and policy advocates believe should not have to happen if the state were to devote more resources to helping people break the cycle of living paycheck to paycheck, and help them build a modest level of assets that might swell further over time.

“We have great concentrations of wealth – there are 478 taxpayers at the very, very top of our income scale who account for 20 percent of the income in this state, [but] pay just 0.02 percent of their income in property tax,” said state Sen. Martin Looney, D-New Haven, speaking in March during a hearing of the Finance, Revenue and Bonding Committee of the Connecticut General Assembly. “There are various forms of inequity here that we need to find ways to address.”

Every year, the IRS releases data on the tax returns filed in every ZIP code, reporting the number of returns and the aggregate amount associated with each line item. CT Insider used the IRS data alongside Social Security cost-of-living adjustments to identify the parts of the state that have grown wealthier or poorer in adjusted 2021 dollars.

Connecticut’s highest earning ZIPs are clustered in the southwestern part of the state, including the 06831 district in Greenwich that spans sections of the town’s backcountry, midcountry and Glenville neighborhoods.

According to a study conducted by University of Pennsylvania professors, the “super-rich” attain that status by investing in risky assets, resulting in more capital gains and dividends income than labor income.

Wage-related income made up a median of 35 percent of total income for the top 1 percent of ZIPs. For the bottom 99 percent, wages made up a median of 66 percent of a ZIP’s total income.

Using averages to calculate household income in any one community can skew the data, notes Patrick O’Brien, research and policy director for the advocacy group Connecticut Voices for Children, due to filers with exceptionally high earnings lifting the overall number upward. And O’Brien says actual income can be under-reported in the higher-income brackets, due to IRS rules that allow some income to be shielded for tax-reporting purposes.

But any way you frame it, O’Brien added, the trend lines are obvious.

“Growth in income has not kept up with inflation,” O’Brien said. “Real household income in Connecticut has declined on average for low- and middle-income families.”

Most of Connecticut has seen relative increases in average income that are smaller than 20 percent between 2013 and 2021. However, one ZIP more than doubled its relative average income over the same time span. Filers in Salisbury’s 06068 ZIP code reported an average income of $290,000 in 2021, compared to the $110,000 in 2013 adjusted for inflation.

But there are some places that have struggled to keep up with the rising cost of living.

Out of all U.S. ZIP codes with data available for 2013 and 2021, changes in average income didn’t keep pace with the increase in the cost of living for 9 percent of ZIPs. The increase in cost of living, estimated to be around 17 percent based on Social Security adjustment formulas, saw its biggest jump between 2020 and 2021 in the years analyzed.

There are likely many places where income increases over the past three years weren’t enough to counteract the large cost of living increases during the pandemic. According to a Bankrate analysis, wage increases won’t match the cost of living until the end of 2024.

A place’s demographic changes may also play a part. According to Census data, many of these ZIPs where income fell behind cost of living had demographic changes that were not in line with state changes, meaning that those filing taxes may make up a very different population than in 2013.

The United Way of Connecticut produces an annual ALICE report that analyzes households living paycheck to paycheck, with the acronym derived from the phrase “asset-limited, income-constrained and employed.”

In Bridgeport, more than two-thirds of families live below the ALICE threshold for being able to meet basic expenses for basics like child care, rent, food, gas, and basic technologies like mobile phones and Internet access, with a little wiggle room for surprise expenses month to month. In New Haven, Hartford and Waterbury, the number is only slightly better; and even in affluent communities like Greenwich, Old Saybrook and Stonington, more than one in five families struggle with insufficient income to get above the ALICE threshold for being able to build assets and retirement funds.

“Look, hardships continue to grow – no surprise there,” said Amy Casavina Hall, senior vice president of strategic partnerships, development and communications for the United Way of Connecticut. “People are working very hard but still not earning enough money to meet a … survival budget – the absolute, bare necessities needed to live and work in a modern economy.”

A major culprit has been rising expenses as households have dealt with skyrocketing costs for rent, interest rates on loans, and health care costs among other line items on budgets. The ALICE report calculated an increase the past two years of 18 percent for those expenses, not including loan debt like credit cards.

“When you look at low- and middle-income households with children in Connecticut in 2023, 27.6 percent of them said that they were finding it very difficult to pay the usual expenses,” O’Brien said. “This isn’t people finding it a little or somewhat difficult – these are the people identifying as very difficult.”

O’Brien said higher percentages of Black and Hispanic households report difficulties in making ends meet, along with single mothers with children.

Of existing policy options, both Connecticut Voices for Children and the United Way believe a permanent child tax credit would go the furthest in giving a leg up for lower-income families.

“Research essentially shows that it’s highly effective in reducing child poverty, and beyond that … it is helpful for low-income and middle-income families that are above the poverty level but that are really struggling to make ends meet,” O’Brien said. “The total cost of … raising a child in the Northeast is $331,000 for a middle income family. That’s an annual average of $18,300.”

Across the nation, the wealthiest places have, on average, become more wealthy over time.

For nine years, a small strip of land off the coast of Miami has had the highest average income in the nation: Fisher Island. From 2013 to 2021, Fisher Island’s approximately 250 filers had average incomes between $1.8 million and $6 million, as reported on their federal tax returns.

Atherton, California, a city in Silicon Valley, was home to the only other ZIP code in the top 10 highest average incomes for all nine years analyzed. Many Bay Area tech CEOs and venture capitalists live in the city, which boasts the highest home prices in the U.S.


Reporting by Alex Soule / Hearst Connecticut Media. Data reporting by Leila Darwiche / Hearst Newspapers DevHub. Design and development by Janie Haseman / Hearst Newspapers DevHub. Production by Derek Turner / Hearst Connecticut Media. Editing by Dan Brechlin / Hearst Connecticut Media and Danielle Rindler / Hearst Newspapers DevHub.

Originally published on April 30, 2024

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Authors: Alexander Soule, Leila Darwiche •  Source: CT Post • View