What Do Survey Data Tell Us about U.S. Businesses?

In a recent working paper published by the Federal Reserve Bank of Minneapolis, Anmol Bhandari, Serdar Birinci, Ellen McGrattan, and Kurt Gerrard See study the reliability of survey data for research on pass-through businesses activities in the United States. Pass-through businesses make up a significant portion of the US economy and have been a focus of recent tax reforms and debates about income inequality.

The paper concludes that there are major inconsistencies within survey data including business incomes, receipts, and numbers of returns. Misrepresentation occurs due to non-representative samples and measurement error, including respondents not referring to the appropriate tax documents, and framing of questions that lead to confusion by the respondents. The implications of this research are significant as accurate data is essential for policy decisions, academic research, and individual business evaluations.