In the U.S., it is the presence of great inequality of wealth that undermines people’s feeling of well-being and also places them at a disadvantage relative to their fellow citizens. From the article:

Since relative deprivation confers many of the disadvantages of absolute deprivation, it should be reflected in the poverty statistics. A simple way to do this would be to classify a household as impoverished if its pre-tax income was, say, less than half the median income—the income of the household at the center of the income-distribution curve. In 2004, the median pre-tax household income was $44,684; a poverty line based on relative deprivation would have been $22,342. (As under the current system, adjustments could be made for different family sizes.)

The following outlines the components of income included in the CBO’s analysis:

* Cash income, taxable and tax exempt, including wages, salaries, self-employment income, rents, taxable and nontaxable interest, dividends, realized capital gains, cash transfer payments, and retirement benefits
* Business taxes, including corporate income taxes, the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes (imputed to households, as per the assumptions on tax incidence above)
* Employees contributions to 401(k) retirement plans
* All in-kind benefits (Medicare, Medicaid, employer-paid health insurance premiums, food stamps, school lunches and breakfasts, housing assistance, and energy assistance)

Note that CBO:

* uses the Census Bureau’s fungible value measure for government in-kind transfers;
* does not adjust capital gains for inflation, and does not include unrealized capital gains or imputed rents on owner-occupied housing (see [1], pp. 23–24); and,
* double counts retirement income (see [1], p. 21).