A "Second Opinion" on the Economic Health of the American Middle Class
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.
We thank Jennifer Tennant and Abigail Kelly-Smith for their helpful comments and suggestions and Sean Lyons for research assistance with some of the data used in this paper. The views in this paper are those of the authors and should not be attributed to the staff of the Joint Committee on Taxation, any Member of Congress, or the National Bureau of Economic Research.
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