The distribution of income in the United States features heavily in congressional discussions about the middle class, program funding and effectiveness, new and existing target groups, government tax revenue, and social mobility, among other topics. Recently, the level and distribution of U.S. income have also been raised in the context of broader macroeconomic issues, such as economic growth. Recent congressional activity—committee hearings and reports, communication with major media outlets, and policy research discussions about income—reveals a heightened interest among some Members in the distribution of U.S. income. This report responds to that interest by providing a guide to various measures, indicators, and graphics commonly used to describe the U.S. income distribution. This report provides descriptive analysis of the U.S. income distribution to illustrate various concepts. This analysis reveals broad trends, but does not provide an exhaustive study of the distribution of income in the United States. Importantly, the report does not explore potential drivers and impacts of changes to the shape and span of the distribution. This report is organized as follows: first, it examines the complexities of income measurement and important definitional and data considerations to bear in mind when using and interpreting income statistics. Next, it describes two popular data sources used to study the U.S. income distribution, followed by sections on statistics commonly used to provide point-in-time analysis and to compare U.S. income across groups, time, and location. The report concludes with an explanation of the Gini index. An appendix presents information on the set of summary indicators of income dispersion reported annually by the U.S. Census Bureau. On the surface, measuring income is a simple concept. In practice, however, empirical analysis of the income distribution involves several choices about how income is defined and the level at which income data are examined. Income can be constructed narrowly (e.g., earnings only) or broadly (e.g., as the sum of earnings, capital gains, government transfers, and other sources). It can be presented in pre-tax status or reflect the taxes paid and tax credits received. Income can be measured at the individual level or represent pooled resources among households, families, or tax units. These choices about how to define and organize income are consequential, because the same data can present different pictures of the income distribution depending on how income is constructed. Among commonly used income definitions, movement from one income measure to another is unlikely to shift household rankings dramatically—that is, the poor are not likely to be characterized as rich, or vice versa—but poor households might not look quite as poor when the value of government transfers are included, and the level and movement in incomes at the top of the distribution will depend importantly on whether and how capital gains and personal income taxes are included. The level of income analysis—that is, whether income is measured at the individual, household, or family level—will also impact indicators used to characterize the income distribution. For example, average individual income will lie below average household income, simply because households can have multiple earners. For these reasons, disagreement over the interpretation of income levels and trends frequently centers on how income is defined. Income can be seen through many lenses. It can refer simply to earnings (i.e., wages, salaries, and self-employment earnings) or to more expansive measures that span several sources of cash income and in-kind benefits and account for taxes paid and tax credits. One income formulation is not necessarily superior, as there may be valid reasons for selecting one definition over another. For example, a restrictive measure may be preferred when assessing trends and outcomes for a particular family of income streams (e.g., how market income is distributed among households). A comprehensive measure, however, may make more sense when examining households' overall ability to use income to meet basic needs. Recognizing a lack of consensus on how to define income and the benefits of definitional flexibility for certain types of analyses, the Census Bureau makes several income formulations available to data users. In addition to the money income definition it uses to produce official income dispersion estimates, Census provides annual estimates of market income, post-social insurance income, disposable income, and an income measure recommended by the National Academies of Science. Census also allows data users to customize an income measure for certain statistics by specifying which of the 42 Census income components to include. Table 1 compares three Census-defined income measures and illustrates the variability of income concepts. The first column shows money income, the income definition used by Census to calculate annual income dispersion estimates. Money income represents pre-tax cash income received on a usual basis by households; notably, it excludes occasional income such as capital gains (and losses) and in-kind benefits. Market income (second column) is a somewhat narrower concept that reflects pre-tax income from market sources. Disposable income (column three) is the most expansive formulation in the table. In addition to all components in money and market income, it includes receipt of the Earned Income Tax Credit (EITC); Supplemental Nutritional Assistance Program (SNAP); free, reduced, and regular-price school lunches; public housing and rental subsidies; and economic stimulus payments (in 2009 only) and recovery payments (in 2010 only). It deducts federal and state income taxes that remain after receipt of refundable tax credits, payroll taxes, and property-taxes on owner-occupied housing. Table 1 highlights a few points that arise regularly in research and policy discussions around the U.S. income distribution. These include whether and how to account for capital gains and losses, tax deductions and credits, and government-supported health insurance. How these components are treated is consequential for income distribution analysis because they are experienced differently by low-, middle-, and high-income individuals and households. This means the difference between including these components in income and not including them in income is not a mere shift in the distribution, but potentially alters the shares of total income held by various income groups, and where an individual or household ranks in the distribution. One notable difference between the Census money income concept and the two alternative definitions presented in Table 1 is the treatment of capital gains. Money income, the definition used by Census to generate its annual income dispersion statistics, does not include capital gains and losses at all. This is frequently identified as a limitation of official Census income statistics in accurately characterizing U.S. income levels, distribution, and trends, because capital gains can be a significant source of income, particularly among households at the upper end of the distribution. The Internal Revenue Service (IRS) income tax return data record capital gains only when the gains are realized and reported as part of taxable income. For these data, capital gains may therefore be more visible among high-income households because they are more likely to hold (and sell) assets that produce taxable income. In addition, some contend that the standard one-time valuation of capital gains income in the year of realization (i.e., sale of asset) is misleading. This is because the value of assets can accrue over the course of several years, contributing incrementally to available resources. The counter perspective is that continuous accounting for capital gains is a purely theoretical exercise, noting that (1) living standards do not rise with asset value accrual, and (2) the view that available resources rise with asset appreciation rests on the assumption that households can obtain peak prices for their assets. The treatment of taxes (i.e., payments and credits) is another point of consideration highlighted in Table 1 . Unlike money income and market income, disposable income presents income in post-tax status, taking into account payment of personal income taxes and receipt of tax credits. It could be argued that this income formulation provides a more realistic representation of income available for consumption in a given year. It also affects the measurement of the income distribution because tax payments and credits are likely to be experienced differently by lower- and higher-income groups. Some low-income individuals and households may not meet the earnings threshold for taxable income or otherwise have a disproportionately lower tax bill than their middle- and high-income counterparts. Likewise, low-income individuals and households are more likely to qualify for certain tax credits, such as the EITC. For these reasons, post-tax income formulations are likely to raise incomes among low-earners and reduce incomes among high-earners when compared with similar pre-tax income definitions. The value of government-supported health insurance—such as Medicare and Medicaid—is a facet of income that is not reflected in any of the Census income definitions summarized in Table 1 . Given its potentially sizable impact on the availability of household resources, income estimates that do not account for government health insurance have been criticized for providing a misleading picture of the income distribution. One concern is that some government-supported health benefits (e.g., Medicaid) are received disproportionately by lower-income individuals and households. Excluding this component may therefore understate the full value of resources among the low-earner group relative to those in the middle and top of the distribution. Figure 1 presents the percentage of U.S. households with no income in 2007 (left side) and the percentage of households that earned $100,000 or more in 2007 (right side), when the three definitions in Table 1 are applied to Census data. The data year 2007 was selected for Figure 1 because that is the last year that Census produced estimates for capital gains and losses (see footnote 6 ). When the most restrictive measure—market income—is applied, Census estimates show that 4.0% of households had zero income in 2007. This measure falls to 1.2% when the money income definition is applied, reflecting the value of government cash transfers on incomes at the bottom of the distribution. The disposable income definition, which takes a fuller range of government benefits and federal and state taxes (payments and credits) into account, produces the fewest no-income households (0.5%).