For those of you who don’t think this is real, this was first developed by the IRS in 1976 during the Carter administration. I was stunned when I found out about it.
As far as I know it is not in the tax code and it should stay that way.
Yes, the concept has been around for a long time, buried away among the multiple alternative definitions of income that the economists have devised. “Income” is actually a quite slippery concept when you start looking at it closely. What do you count, and how?
IMHO, employer contributions to employee’s health insurance and pension plans should count as taxable income, as should all transfer payments including both Social Security and other welfare paynents. The insurance value of Medicare and Medicaid should count. Etc.
Inclusion of imputed rental income has never made intuitive sense to me for tax purposes, but the idea does make some sense if the purpose is to measure economic well-being on a consistent basis across the population, which I think is why the measure was first devised. A similar wrinkle is whether and how to count a number of wealth effects like the buildup of cash values in life insurance, unrealized capital gains, rising property values, etc. It’s fine to try to measure such things if one is trying to analyze the dynamics of wealth and income in the society, but transfering the concept into the tax arena is another matter. Of course, given that government is bankrupt, the lefties can be counted on to argue that if something can be measured, it can be taxed.