• In measuring income, the JCT doesn't include government transfers, which amount to $200 billion and would raise all income levels.

• The JCT tables measure household income, rather than individual income and do not distinguish between one and two-earner families.

• The Treasury's income distribution tables include cash transfers and also include other measures of wealth, such as the income a homeowner could receive by renting out his house and the value of unrealized capital gains.

Dramatic changes can result by the selection of different assumptions, showing how easily the tables can be altered. There is no one "right" answer to such questions as:

• Who bears the burden of the corporate income tax and how is the burden distributed -- or should it be left out due to lack of data?

• Should forecasters use the current value of tax benefits over an individual's lifetime or the simple annual cash value for a period of years?

• Should the estimates include changes in tax revenue resulting from changes in taxpayers' behavior in response to tax cuts -- dynamic scoring versus static scoring?

Further, individuals in the same income bracket are not in the same economic situation, hence income distribution tables provide little information on the effects of tax changes on real individuals. And since the national median household income of $31,000 in 1993 was 79 percent of the Connecticut median income but 140 percent of median income in Mississippi, how can one define who is rich or poor?

Finally, the composition of income groups changes over time due to income mobility. Of those in the lowest income quintile in 1979, only 14.2 percent remained in that quintile in 1988, and 14.7 percent had moved to the highest quintile. With such mobility, an increasing amount of income inequality can be a sign of progress, not decline.

Determining the distributional effects of a flat income tax or consumption tax is even more difficult. Thus, tax tables and unknown distributional effects should not be used to determine tax policy.

Sources: Diana Furchtgott-Roth, "Abuses of Income Distribution Tables in Tax Policy," On the Issues, January 1996, and R. Glenn Hubbard and Eric J. Toder, ""What's Fair? Income Distribution and National Policy," Conference Summary, January 1996, American Enterprise Institute, 1150 Seventeenth Street, NW, Washington, DC 20036, (202) 862-5800.