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Abstract
The Agricultural Resource Management Survey (ARMS) collects information on income of farm
households from a variety of sources. Traditionally, the amount of money income received
during a calendar year has been the primary income measure for assessing the economic wellbeing
of farm households. This measure does not include the effects of income and payroll
taxes. As the tax code has been increasingly used as a vehicle for the implementation of various
policy objectives, the failure to include taxes and the impact of tax law changes in a measure of
economic well-being has increased in importance. Recently, the Census Bureau has recognized
the inadequacies of the traditional money income concept as a satisfactory measure of economic
well-being. In response to these recognized inadequacies, recent Census reports have included
alternative income measures that consider income and payroll taxes. At the same time, efforts
on the international level to enhance national household income statistics by developing
standards related to the estimation of income distribution statistics has resulted in the
establishment of a conceptual framework for defining and measuring household income that also
includes the effects of income and payroll taxes. Recently, researchers at ERS began developing
an added farm household income measure that will incorporate income and payroll taxes into the
traditional measure. This will provide a more complete picture of the economic well-being of
farm households, allowing it to be compared to new Census measures for nonfarm households
and also making it more appropriate for international income comparisons. This paper will
present the methodology and discuss obstacles in utilizing farm survey data to estimate an aftertax
income measure and provide information on after-tax income of farm households by various
sizes of farms and in various regions of the U.S. Information on after-tax income will aid in
understanding the financial situation, savings, and investment behavior of farm households.