Small Area Health Insurance Estimates

Data Inputs: Federal Tax Returns

We obtain income tax return data from the Internal Revenue Service (IRS) annually. The U.S. Census Bureau aggregates this information to the state and county levels. Access to these data is vital to the health insurance coverage estimates, and these data are obtained and kept in the strictest confidentiality. No personal identifiers are included on the records used by the SAHIE program.

The summaries of the tax data that we use are:

• the mean of the log of the ratio of persons' family income to their Federal Poverty Level (FPL) (a measure of the counties' general affluence);
• the variance of the log of the ratio of persons' family income to their FPL (a measure of the counties' income inequality); and
• the number of tax exemptions by Income-to-Poverty ratio (IPR) categories, which are further divided into adult and child exemptions.

The measure of the Federal Poverty Level (FPL) and family income from the IRS tax data differs from the American Community Survey (ACS) measure because the income information in the two data sets differs. The official FPL is determined by the size and composition of the family and is determined by the income measures collected in the ACS, which represents total money income. The closest concept to the size of family in the IRS data is the number of tax exemptions associated with a tax return, which is not necessarily the same as a family as defined by the ACS. Additionally, the income measure used in the IRS calculations is Adjusted Gross Income.