What can administrative tax information tell us about income measurement in household surveys? Evidence from the Consumer Expenditure Surveys 1

Abstract

In this paper, we investigate the potential of linking administrative records income data to the Consumer Expenditure Survey (CE). We match individual responses to CE survey data collected from 2013–2014 to IRS administrative data in order to analyze CE questions on wages. We find that while wage amounts are largely in alignment between the CE and administrative records in the middle of the wage distribution, there is evidence that wages are over-reported to the CE at the bottom of the wage distribution and under-reported at the top of the wage distribution. In addition to the analysis using person-based linkages, we also match responding and non-responding CE sample units to the universe of IRS 1040 tax returns by address to examine non-response bias. We find that non-responding households are substantially richer than responding households, and that very high income households are less likely to respond to the CE.