For other versions of this document, see http://wikileaks.org/wiki/CRS-RS20811 ------------------------------------------------------------------------------ ¢ Prepared for Members and Committees of Congress ¢ Although not itself a subject of legislation, the shape of the U.S. income distribution is a factor in a number of policy areas of congressional interest, including taxes, welfare, Social Security, and the minimum wage. The Bureau of the Census conducts an annual survey from which it derives estimates of the distribution of income in the United States. This report presents summary estimates of the distribution of household income for 2007. It will be updated periodically. For more information on the distribution of income including changes over time, see CRS Report RL32639, Inequality in the Distribution of Income: Trends and International Comparisons, by Brian W. Cashell. The Distribution of Household Income ........................................................................................... 1 Table 1. Distribution of Household Income, 2007 .......................................................................... 1 Table 2. Distribution of Household Income, 2007 .......................................................................... 2 Table 3. Distribution of Household Income, by Definition of Income, 2005.................................. 3 Author Contact Information ............................................................................................................ 3 The Bureau of the Census conducts an annual survey from which it derives estimates of the distribution of household income. The Census Bureau's `official' measure of income is based on the concept of money income and includes earnings, Social Security, interest, dividends, and other forms of social insurance. It excludes the value of non-money benefits such as food stamps and housing subsidies. It does not include capital gains, and it is pre-tax income.1 Table 1 shows the distribution of income in 2007, by quintile, using this official measure of household income. Each quintile represents 20% of the total number of households. In 2007, there were 116,783,000 households, so each quintile represents 23,356,600 households. The top 5% (the top 5,835,150 households) are also shown independently, because they alone account for a significant share of household income. The Census Bureau publishes these estimates by quintile to provide a concise snapshot of the overall distribution of income. It should be noted that there is no official definition of "middle class," but one approach that has been used is to group together the three middle quintiles. In 2007, that included those households with incomes between $20,291 and $100,000. The concept of middle class, however, remains entirely subjective.2 1 elbaT 7002 ,emocnI dlohesuoH fo noitubirtsiD . selitniuQ %5 poT tsewoL dnoceS drihT htruoF tsehgiH )%( sdlohesuoh fo erahS 02 02 02 02 02 5 naht ssel 192,02$ 001,93$ 000,26$ naht erom naht erom ssalc emocni fo egnaR 192,02$ ot ot ot 000,001$ 000,771$ 001,93$ 000,26$ 000,001$ dlohesuoh fo erahS 4.3 7.8 8.41 4.32 7.94 2.12 )%( emocni .susneC eht fo uaeruB ,ecremmoC fo tnemtrapeD :ecruoS Data describing the distribution of household money income are also available by level of income, or income class. These figures, shown in Table 2, indicate the number and share of households in selected income ranges up to and above $250,000. Also shown are median and mean household income. 1 The complete Census Bureau report on income is available on their website at http://www.census.gov/hhes/www/ income/income.html. 2 See CRS Report RS22627, Who Are the "Middle Class"?, by Brian W. Cashell. 2 elbaT 7002 ,emocnI dlohesuoH fo noitubirtsiD . ssalC emocnI sdlohesuoH fo # sdlohesuoH fo % )sdnasuoht ni( sdlohesuoH llA 387,611 0.001 000,5$ naht sseL 314,3 9.2 999,9$ ot 000,5$ 240,5 3.4 999,41$ ot 000,01$ 150,7 0.6 999,91$ ot 000,51$ 727,6 8.5 999,42$ ot 000,02$ 108,6 8.5 999,92$ ot 000,52$ 413,6 4.5 999,43$ ot 000,03$ 812,6 3.5 999,93$ ot 000,53$ 887,5 0.5 999,44$ ot 000,04$ 057,5 9.4 999,94$ ot 000,54$ 389,4 3.4 999,95$ ot 000,05$ 565,9 2.8 999,96$ ot 000,06$ 900,8 9.6 999,97$ ot 000,07$ 600,7 0.6 999,98$ ot 000,08$ 887,5 0.5 999,99$ ot 000,09$ 147,4 1.4 999,941$ ot 000,001$ 412,41 2.21 999,991$ ot 000,051$ 511,5 4.4 999,942$ ot 000,002$ 210,2 7.1 evoba dna 000,052$ 542,2 9.1 emocnI naideM 332,05$ emocnI naeM 906,76$ .susneC eht fo uaeruB ,ecremmoC fo tnemtrapeD :ecruoS The Census Bureau also published estimates of the income distribution in 2005 using alternative definitions of income. Table 3 presents the distributions, by quintile, for these alternative definitions of income. The first row, money income, shows the income shares using the same definition of income as that shown in Table 1. Market income includes money income except for government cash transfers, capital gains and losses, and an imputed return on home equity. It also subtracts an estimate of work-related expenses.3 Post-Social Insurance Income includes money income except government means-tested transfers, capital gains and losses, and estimated return on home equity, and it subtracts work-related expenses. The difference between market income and post-social insurance income is that the latter excludes means-tested government transfers. Disposable Income includes money income, the value of non-cash transfers such as food stamps and subsidized housing, capital gains and losses, and estimated return on home equity. It subtracts 3 Work related expenses includes items such as child care, union dues, permit and license fees, and commuting costs. work expenses, federal payroll taxes, federal and state income taxes, and property taxes on owner occupied homes.4 Money income is the measure on which official estimates of poverty are based, and it is the source for the most publicized income measures such as median household income. Market income can be compared with post-social insurance income to assess the effect of non-means- tested transfers like Social Security on the distribution. Comparing post-social insurance income with disposable income shows the effect of means-tested transfers on inequality. Finally, comparing market income with disposable income is a way to see the effect of transfers and taxes on the distribution. 3 elbaT 5002 ,emocnI fo noitinifeD yb ,emocnI dlohesuoH fo noitubirtsiD . selitniuQ tsewoL dnoceS drihT htruoF tsehgiH emocnI yenoM 4.3 8.8 4.41 0.32 3.05 emocnI tekraM 5.1 3.7 0.41 4.32 8.35 emocnI ecnarusnI laicoS-tsoP 2.3 6.8 3.41 8.22 0.15 emocnI elbasopsiD 4.4 9.9 3.51 1.32 3.74 .susneC eht fo uaeruB ,ecremmoC fo tnemtrapeD :ecruoS Brian W. Cashell Specialist in Macroeconomic Policy bcashell@crs.loc.gov, 7-7816 4 The full report on alternative income estimates is available on the Census Bureau's website at http://www.census.gov/ hhes/www/poverty/effect2005/tables.html. ------------------------------------------------------------------------------ For other versions of this document, see http://wikileaks.org/wiki/CRS-RS20811