Question

How is personal income calculated from private income?

Answer 1

Personal income is calculated from private income by subtracting those parts of private income that are not actually received by individuals. These include:

• Undistributed profits (also called retained earnings),
• Corporate tax (paid by firms to the government),
• Retained earnings of foreign companies, and
• Contributions made by enterprises to social security schemes.

Personal Income = Private Income − Undistributed Profits − Corporate Tax − Retained Earnings of Foreign Companies − Contributions to Social Security Schemes