Editing Disposable income

{{Short description|Total personal income minus current income taxes}}
{{For|the album by Snuff|Disposable Income (album)}}

[[File:Household spending United States.png|thumb|300px|right|Median American household disposable income <br> Not including [[Sales taxes in the United States|sales tax]] or [[Property tax in the United States|property tax]]]]
[[File:Denmark disposable income.webp|thumb|300px|Denmark disposable income after tax<br> Not including [[value-added tax]] or [[property tax]]]]
[[File:Germany disposable income after taxes.webp|thumb|300px|Germany disposable income after taxes <br> Not including [[value-added tax]] or [[property tax]]]]

'''Disposable income''' is total [[personal income]] minus current [[income tax|taxes on income]].<ref>{{Cite web |url=https://www.census.gov/hhes/www/income/publications/cpsdataquality101504.pdf |title=Income Data Quality Issues in the Annual Social and Economic Supplement to the Current Population Survey  |access-date=2017-12-07 |archive-url=https://web.archive.org/web/20151014173331/http://www.census.gov/hhes/www/income/publications/cpsdataquality101504.pdf |archive-date=2015-10-14 |url-status=dead }}</ref> In [[National accounts|national accounting]], [[personal income]] minus [[income tax|personal current taxes]] equals disposable personal income or household disposable income.<ref>{{Cite web |url=http://www.bls.gov/bls/fesacp1061104.pdf |title=Alternative Measures of Household Income: BEA Personal Income, CPS Money Income, and Beyond|first1=John|last1=Ruser|first2=Adrienne|last2=Pilot|first3=Charles|last3=Nelson|website=[[U.S. Bureau of Labor Statistics]]|access-date=2013-08-23 |archive-url=https://web.archive.org/web/20140611175537/http://www.bls.gov/bls/fesacp1061104.pdf |archive-date=2014-06-11 |url-status=dead }}</ref> Subtracting personal outlays (which includes the major category of [[personal consumption expenditures price index|personal [or private] consumption expenditure]]) yields personal (or, private) [[savings]], hence the income left after paying away all the taxes is referred to as disposable income.

Restated, consumption expenditure plus savings equals disposable income<ref>https://portal.wsiz.rzeszow.pl/plik.aspx?id=12166 {{dead link|date=May 2022}}</ref> after accounting for transfers such as payments to children in school or elderly parents' living and care arrangements.<ref>{{cite web|url=http://www.parl.gc.ca/information/library/PRBpubs/prb0520-e.htm|title=Research Publications|website=www.parl.gc.ca|access-date=27 May 2017|archive-url=https://web.archive.org/web/20070821132452/http://www.parl.gc.ca/information/library/PRBpubs/prb0520-e.htm|archive-date=21 August 2007|url-status=dead}}</ref>

The [[marginal propensity to consume]] (MPC) is the fraction of a change in disposable income that is consumed. For example, if disposable income rises by $100, and $65 of that $100 is consumed, the MPC is 65%. Restated, the marginal propensity to save is 35%.

For the purposes of calculating the amount of income subject to garnishments, United States' federal law defines disposable income as an individual's compensation (including salary, overtime, bonuses, commission, and paid leave) after the deduction of health insurance premiums and any amounts required to be deducted by law. Amounts required to be deducted by law include federal, state, and local taxes, state unemployment and disability taxes, social security taxes, and other garnishments or levies, but does not include such deductions as voluntary retirement contributions and transportation deductions. Those deductions would be made only after calculating the amount of the garnishment or levy.<ref>{{cite web |title= 31 CFR 285.11 |work= Legal Information Institute |publisher= Cornell University |access-date= June 29, 2012 |url= https://www.law.cornell.edu/cfr/text/31/285.11 }}</ref> The definition of disposable income varies for the purpose of state and local garnishments and levies.

