Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends

Abstract

Top income share estimates based only on individual tax returns (Piketty and Saez, 2003) are biased by tax-base changes, major social changes, and missing income sources. Addressing these issues requires numerous assumptions, especially for broadening income beyond that reported on tax returns. This paper shows the effects of adjusting for technical tax issues and the sensitivity to alternative assumptions for distributing missing income sources. Our estimates of the distribution of national income suggest that since 1980 top income shares are lower and have increased less than other tax-based studies. Since the early 1960s, increasing government transfers and tax progressivity have resulted in little change in after-tax top income shares. data Views and opinions expressed are of the and do official Treasury or policy. This paper embodies the of the Joint Committee on but as members of both and both houses of the Joint Committee