Economic Income Different Than Family Taxable Income
Mollison, Andrew, THE JOURNAL RECORD
By Andrew Mollison
Cox News Service
WASHINGTON _ When President Clinton said his new income and energy taxes would cost $17 a month for those with incomes of $40,000, he was talking about their economic income.
Some of his listeners may not have realized that he was talking about families with taxable incomes or money incomes that are lower _ sometimes far lower _ than $40,000.
Take a couple that we'll call Joan and John Jones. They own a heavily mortgaged suburban home. Joan makes $12,000 and John makes $18,000 a year. Earnings from their savings accounts and mutual fund add another $3,000 to their annual income. They put part of John's pay into a 401(k) retirement plan.
How should we calculate the Jones' income? Using the president's method, it's more than $40,000. That's their economic income. Or you could say it's $33,000 (their money income). Or you could say it's under $30,000 (their taxable income).
Each of those methods for describing family income has been used by officials describing Clinton's plan.
Taxable income is the lowest number. That's your income after you account for all of the deductions, exemptions and other tax breaks in the revenue code.
Money income is the middle number. It's a term used by the Census Bureau. For those who file a Form 1040 tax return, it's a little bigger than the "adjusted gross income" listed on the bottom line of the first page. For most people, money income is the gross pay on your pay stub, plus interest, dividends and business profits. It also includes cash benefits such as Social Security, welfare or disability checks. …