This report presents alternative measures of income that include estimates of taxes and values of various noncash benefits for calendar year 2003. These measures were derived from information collected in the 2004 Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS) conducted by the U.S. Census Bureau, along with information from other agencies, such as the Centers for Medicare and Medicaid Services (CMS), the U.S. Bureau of Labor Statistics, the U.S. Department of Agriculture, the U.S. Internal Revenue Service, and the U.S. Office of Personnel Management (OPM).
Traditionally, income data in Census Bureau reports have been based on the amount of money people or households received during a calendar year. (See Income, Poverty, and Health Insurance Coverage in the United States: 2003, U.S. Census Bureau, Current Population Reports, P60-226.) This income concept (money income) is limited and does not provide a complete measure of economic well-being. For example, it does not include the effect of taxes and, therefore, does not reflect the effect of any tax law changes on economic well-being. Similarly, this concept excludes the effect of noncash benefits (such as employer-provided group health insurance, foodstamps, school lunches, and housing assistance), which enhance economic well-being.
This report presents 17 alternative income measures that systematically remove or add various income components, such as deducting payroll taxes and federal and state income taxes and including the value of specific noncash benefits—food stamps, school lunches, housing subsidies, health insurance programs, and return on home equity. Alternative income definitions were first developed in the early 1980s, in response to a Congressional request.1 After research and discussion with academic professionals, other government agencies, private sector organizations, and nonprofit and public interest organizations, the Census Bureau began publishing alternative measures in a series of technical papers beginning in 1982.2 Eleven alternative income definitions were presented in a subsequent Census Bureau report, Measuring the Effect of Benefits and Taxes on Income and Poverty: 1986, Current Population Reports, P60-164-RD1, issued in December 1988. By 1993, 17 alternative income definitions were available.
Four of the alternative income definitions are featured and discussed in detail. These four were chosen because they are complete definitions that summarize how taxes, noncash benefits including and excluding Medicaid and Medicare, and potential return on home equity affect economic well-being. The others are intermediate definitions that are included to show the effect of each of the individual components of income that comprise the four definitions that are discussed in detail. See text box “What are. . .definitions of income?” for a full description of these definitions.
1 U.S. Senate Statement, “Data Collection and Poverty Level,” Department of State, Justice, and Commerce, The Judiciary and Related Agencies Appropriations Bill, 1981. U.S. Senate 96th Congress, 2nd Session, September 16, 1980: 33-34. Cited in U.S. Census Bureau, Technical Paper 56, Estimates of Poverty Including the Value of Noncash Benefits: 1985, U.S. Government Printing Office, Washington, DC, 1986.
2 For an example of the research discussion that took place while the measures were under development, see the proceedings of the “Conference on the Measurement of Noncash Benefits,” Fort Magruder Inn & Conference Center, Williamsburg, VA, December 12-14, 1985. According to the Williamsburg conference’s statement of purpose, “the conference was designed to provide a wide variety of academic, private sector, and government researchers, as well as representatives from public interest groups and interested Congressional committees, an opportunity to learn about the issues involved in considering noncash benefits as income and to make their own views known to the Census Bureau.”