In the ACS survey, I noticed that the income wage variable- incwage- is capped. In 2016, it was capped at $504,000, at 2015 at $483,000. how was the capping level determined? why is there a cap at all? thanks for your help answering my questions.
Income values are top-coded in order to preserve confidentiality within public use data. Above some threshold of income there are fewer and fewer individuals, and therefore without top-codes it could be possible to identify individuals in the public use data. In order to prevent this from happening the U.S Census Bureau implements a top-coding scheme. The specific top-code value depends on the specific sample of data you are using. These details can be seen on the Codes Tab. In particular, in ACS samples, the top-code represents the average income of those within the 99.5th percentile within each state.