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

Income Inequality in the United States: Using Tax Data to Measure Long-term Trends. Gerald Auten, David Splinter. November 12, 2017. http://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequality.pdf

Abstract: Previous studies using U.S. tax return data, such as Piketty and Saez (2003), concluded that top one percent income shares increased substantially since 1960. But tax return based measures are biased by tax base changes and missing income sources. Accounting for these limitations reduces the increase in top one percent income shares by two-thirds. Further, accounting for government transfers reduces the increase over 80 percent. After-tax income results are similar. This shows that unadjusted tax return based measures present a distorted view of inequality because incomes reported on tax returns are sensitive to tax law changes and omit significant income sources.

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Update to Using Tax Data to Measure Long-Term Trends in U.S. Income Inequality. Gerald Auten and David Splinter. Draft Paper, Annual Conference, ASSA Annual Meeting, 2017. http://www.bipartisanalliance.com/2017/09/using-tax-data-to-measure-long-term.html