IRS Income Data Unreliable Measure of Inequality, Report Says

The Tax Foundation’s Alan Cole in a recent report found that the IRS income data unreliable as a measure of inequality.

The conclusions of the report were:

IRS income data is collected in order to raise revenue as directed by

Congress, which means it is not necessarily well-suited for other purposes,

like measuring equality in our society.

 

The average taxpayer’s income changes dramatically throughout his

lifetime; the average tax return for an 18- to 25-year-old shows about

$15,000 in adjusted gross income where an average tax return for

someone between ages 55 and 64 shows above $80,000.

 
College students, particularly, comprise a very large number of low-income

taxpayers.

 

Incomes go considerably farther in some places than in others. Much of the

narrative about rural states being poorer is mistaken.

 

Much capital income—especially capital income in tax-free middle-class

retirement accounts—goes uncounted in income data, heavily distorting

the measurement and making people appear poorer than they are.

 

Thomas Piketty’s income inequality data leaves out $19 trillion of pension

assets, which are yet to be attributed to any individual.