Alternative Measures of Household Income

Three of the most widely used measures of household income are BEA’s measure of personal income, the Census Bureau’s measure of money income, and the Internal Revenue Service’s measure of adjusted gross income of individuals.¹

Personal income, in general, is a more comprehensive measure. For both the national and regional accounts, personal income is defined as the sum of wage and salary disbursements, supplements to wages and salaries, proprietors’ income with inventory and capital consumption adjustments, rental income of persons with capital consumption adjustment, personal dividend income, personal interest income, and personal current transfer receipts, less contributions for government social insurance. These measures of personal income include incomes of individuals, nonprofit institutions that primarily serve individuals, private noninsured welfare funds, and private trust funds. Life insurance carriers and noninsured pension plans are not counted as persons, but their income (and saving) is credited to persons.

Money income consists of income in cash and its equivalents that is received by individuals. It excludes, but personal income includes, employer contributions for employee pension and insurance funds, lump–sum payments except those received as part of earnings, certain in–kind personal current transfer receipts–such as Medicaid, Medicare, and food stamps–and imputed income.² Money income includes, but personal income excludes, personal contributions for government social insurance, income from government employee retirement plans and from private pensions and annuities, and income from regular interpersonal transfers, such as child support.

In addition, personal income at the national, state, and local area levels is presented annually on a per capita basis (on a simple average per person). Money income at the national and state levels is presented annually both on a per capita basis and on a median household basis.³ Personal income is not adjusted for inflation, whereas the estimates of money income are available in current dollars, and they are adjusted to remove inflation, using the consumer price index.⁴

Adjusted gross income (AGI) consists of the taxable income of individuals who filed a Federal income tax return. It includes, but personal income excludes, personal contributions for social insurance, gains and losses on the sale of assets, and income from government employee retirement plans and from private pensions and annuities. AGI excludes, but personal income includes, the income of the recipients of taxable incomes who, legally or illegally, did not file an individual income tax return. In particular, AGI excludes the income of many individuals with low incomes who are exempt from filing tax returns. Additionally, AGI excludes certain types of income that are not taxed–such as tax exempt interest and nontaxable transfer payments, including Medicare, Medicaid, and welfare benefit payments –and it includes the taxable portion of social security benefit payments.

Footnotes to Table

n/a Not available

1. Bureau of Economic Analysis, available at www.bea.gov.

2. Census Bureau’s Current Population Survey (CPS), available at www.census.gov. The Census Bureau calculates CPS per capita money income using the civilian noninstitutional population total as of March of the next year.

3. Internal Revenue Service (IRS), available at www.irs.gov. The IRS does not produce per capita adjusted gross income (AGI). The measures shown are derived by dividing aggregate IRS AGI by total population from the Census Bureau.

---

Footnotes

1. For additional information, see the Census Bureau's annual publication Money Income in the United States; the Internal Revenue Service's annual publication Statistics of Income–Individual Income Tax Returns; and Mark A. Ledbetter, "A Comparison of BEA Estimates of Personal Income and IRS Estimates of Adjusted Gross Income: New Estimates for 2001 and Revised Estimates for 1959–2000", SURVEY 84 (April 2004): 8–22.

2. Imputations are added to personal income in both the national and regional measures so that a comprehensive account of total production and its distribution can be presented. For a description of these imputations, see State Personal Income, 1929-97 (Washington, DC: U.S. Government Printing Office, May 1999): M–44–M–45 or go to http://www.bea.gov/methodologies/index.htm#regional_meth.

3. For states, the most recent estimates of money income on a per capita basis and on a median household basis are those for 2002.

4. At the national level, BEA also presents real per capita disposable personal income (DPI). DPI is personal income less personal current taxes; real DPI is DPI divided by the implicit price deflator for personal consumption expenditures. For the sources of the prices used for this deflator, see "Updated Summary of NIPA Methodologies", SURVEY 82 (October 2002): 34–35.

  

Advanced | FAQ | A-Z Index