Printer Friendly

Personal income and adjusted gross income 1981-83.

THE reconciliation of the Bureau of Economic Analysis (BEA) measure of personal income and the Internal Revenue Service (IRS) measure of adjusted gross income (AGI) by type of income of 1981-82 is revised and extended to 1983 in this article. The revised reconciliation incorporates the revision of personal income for 1981-83 published in July 1984 and the final tabulation of AGI for 1982 published by IRS in 1984. The 1983 reconciliation is based on preliminary tax data from individual income tax returns for tax year 1983.

The reconciliation items in tables 1-3 allow the construction from personal income (line 1) of a BEA-derived AGI (line 22) that conforms to the IRS definition of AGI (line 23). (These reconciliation items are explained in detail in articles in the November 1981 and April 1983 issues of the SURVEY OF CURRENT BUSINESS). The difference between the BEA-derived AGI and the IRS measure of AGI is called the AGI gap (line 24). The AGI gap can be viewed as evidence of noncompliance with the tax code, but with the following caveats: The AGI gap includes income earned by low-income individuals who are not required to file income tax returns, unreported income identified by IRS audit programs that is included in personal income, gross errors and omissions in the estimates of reconciliation items, and the net effect of errors in personal income and AGI of IRS.

The AGI gap as a percentage of the BEA-derived AGI (hereafter, the relative gap) was revised down by very small amounts in 1981 and 1982, reflecting downward revisions in the relative gaps for nonfarm proprietors' income and personal interest income. The 1982 relative AGI gap still shows a decline from 1981, the first since 1976. However, the 1983 relative AGI gap shows an increase.

The combined relative gap for personal dividend income and personal interest income increased in 1983, following a substantial decline in 1982; however, it was still below the relative gap that prevailed in the 1977-81 period. The 1982 decline and 1983 increase may be partly attributable to legislative action on withholding on interest and dividends. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) imposed a 10-percent withholding on interest and dividend payments, effective July 1, 1983, but this provision was repealed by the Interest and Dividends Compliance Act of 1983. On the other hand, the relative gap for taxable pensions declined substantially in 1983, following an increase in 1982. The 1983 decline also may be partly attributable to TEFRA, which imposed an optional withholding system for taxable pension payments made after 1982.

The size and changes in the total gap and its components should be interpreted with caution because the 1983 IRS data on AGI and its components, as reported in Statistics of Income Bulletin, are preliminary. In addition, a comprehensive revision of the national income and product accounts is in progress, and that revision is expected to increase wages and salaries and nonfarm proprietors' income substantially. The increase is based on new information about the extent of underreporting on tax returns and of the failure to file income and employment tax returns.

Tables 4 and 5 provide historical data for the AGI gap and the relative gap.
COPYRIGHT 1985 U.S. Government Printing Office
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1985 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Park, Thae S.
Publication:Survey of Current Business
Date:Apr 1, 1985
Words:534
Previous Article:Impact of recent tax law changes.
Next Article:County and metropolitan area personal income, 1981-83.
Topics:


Related Articles
County and metropolitan area personal income, 1981-83.
Comparison of BEA Estimates of Personal Income and IRS Estimates of Adjusted Gross Income.
Table 6.--Total adjusted gross income estimated from National Income and Product Accounts (NIPA) and as reported on individual income tax returns per...
Table 8.--Personal income per National Income and Product Accounts (NIPA), and taxable income and individual income tax per Statistics of Income...
Table 6.--Total adjusted gross income estimated from National Income and Product Accounts (NIPA) and as reported on individual income tax returns per...
Table 8.--Personal income per National Income and Product Accounts (NIPA), and taxable income and individual income tax per Statistics of Income...
Table 6.--Total adjusted gross income estimated from National Income and Product Accounts (NIPA) and as reported on individual income tax returns per...
Table 6. Total adjusted gross income estimated from National Income and Product Accounts (NIPA) and as reported on individual income tax returns per...
Table 8. Personal income per National Income and Product Accounts (NIPA), and taxable income and individual income tax per Statistics of Income...
Table 8. Personal income per National Income and Product Accounts (NIPA), and taxable income and individual income tax per Statistics of Income...

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters