Income 2002

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Alternative Measures of Income for 2001 and 2002 (Revised)

Each year the Census Bureau releases estimates of money income and official poverty. These estimates are based on the Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC) and rely on measures of before-tax income. In addition, the Census Bureau releases a number of alternative measures of income and poverty that rely on measures of after-tax income.

As a result of changes in the Census Bureau’s CPS tax model described below, we are issuing revised 2001 and 2002 estimates of the alternative measures. These revisions do not affect the official estimates of poverty, or the estimates of money income, because those measures use before-tax income.

The tax model changes are:

• Incorporating an additional child tax credit for tax years 2001 and 2002;

• Incorporating a rate reduction credit for tax year 2001 that was previously treated as a tax rebate. (This change was made to conform to the views of the Internal Revenue Service. The original treatment of the 2001 tax change as a rebate conformed to generally held views-- see Shapiro and Slemrod, “Consumer Response to Tax Rebates”, American Economic Review, Vol. 93, No. 1, March 2003, pp. 381-396 for a further discussion. Because tax rebates are a return of previous year’s income to the taxpayer, they are traditionally excluded from the current year’s income estimates.)

• Correcting a rounding error in the marginal tax rates used in tax year 2001.

The impact of these changes on alternative income and poverty measures is shown in tables 1-3.

Table 1. Alternative Poverty Estimates Based on National Academy of Science (NAS) Recommendations Using Revised Tax Model: 2001 and 2002 [PDF 452k]

Table 2. Poverty Estimates Based on Alternative Measures of Income and Deflators Using Revised Tax Model: 2001 and 2002 [PDF 442k]

Table 3. Household Income by Race and Hispanic Origin and Income Definition Using Revised Tax Model: 2001 and 2002 [PDF 464k]

For a further explanation of the alternative income and poverty measures, see Current Population Reports, P60-221 and P60-222, respectively.

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Last Revised: July 08, 2004