The [[consumer leverage ratio]] is the expression of the ratio of total [[household debt]] to disposable income.<ref>{{cite web |url=https://www.bankingsupervision.europa.eu/framework/legal-framework/public-consultations/pdf/internal_models_risk_type_chapters/ssm.guide_to_internal_models_risk_type_chapters_201809.en.pdf |title=ECB guide to internal models |publisher=[[European Central Bank]] |quote=The consumer leverage ratio can be calculated as the ratio of total household debt to disposable personal income. |p=50}}</ref>

==Meanings of disposable income==
Disposable income can be understood as: 

* National disposable income of a country: The national income minus current transfers (current taxes on income, wealth etc., social contributions, social benefits and other current transfers), plus current transfers receivable by resident units from the rest of the world.<ref>{{cite web |title=Glossary:National disposable income |publisher=[[Eurostat]] |url=https://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:National_disposable_income |access-date=2021-05-03}}</ref>
* Disposable personal (or family/household) income: The income that individuals or households have for their spending.

==Discretionary income==
'''Discretionary income''' is disposable income (after-tax income), minus all payments that are necessary to meet current bills. It is total personal income after subtracting taxes and minimal survival expenses (such as food, medicine, rent or [[Mortgage loan|mortgage]], utilities, insurance, transportation, property maintenance, child support, etc.) to maintain a certain [[standard of living]].<ref>{{cite web |last=Linden |first=Fabian |title=A Marketer's Guide to Discretionary Income (abstract) |publisher=US Department of Education |year=1998 |url=http://www.eric.ed.gov/ERICWebPortal/custom/portlets/recordDetails/detailmini.jsp?_nfpb=true&_&ERICExtSearch_SearchValue_0=ED310997&ERICExtSearch_SearchType_0=no&accno=ED310997 |access-date=2007-12-27}}</ref> Expenses that persist with zero income are termed [[autonomous consumption]]. Discretionary income is the amount of an individual's income available for spending after the essentials have been taken care of:

<math>\text{Discretionary income}</math>
:<math>= (\text{Gross income} - \text{taxes}) - \text{all compelled payments}</math>
:<math>= (\text{Disposable income}) - \text{autonomous spending}</math>

The term "disposable income" is often incorrectly used to denote discretionary income. For example, people commonly refer to disposable income as the amount of "play money" left to spend or save.{{Citation needed|date=February 2025}}

== In the national accounts ==
The [[System of National Accounts|system of national accounts]] defined the concept of disposable income for all institutional sectors of the economy. For corporations it is equal to [[Retained earnings|profit retained]], and for the government it is equal to [[Tax|taxes]] + income received from [[Public company|public corporation]]. The sum of disposable income across all institutional sectors is called the national disposable income.<ref>{{Cite web |title=Glossary:National disposable income |url=https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Glossary:National_disposable_income |access-date=2024-11-12 |website=ec.europa.eu |language=en}}</ref>{{citation needed|date=November 2024}}

== See also ==
* [[List of countries by disposable income]]
* [[List of countries by GNI per capita growth]]

==References==
{{Reflist}}

==External links==
* [https://web.archive.org/web/20050123214555/http://disposableincome.net/ A simple discretionary income calculator]—even though this says it's measuring "disposable income," using the economist's language, it's discretionary income.
* Eurostat, News Release No. 60/2010, [https://web.archive.org/web/20100602043608/http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-30042010-CP/EN/2-30042010-CP-EN.PDF Household Savings and Disposable Income], 30 April 2010
* Eurostat, Statistics Explained, Glossary article: [http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/National_disposable_income National Disposable Income]
* [http://stats.oecd.org/wbos/index.aspx?datasetcode=sna_table2 OECD Disposable income statistics]
* [http://www.google.com/publicdata/explore?ds=a7jenngfc4um7_&ctype=l&strail=false&nselm=h&met_y=disposable_personal_income&hl=en&dl=en Google – public data]: GDP and Personal Income of the U.S. (annual): Disposal Personal Income
* [http://www.google.com/publicdata/explore?ds=a7jenngfc4um7_&ctype=l&strail=false&nselm=h&met_y=per_capita_disposable_personal_income&hl=en&dl=en Google – public data]: GDP and Personal Income of the U.S. (annual): Disposal Personal Income per capita

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[[Category:Personal taxes]]
[[Category:Household income]]
[[Category:Family economics]]
[[Category:National accounts]]