Working Paper: NBER ID: w17164
Authors: Richard V. Burkhauser; Jeff Larrimore; Kosali I. Simon
Abstract: Researchers considering levels and trends in the resources available to the middle class traditionally measure the pre-tax cash income of either tax units or households. In this paper, we demonstrate that this choice carries significant implications for assessing income trends. Focusing on tax units rather than households greatly reduces measured growth in middle class income. Furthermore, excluding the effect of taxes and the value of in-kind benefits further reduces observed improvements in the resources of the middle class. Finally, we show how these distinctions change the observed distribution of benefits from the tax exclusion of employer provided health insurance.
Keywords: No keywords provided
JEL Codes: H2; H24; I18; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| income definitions (D31) | perceived economic resources of the middle class (P17) |
| tax units (H29) | underestimation of growth in economic resources available to the middle class (F62) |
| posttax posttransfer income (H24) | improvement in median income growth (O49) |
| noncash benefits (J32) | perceived growth in resources (O49) |
| income measures (E01) | interpretation of economic trends (E66) |
| choice of sharing unit (D16) | observed economic resources available to individuals (P36) |