2 ms·

I'm a bit confused as to what 'tax unit' mean here. Is that the amount of tax (in monetary unit like USD) one is supposed to pay if s/he hits certain percentage

I'm a bit confused as to what 'tax unit' mean here. Is that the amount of tax (in monetary unit like USD) one is supposed to pay if s/he hits certain percentage of wealth class? Thanks in advance for the reply!

mikeyouse 7y ago
I'll just copy/paste from the source of the chart, but a tax unit is everyone on a single tax return where a household is everyone that lives in a house. So if an elderly parent who pays their own taxes moves into their adult children's household, that property would consist of 1 household but 2 tax units. The net worth of the household would increase, even though the net worth of those two tax units stayed the same. > "For most people, their tax unit and household are the same. But there are cases where a household would include multiple tax units. When an elderly parent moves in with an adult child with kids filing taxes separately to form a three-generation household there would be multiple tax units exist in one household. The same is true when a child moves back in after college or an unmarried couple moves in together. These are groups that we probably want to think about together because they rely on each other economically. On the other hand, a group of unrelated adults living together as roommates would also count as a household." > We might prefer tax units to households for income trend analysis because household structure is not independent of economic circumstances. For instance, adult children move back in with their parents (Gallup reported that 14 percent of 24 to 34 year olds lived with their parents in 2013 and a Pew Research Center study showed this to be increasing). Similarly, homeowners sometimes take in boarders for economic reasons. In each of those cases, the tax-unit data captures the deteriorating economic situation associated with these types of living arrangements. > In contrast, household data captures more earners under one roof, which increases household income. Imagine a group of three graduate students living together where each makes $25,000. They would show up as three different tax units but one household making $75,000. Now image that they all got $5,000 raises and decided to get places on their own. This would show up as a 20 percent increase in their incomes by tax units, but their household incomes would have dropped by 60 percent.

mikeyouse 7y ago

I'll just copy/paste from the source of the chart, but a tax unit is everyone on a single tax return where a household is everyone that lives in a house. So if an elderly parent who pays their own taxes moves into their adult children's household, that property would consist of 1 household but 2 tax units. The net worth of the household would increase, even though the net worth of those two tax units stayed the same. > "For most people, their tax unit and household are the same. But there are cases where a household would include multiple tax units. When an elderly parent moves in with an adult child with kids filing taxes separately to form a three-generation household there would be multiple tax units exist in one household. The same is true when a child moves back in after college or an unmarried couple moves in together. These are groups that we probably want to think about together because they rely on each other economically. On the other hand, a group of unrelated adults living together as roommates would also count as a household." > We might prefer tax units to households for income trend analysis because household structure is not independent of economic circumstances. For instance, adult children move back in with their parents (Gallup reported that 14 percent of 24 to 34 year olds lived with their parents in 2013 and a Pew Research Center study showed this to be increasing). Similarly, homeowners sometimes take in boarders for economic reasons. In each of those cases, the tax-unit data captures the deteriorating economic situation associated with these types of living arrangements. > In contrast, household data captures more earners under one roof, which increases household income. Imagine a group of three graduate students living together where each makes $25,000. They would show up as three different tax units but one household making $75,000. Now image that they all got $5,000 raises and decided to get places on their own. This would show up as a 20 percent increase in their incomes by tax units, but their household incomes would have dropped by 60 percent.