Personal Dividend Income, Personal Interest Income, and Rental Income of Persons
The state estimates of personal dividend income, personal interest income, and rental income of persons are presented together. These three components of personal income accounted for just almost 19 percent of total personal income at the national level in 2001 (see table E).
The estimates of these three components consist of the estimates of the income that is received by individuals and the estimates of the income that is received on behalf of individuals by private and government employee retirement plans and by quasi–individuals, which include nonprofit institutions and private trust funds that are administered by fiduciaries.(1)
The national estimates of dividends, interest, and monetary rent are based on data that are not available for states. The state allocations of the national estimates of the income received by individuals are based mainly on individual income tax data. Some of the data used to prepare the national estimates of the imputed rent of the owner–occupants of nonfarm dwellings are also used to prepare the state estimates.
Personal Dividend Income
Personal dividend income is payments in cash or other assets, excluding the corporations' own stock, that are made by corporations in the United States or abroad to noncorporate stockholders who are U.S. residents.
Personal dividend income accounted for about 4.7 percent of total personal income at the national level in 2001 (table E).
The state estimates of personal dividend income are prepared in four parts: Dividends received by individuals, dividends received by private and government employee retirement plans, dividends received by nonprofit institutions, and dividends received, retained, and reinvested by fiduciaries.
Dividend income received by individuals.– The state estimates of the dividends received by individuals from Subchapter S corporations are based on sample data for "S–Corporation net income less loss" by state from the Statistics of Income series of the Internal Revenue Service (IRS). The state estimates of the dividends received from other corporations are based on tabulations by state of the dividends that are reported by individuals on IRS form 1040. These data are tabulations of Federal individual income tax data from the Individual Master File (IMF) of the IRS.(2)
Dividend income received by private and government employee retirement plans.–This income comprises the dividends received by private pension plans, by the Federal civilian employees' Thrift Savings Plan (TSP), and by state and local government employee retirement plans. For each of these categories, 60 percent of the dividends–the "currently employed" portion–is assumed to be received on behalf of current employees, and 40 percent–the "retired" portion–on behalf of retired persons and their survivors.(3)
For the dividends received by the private pension plans, the state estimates of the "currently employed" portion are based on state–of–residence estimates of employer contributions to these plans.(4) The state estimates of the "retired" portion reflect the geographic distribution of the state estimates of social security retirement benefits.
For the dividends received by the TSP, the state estimates of the "currently employed" portion are based on residence–adjusted state estimates of Federal civilian wages and salaries, and state estimates of the "retired" portion, on state estimates of Federal civilian retirement benefits by state.(5)
For the dividends received by the state and local government employee retirement plans, the state estimates of both the "currently employed" and the "retired" portions are based on state–level data for the dividends received by the plans from the Census Bureau's annual Finances of Employee–retirement Systems of State and Local Governments. This series, which is available beginning with 1994, is extrapolated to earlier years by two different statistics: By the relative change in state and local government wages and salaries–used to estimate the "currently employed" portion–and by the relative change in benefits paid by the plans from the Census Bureau publication–used to estimate the "retired" portion. Each series–the direct data, used to estimate both portions for 1994 and later years, and the two different extrapolations, used to estimate each portion for 1993 and earlier years–is then adjusted to a place–of–residence basis to yield the allocating series for the dividends received by the plans.
Dividend income received by nonprofit institutions.–Because state data are unavailable, the national estimate is allocated to the states in proportion to the annual state estimates of the civilian population that are prepared by the Census Bureau.
Dividend income retained by fiduciaries.–The available data for these dividends do not reflect the location of the individuals on whose behalf the dividends are received. Accordingly, the national estimate of the dividends retained by fiduciaries is allocated to states in proportion to IMF dividends, which includes the dividends distributed by fiduciaries to individuals.
Personal Interest Income
Personal interest income is the interest income (monetary and imputed) from all sources that is received by individuals, by private and government employee retirement plans, by nonprofit institutions, and by estates and trusts.
Personal interest income accounted for more than 12 percent of total personal income at the national level in 2001 (table E). Monetary interest accounted for over 7 percent of total personal income, and imputed interest accounted for just over 5 percent.
Monetary interest income
The state estimates of monetary interest income are prepared in the following parts: The net interest accrued on unredeemed series E, EE, H, and HH bonds that are issued by the Federal Government and that are owned by individuals, the other interest received by individuals, the interest received by private and government employee retirement plans, the interest received by nonprofit institutions, and the interest retained by fiduciaries.
Net accrued interest income from Federal Government savings bonds.–The state estimates of the net accrued interest on unredeemed series E, EE, H, and HH bonds are prepared in two steps.(6)
First, the national estimate of the total interest accrued on savings bonds during a year is allocated to the states in proportion to the value of the unredeemed bonds at the end of the year, and the national estimate of the accrued interest realized from bonds redeemed during the year is allocated to the states in proportion to the value of the unredeemed bonds at the end of the preceding year.(7) Second, the state estimate of the realized interest is subtracted from the state estimate of the total accrued interest to yield the state estimate of the net accrued interest.
Other interest income received by individuals.–This interest consists largely of interest that is reportable for Federal individual income tax (including the nontaxable interest from municipal bonds); it also includes the interest accrued on individual retirement accounts and other tax–deferred savings accounts in the year in which the interest is earned. (The IMF interest data do not include this interest, because it is reported on the tax returns as part of taxable withdrawals, not as interest, in the year in which the funds are withdrawn.)
The state estimates are based on the IMF data for interest that are supplemented by a series prepared from the IMF data for dividends.(8) The supplementation is necessary because the reportable interest received by individuals from regulated investment companies, such as money market mutual funds, is reported as dividend income on IRS form 1040.
The state estimates are prepared in four steps. First, the national ratio of the estimate of the reportable interest received by individuals from regulated investment companies to the sum of this interest and the estimate of the dividends received by individuals is calculated.(9) Second, this ratio is multiplied by the IMF dividends for each state to yield a first approximation of the interest from regulated investment companies that is reported as dividends. Third, the first approximations are added to the IMF state tabulations of interest to yield provisional state estimates of interest. Fourth, the national estimate of the interest is allocated to the states in proportion to the provisional estimates.
Interest income received by private and government employee retirement plans.–This income comprises the interest received by private pension plans, by the Federal civilian employee retirement plans (including the TSP), by the military retirement plan, and by state and local government employee retirement plans. For each of the civilian categories, 60 percent of the interest–the "currently employed" portion–is assumed to received on behalf of current employees, and 40 percent–the "retired" portion–on behalf of retired persons and their survivors.(10) For the military plan, the "currently employed" portion is assumed to be 40 percent, and the "retired" portion, 60 percent.(11)
For the interest received by the private pension plans, the state estimates of the "currently employed" portion are based on state–of–residence estimates of employer contributions to these plans.(12) The state estimates of the "retired" portion reflect the geographic distribution of the state estimates of social security retirement benefits.
For the interest received by the Federal civilian plans, the state estimates of the "currently employed" portion are based on residence–adjusted state estimates of Federal civilian wages and salaries, and state estimates of the "retired" portion, on state estimates of Federal civilian retirement benefits by state.(13)
For the interest received by the Federal military retirement plan, the state estimates of the "currently employed" portion are based on residence–adjusted state estimates of the pay of active–duty military personnel, and the "retired" portion, on state estimates of Federal military retirement benefits by state.(14)
For the interest received by the state and local government employee retirement plans, the state estimates of both the "currently employed" and the "retired" portions are based on state–level data for the interest received by the plans from the Census Bureau's annual Finances of Employee–retirement Systems of State and Local Governments.(15) This series, which is available beginning with 1994, is extrapolated to earlier years by two different statistics: By the relative change in state and local government wages and salaries–used to estimate the "currently employed" portion–and by the relative change in benefits paid by the plans from the Census Bureau publication–used to estimate the "retired" portion. Each series–the direct data, used to estimate both portions for 1994 and later years, and the two different extrapolations, used to estimate each portion for 1993 and earlier years–is then adjusted to a place–of–residence basis to yield the allocating series for the dividends received by the plans.
