National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Census Bureau Tax Estimation Procedures

« Previous: Taxes
Suggested Citation:"Census Bureau Tax Estimation Procedures." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
×
Page 238

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

DEFINING RESOURCES 238 taxes, such as sales, excise, or property taxes. These taxes are an integral part of consumption, and the CEX expenditure data that we recommend be used to develop the reference family poverty threshold include them (e.g., clothing expenditures in the CEX include the applicable sales taxes). It is true that such taxes vary from locality to locality, so that the average amounts included in the thresholds may not be completely appropriate for specific areas (even with the housing cost adjustments by region and size of place). Yet it is clearly not feasible to develop the large number of thresholds that would be needed to take account of different levels of property and other consumption taxes across areas. It might be possible for people with above-average values of consumption taxes to subtract the difference from income (and vice versa for people with below-average values). However, the costs of obtaining the necessary data would be high and the measurement problems would be great. Census Bureau Tax Estimation Procedures For more than a decade, the Census Bureau has published experimental poverty estimates that deduct payroll and federal and state income taxes from annual income as measured in the March CPS (see, e.g., Bureau of the Census, 1993a). The current procedure for imputing Social Security payroll taxes is straightforward. CPS-reported wage and salary earnings are multiplied by the Social Security payroll tax for the employee portion up to the specified limit; CPS-reported net self-employment earnings are multiplied by the (higher) payroll tax rate for the self-employed up to the specified limit; and certain employees (based on unpublished statistics from the Social Security Administration) are assigned noncovered status (e.g., federal government employees and proportions of workers in certain occupation groups). For imputing federal income taxes, including the refundable Earned Income Tax Credit, the current Census Bureau procedure involves a complex series of operations. The Bureau first assigns members of CPS households to tax filing units, using a set of rules to try to approximate Internal Revenue Service (IRS) filing provisions. Next, the Bureau calculates adjusted gross income by summing reported amounts for wages and salaries, net farm and nonfarm self-employment income, net rental and property income, dividends, interest, income from estates and trusts, private and government pensions, unemployment compensation, and alimony; plus a portion of Social Security income and imputed amounts for net realized capital gains; minus imputed contributions to Individual Retirement Accounts (IRAs). Statistics of Income (SOI) data from the IRS are used for the capital gains and IRA imputations; the May 1983 CPS pension supplement is also used to estimate probabilities for IRA contributions. No attempt is made to adjust for other exclusions from income, such as moving expenses or alimony paid. Second, the Census Bureau determines which tax filing units itemize

Next: Assessment »
Measuring Poverty: A New Approach Get This Book
×
Buy Paperback | $75.00 Buy Ebook | $59.99
MyNAP members save 10% online.
Login or Register to save!
Download Free PDF

Each year's poverty figures are anxiously awaited by policymakers, analysts, and the media. Yet questions are increasing about the 30-year-old measure as social and economic conditions change.

In Measuring Poverty a distinguished panel provides policymakers with an up-to-date evaluation of

  • Concepts and procedures for deriving the poverty threshold, including adjustments for different family circumstances.
  • Definitions of family resources.
  • Procedures for annual updates of poverty measures.

The volume explores specific issues underlying the poverty measure, analyzes the likely effects of any changes on poverty rates, and discusses the impact on eligibility for public benefits. In supporting its recommendations the panel provides insightful recognition of the political and social dimensions of this key economic indicator.

Measuring Poverty will be important to government officials, policy analysts, statisticians, economists, researchers, and others involved in virtually all poverty and social welfare issues.

  1. ×

    Welcome to OpenBook!

    You're looking at OpenBook, NAP.edu's online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

    Do you want to take a quick tour of the OpenBook's features?

    No Thanks Take a Tour »
  2. ×

    Show this book's table of contents, where you can jump to any chapter by name.

    « Back Next »
  3. ×

    ...or use these buttons to go back to the previous chapter or skip to the next one.

    « Back Next »
  4. ×

    Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

    « Back Next »
  5. ×

    To search the entire text of this book, type in your search term here and press Enter.

    « Back Next »
  6. ×

    Share a link to this book page on your preferred social network or via email.

    « Back Next »
  7. ×

    View our suggested citation for this chapter.

    « Back Next »
  8. ×

    Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

    « Back Next »
Stay Connected!