Published IRS tables generally sort taxpayers by Adjusted Gross Income (AGI) for purposes of reporting tax statistics. Distributional analyses of tax policy in government agencies and non-profits, however, typically use more expansive income classifiers to better reflect households’ true economic income or, alternatively, potentially taxable income. In this paper, we introduce a new income measure—Expanded Income (EI)—as a classifier for tax analysis. EI is generally broader than the income classifiers used by Joint Committee on Taxation, the Treasury Department, the Congressional Budget Office and Tax Policy Center and thus is closer to a Haig-Simons comprehensive income measure than are other classifiers. EI includes estimates of annualized unrealized capital gains, imputed income from owner-occupied housing, unreported business income, inheritances received, Medicare, Medicaid, and other items. We construct EI using the Survey of Consumer Finance (SCF), NBER’s TAXSIM calculator, and other data sources. We show that aggregate EI is about 90 to 100% larger than aggregate AGI since 2000. The largest proportional differences between EI and AGI occur at the top and the bottom of the EI distribution. The largest single component of the difference between AGI and EI is unrealized capital gains, which have exceeded 30% of AGI in some recent years. Re-ranking tax units using EI greatly reduces the share of taxes paid at the top of the income distribution, and increases the share paid in the second and third quintiles.
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