Interest income received by nonprofit institutions.–Because state data are unavailable, the national estimate is allocated to the states in proportion to the annual state estimates of the civilian population.
Interest income retained by fiduciaries.––The available data for this interest do not reflect the location of the individuals on whose behalf the dividends are received. Accordingly, the national estimate of the interest retained by fiduciaries is allocated to states in proportion to IMF interest, which includes the interest distributed by fiduciaries to individuals.
Imputed interest income
Imputed interest received by persons consists of the investment income that is received by life insurance carriers and the imputed interest that is received by persons from banks, credit agencies, and regulated investment companies, which represents the value of financial services for which persons are not explicitly charged.(16) The national estimate of each type of imputed interest is allocated to states in proportion to interest reported by individuals to the IRS, as tabulated from the IMF.
.Rental Income of Persons
The rental income of persons with capital consumption adjustment is the net current–production income of persons from the rental of real property except for the income of persons primarily engaged in the real estate business; the imputed net rental income received by owner–occupants of nonfarm dwellings; and the royalties received by persons from patents, copyrights, and rights to natural resources.(17) The estimates include BEA adjustments for uninsured losses to real estate caused by disasters, such as hurricanes and floods.
The national estimate of the rental income of persons accounted for about 1.6 percent of total personal income in 2001 (table E). Monetary rental income accounted for about 0.6 percent of total personal income, and imputed rental income accounted for almost 1 percent.
Monetary rental income
The state estimates of monetary rental income are prepared in the following parts: The net rents and royalties received by individuals, the net rents and royalties received by private pension plans, the net rents and royalties received by nonprofit institutions, and the net rents and royalties retained by fiduciaries.
Net rents and royalties received by individuals.–Because the available state data are unreliable, the national estimate excluding the disaster adjustments is allocated to states in proportion to the tabulations of data for gross rents and royalties from the IMF.(18) The national disaster adjustments are assigned to states on the basis of data from the Federal Emergency Management Agency.
Net rents and royalties received by private pension plans.–Sixty percent of these rents and royalties–the "currently employed" portion–is assumed to received on behalf of current employees, and 40 percent–the "retired" portion–on behalf of retired persons and their survivors.(19) The state estimates of the "currently employed" portion are based on state–of–residence estimates of employer contributions to these plans.(20) The state estimates of the "retired" portion reflect the geographic distribution of the state estimates of social security retirement benefits.
Net rents and royalties received by nonprofit institutions.–Because state data are unavailable, the national estimate is allocated to the states in proportion to the annual state estimates of the civilian population.
Net rents and royalties retained by fiduciaries.–The state estimates are based on state–level tabulations of data from the entry "income from estates and trusts" in "Schedule E: Supplemental Income" of IRS form 1040; this entry consists mainly of rental income. Based on the assumption that the geographic distribution of the income that is retained by fiduciaries is similar to the distribution of the income that the fiduciaries distribute to individuals, the national estimate is allocated to states in proportion to the income received by individuals from fiduciaries.
Imputed rental income
The state estimates of imputed net rental income are prepared in two parts: Imputed net rent received by the owner–occupants of mobile homes and imputed net rent received by the owner–occupants of all other nonfarm dwellings.(21)
Imputed net rent from mobile homes.–The national estimates of imputed net rent from mobile homes for 1990 and later years were allocated to states in proportion to the number of mobile homes from the 1990 Census of Housing.
Imputed net rent from all other nonfarm dwellings.–The state estimates for the years after 1990 are based on the state estimates for 1990. The 1990 state estimates were derived from the allocation of the national estimates using state estimates of the gross rental value of owner–occupied, single–family nonfarm dwellings, which were derived from data from the 1990 Census of Housing.(22)
The state estimates for the years after 1990 were prepared in two steps. First, provisional state estimates were extrapolated from the 1990 state estimates by the relative change in the estimates of nonfarm personal income.(23) Second, the national estimates were allocated to states in proportion to the provisional estimates.
