February 12, 2014

Merced County incomes rise faster than California average, but are still among the lowest in state

State tax returns show incomes rose about 2.9 percent in Merced County during 2012, but they still lag far behind state averages and below what local residents were earning in 2008 when the recession took hold. This will be a localization of Sac Bee story.

In another indicator that the economy is shaking off the recession, state tax officials reported this week that California’s median incomes rose 3.5 percent in 2012.

Merced County incomes increased 3.7 percent, but local folks still earned significantly less than most other Californians. Merced incomes also remained below what they were in 2008, before recession fully gripped the region.

Merced County residents were among the lowest-earning Californians. Individuals reported earning a median $27,289 in 2012, compared with California’s $35,910 median. That difference means Merced residents had $23.62 less to spend each day than those living elsewhere in the state.

The gap was even wider for couples filing joint tax returns. Merced couples earned $45,228 compared with the state’s median $70,938. So couples here had to make do with $70.43 less each day than those living in other parts of California.

Merced County ranked 56th out of 58 counties for median income for couples, but that is an improvement from 57th last year. Stanislaus County ranked closer to the center as individuals reported earning a median $32,077 in 2012, and couples earned $55,833.

While incomes edged up from 2011 to 2012, they remained below what Merced residents were earning back in 2008. Local couples earned $1,087 more in 2008 than they earned in 2012. Statewide incomes, by contrast, rose by nearly $2,000 per couple during those years.

Mark Hendrickson, Merced County director of community and economic development, said agriculture-based economies like Merced’s tend to see growth at a slower rate than some other regions of the state. He said the county should continue to be “cautiously optimistic” about economic improvements.

Hendrickson said the agriculture industry is finding ways to improve production and sell to new markets, including internationally. “Generally speaking, we are seeing greater activity in recent years,” he said.

Merced County has streamlined its process to make it easier for developers to get started in the county. Hendrickson said he continues to receive inquiries from interested parties.

One recent development happened late last month. Technology giant Google confirmed it had entered a lease agreement with Merced County to use 60 acres of land at Castle Commerce Center to help develop the company’s self-driving car technology.

Google will reportedly bring 10 to 15 people to work at the site. Last month, Hendrickson said the long-term implications for the agreement are very positive, particularly with the contractors, engineers and ancillary spin-off projects associated with the endeavor.

In the meantime, income disparity between counties was greater than ever in 2012.

Marin County couples, for instance, earned a median $127,471 – more than double what Merced couples earned and more than triple the $38,858 Imperial County couples earned.

In order to see higher paying jobs in Merced, the region will likely need to find ways to keep graduating engineers and scientists from UC Merced, City Manager John Bramble said. At the same time, the city will need better paying jobs for those without degrees.

“We’re just not going to be Silicon Valley,” Bramble said. “We could be a mini-Silicon Valley at some point, as the students develop their skills and abilities.”

Merced received a report last month from Los Angeles-based Beacon Economics that predicted the area will continue to add jobs. Merced County had about 59,000 jobs in November 2012, which was about 500 more than the previous year and 4,000 more than 2010.

Of course, Bramble said, the people of Merced want to see the income numbers rise fast, but it’s going to happen slowly. “We can take what we got right now and feel good,” he said.

The state Franchise Tax Board reported that California residents earned more than $1.46 trillion during 2012 and paid 4.2 percent of that in state income taxes – nearly $61.7 billion.

Because Valley residents earned less, they also paid a lower percentage of their income in state taxes. Merced residents paid just 2.9 percent in state income taxes, and Stanislaus residents paid less than 3.3 percent. Marin residents, by contrast, paid nearly 7.6 percent of their income in state taxes.

The median income numbers for 2012, the tax board’s most recent data, are the midpoint of reported incomes in all counties.

“California in general has been going very nicely since the end of the recession, even though it’s not as strong as we’d like it to be,” said Sung Won Sohn, an economist at California State University, Channel Islands.

During 2012, Sohn said, statewide job gains were showing up in real estate, tourism, mortgage and banking, and in professional services, such as accounting and management consulting.

“Now, in 2014, we’re creating higher-paying construction, manufacturing and IT jobs,” Sohn said. “When you look at the overall picture, it’s a very encouraging one.”

But Sohn acknowledged that recovery from the recession is “not uniform across the state.” He said the Central Valley and the Inland Empire are lagging in income and employment opportunities. Because they were more reliant on agriculture and the housing boom, Sohn said, those regions have struggled to recover as fast as the state’s more urban areas.

“It’s good to talk about economic recovery, but it depends on where you are. The vast majority of Californians are benefiting,” Sohn said, “but how well you are doing depends on where you are geographically ... and the industry you’re in.”

Another factor boosting California’s 2012 incomes: investment gains. That year, the combination of a robust stock market and uncertainty over 2013 tax hikes meant a number of Californians sold stocks late in the year, boosting their annual incomes.

The amount of capital gains income – what Californians received from selling stocks or other investments at a profit – is estimated to have doubled between 2011 and 2012, said H.D. Palmer, spokesman for the state Department of Finance. In 2011, Californians reported $52.1 billion in capital gains income; a year later, it had jumped to $104.1 billion.

“It was one of the factors driving up adjusted gross incomes,” said Palmer. For 2013, capital gains income is expected to show “a modest decline,” to $87.5 billion.

The complete list is available on the Franchise Tax Board website, www.ftb.ca.gov.

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