Question of the day: How do you handle personal consumption deductions for high wage earners?

In injury and death cases, personal consumption, or the amount the deceased would have consumed personally on services and personal upkeep products, must be taken out. This is well known. There is a lot of information on the spending patterns of lower income, middle income and even upper middle income individual earners. According the personal consumption for the deceased in an injury or wrongful death case involving these persons can be determined with a relatively high degree of certainty.

However for the top 1% or more ($200k or more a year) of earners there is little data available for the group. In short, social scientists know very little about the spending patterns of this group, so determining the personal consumption factor for the deceased in a case involving a very high wage earner is difficult.

Most tables of personal consumption factors does not have factors for income levels over $150,000. See for example the Patton Nelson tables, which are relied upon routinely in injury and wrongful death damage calculations.

For this group, one of two assumptions can be made. One, some economists just assume that earners with income greater than $150,000 have personal expenditure habits that are the same as the top earners in the available data.

The problem with this approach is that the statistical models that estimate personal consumption, show that personal consumption factor decreases as the income level increases.

According, other economists use the equations shown in the research papers to directly calculate the personal consumption factor for the deceased specific income. Using this approach for example would suggest about a 3.5% personal consumption factor for a person (with only a wife) earning $2.0 million a year. In contrast, the highest earners in the available data spend 10.0% on personal expenditures.

Which is correct?