A "Second Opinion" on the Economic Health of the American Middle Class

Richard V. Burkhauser, Jeff Larrimore, Kosali I. Simon

NBER Working Paper No. 17164
Issued in June 2011
NBER Program(s):The Health Care Program, The Health Economics Program, The Labor Studies Program, The Public Economics Program

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.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w17164

Published: Richard V. Burkhauser & Jeff Larrimore & Kosali I. Simon, 2012. "A "Second Opinion" on the Economic Health of the American Middle Class," National Tax Journal, vol 65(1), pages 7-32. citation courtesy of

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