Footnotes
1. See "Persons" and "Fiduciaries" in the "Glossary."
2. The annual IMF tabulations become available about 18 months after the end of the year; therefore, the state estimates that are based on the IMF data for a year are first derived from the extrapolation of the data for the previous year. The extrapolation used for the estimates of dividends uses past trends in the IMF dividends series, as determined from regression analysis that relates the IMF dividends data for each state to the national estimates of dividends and to time for an 8–year period.
3. For the private pension plans, the division of the dividends into the "currently–employed" and the "retired" portions is based largely on participation rates in the social security retirement system. The 60 percent versus 40 percent split corresponds roughly to the relative numbers of the participants–those making the contributions and those receiving the benefits. The "currently employed" share is discounted somewhat, relative to the number of participants, to account for the common practice of vesting rights to a pension only after an employee has worked in the covered job for several years.
For the Federal civilian and the state and local government retirement plans, the 60–40 split is roughly in accord with participation rates in those systems, allowing for delayed vesting provisions.
4. The state–of–residence estimates of employer contributions to private pension plans are based on 1990 benchmark estimates: The 1990 national estimate of the contributions for each Standard Industrial Classification two–digit industry is allocated to states in proportion to the earnings of wage and salary workers employed in that industry as reported in the 1990 Census of Population. The 1990 estimate for each industry is then extrapolated to subsequent years by the relative change in the BEA estimates of wages and salaries for the industry. The estimates by industry are then summed to the all–industry level.
5. The state estimates of the Federal civilian retirement benefits are those estimated as part of transfer payments in the previous definition of personal income; the methodology is described in the "Transfer Payments" methodology section documentation on previous issues of this CD–ROM or in U.S. Department of Commerce, Bureau of Economic Analysis, State Personal Income, 1929–97 (Washington DC: U.S. Government Printing Office, 1999): M–24.
6. The net accrued interest is the excess of the interest accrued on the bonds during the year over the accrued interest that was realized from the bonds redeemed during the year.
The interest accrued on unredeemed bonds is treated as if it were received by individuals as it accrues because it is available to the individuals.
7. The state data series for the value of the unredeemed bonds are tabulated by the Bond Division of the Department of the Treasury.
8. See footnote 2.
9. The national estimate of the reportable interest that is received by individuals from these companies is prepared as part of the reconciliation of personal income and adjusted gross income. See Thae S. Park, "Comparison of BEA Estimates of Personal Income and IRS Estimates of Adjusted Gross Income," Survey 81 (November 2001): 9–16.
10. See footnote 3.
11. Under the military plan, the number of persons currently in service is roughly equal to the number receiving benefits. The smaller proportion of the interest attributed to the "currently employed" portion allows for the 20–year vesting provision of this plan.
12. See footnote 4.
13. See footnote 5.
14. The state estimates of the military retirement benefits are those estimated as part of transfer payments in the previous definition of personal income; see footnote 5.
15. The interest received by the plans is derived as a residual from the published data: Total investment income less dividends and capital gains.
16. For additional information, see "Imputation" in the "Technical Notes."
17. The net rental income received by persons who are primarily engaged in the real estate business is included in nonfarm proprietors' income. The imputed rental income received by the owner–occupants of farm dwellings is included in farm proprietors' income.
18. The available estimates from the Internal Revenue service for net rents are unreliable as a basis for the estimation of monetary rent because of large sampling errors in the estimates for the less populous states.
19. See footnote 3.
20. See footnote 4.
21. For additional information, see "Imputation" in the "Technical Notes."
22. The 1990 state estimates of the gross rental value were calculated in three steps. First, the estimate of the market value of the dwellings in each value–size range for a state was calculated as the product of the number of dwellings and the median value of the dwellings in the state. Second, the state estimate of the market value for each range was multiplied by the national mean contract rent for the rented dwellings in that range to yield the estimate of the gross rental value for the range in the state. Third, the estimates for the ranges for the state were summed to yield the state estimate of the gross rental value.
23. The extrapolation also used data for the four census regions from the Census Bureau's biennial American Housing Survey, which is available most recently for 1999.
