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What are the reasons why the data we use to measure income distribution in the U. S. is...

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paboo2007 | Student, College Freshman | eNoter

Posted December 6, 2011 at 2:11 AM via web

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What are the reasons why the data we use to measure income distribution in the U. S. is an incomplete picture.

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readerofbooks | College Teacher | (Level 2) Educator Emeritus

Posted December 6, 2011 at 2:44 AM (Answer #1)

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There are several reasons for this. Let me offer you three of them.

First, we are dealing with a population of 300,000,000 people. With this massive population, the best you are going to get is an approximation; there will be inaccuracies.

Second, not all people report their income properly. Many rich people have creative accounting practices and they have found loopholes. For this reason, it is hard to know how much they have made and how much they are worth. They have charities, offshore accounts, and foreign investments. All of this adds an incredible level of complication. This is a hurdle in finding out income distribution.

Third, many people get paid off the books, that is to say, some people do not pay taxes. When this happens, their income is not recorded. We have little idea how much money this represents. Let me give an example, many illegal immigrants do not have paper work. So, many of these people will be paid under the table. Also small business can play with their numbers as well.

All of these factors give an incomplete picture.

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