Although the economy has slowed significantly, disposable personal income in the third quarter of 2001 had its largest increase in real terms since the second quarter of 1975 at both the national and per capita levels. Two factors contributed to this increase. One was the advance refund checks sent to taxpayers beginning in July as part of the Economic Growth and Tax Relief Reconciliation Act of 2001, which lowered net income tax payments. In addition, the Act lowered income tax withholding rates beginning in July. As a result, personal tax and non-tax payments decreased $138.1 billion in August and $96.5 billion in July. The other factor was an increase in transfer payments in July, which reflected one time payments to taxpayers to correct for underpayments of benefits associated with an error in the indexing for social security and supplemental security income benefits.
|Per Capita Disposable Personal Income||Q2 01||Q3 01|
|Annualized Per Capita Disposable Personal Income (Billions of current dollars)||26,520||27,238|
|Billions of current dollars percent change from previous quarter||0.70||2.71|
|Annualized Per Capita Disposable Personal Income (Billions of chained 1996 dollars)||24,200||24,880|
|Billions of chained 1996 dollars percent change from previous quarter||0.37||2.81|
NOTES: Disposable personal income is personal income less personal tax and non-tax payments.
Chained 1996 dollars are calculated using chain-type indices, rather than constant dollars, to measure real changes in personal income. The chain-type method first calculates the real changes between adjacent years. Annual rates of real changes between adjacent years are then chained (multiplied) together to obtain the rate of real changes between nonadjacent years. Chained dollars are preferable to constant dollars because it avoids the bias of base year associated with constant dollars.
SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Products Accounts Data, Oct. 31, 2001, available at: http://www.bea.doc.gov/bea/dn1.htm.