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Business Incomes at the Top

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  • Wojciech Kopczuk
  • Eric Zwick

Abstract

Business income constitutes a large and increasing share of income and wealth at the top of the distribution. We discuss how tax policy treats and shapes how businesses are organized and how they distribute economic gains to owners, with the focus on closely held and pass-through firms. These considerations influence whether and how labor and capital income is observed in economic data and feed into research controversies regarding the measurement of inequality and the progressivity of the tax code. We discuss the importance of these issues in the United States and highlight that limited evidence from other countries suggests that they are likely to be important elsewhere.

Suggested Citation

  • Wojciech Kopczuk & Eric Zwick, 2020. "Business Incomes at the Top," Journal of Economic Perspectives, American Economic Association, vol. 34(4), pages 27-51, Fall.
    • Handle: RePEc:aea:jecper:v:34:y:2020:i:4:p:27-51
    DOI: 10.1257/jep.34.4.27
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    2. Adhikari, Bibek & Alm, James & Harris, Timothy F., 2021. "Small business tax compliance under third-party reporting," Journal of Public Economics, Elsevier, vol. 203(C).
    3. Jarkko Harju & Toni Juuti & Tuomas Matikka, 2023. "Stairway to Heaven? Selection into Entrepreneurship, Income Mobility and Firm Performance," Working Papers 17, Finnish Centre of Excellence in Tax Systems Research.
    4. Bukowski, Pawel & Novokmet, Filip, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," LSE Research Online Documents on Economics 110221, London School of Economics and Political Science, LSE Library.
    5. Francesco Furno, 2021. "The Macroeconomic Effects of Corporate Tax Reforms," Papers 2111.12799, arXiv.org.
    6. Nishant Yonzan & Branko Milanovic & Salvatore Morelli & Janet Gornick, 2022. "Drawing a Line: Comparing the Estimation of Top Incomes between Tax Data and Household Survey Data," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(1), pages 67-95, March.
    7. Kwon, Spencer Y. & Ma, Yueran & Zimmermann, Kaspar, 2022. "100 years of rising corporate concentration," SAFE Working Paper Series 359, Leibniz Institute for Financial Research SAFE.
    8. Zwick, Eric, 2023. "Comments on “Wealth inequality dynamics in Europe and the United States: Understanding the determinants” by Blanchet and Martínez-Toledano," Journal of Monetary Economics, Elsevier, vol. 133(C), pages 44-47.
    9. Bukowski, Pawel & Chrostek, Pawel & Novokmet, Filip & Skawinski, Marek, 2023. "Income inequality in the 21st century Poland," LSE Research Online Documents on Economics 121282, London School of Economics and Political Science, LSE Library.
    10. Andreas Bergh & Anders Kärnä, 2022. "Explaining the rise of populism in European democracies 1980–2018: The role of labor market institutions and inequality," Social Science Quarterly, Southwestern Social Science Association, vol. 103(7), pages 1719-1731, December.
    11. Bukowski, Pawel & Chrostek, Paweł & Novokmet, Filip & Skawiński, Marek, 2023. "Income inequality in the 21st century Poland," LSE Research Online Documents on Economics 121036, London School of Economics and Political Science, LSE Library.
    12. Ram Singh, 2022. "Do the Wealthy Underreport their Income? Analysing Relationship between Wealth and Reported Income in India," Working papers 331, Centre for Development Economics, Delhi School of Economics.
    13. Marius Leckelt & Johannes König & David Richter & Mitja D. Back & Carsten Schröder, 2022. "The personality traits of self-made and inherited millionaires," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-12, December.
    14. Burdín, Gabriel & De Rosa, Mauricio & Vigorito, Andrea & Vilá, Joan, 2022. "Falling inequality and the growing capital income share: Reconciling divergent trends in survey and tax data," World Development, Elsevier, vol. 152(C).
    15. Massenz, Gabriella, 2023. "On the behavioral effects of tax policy," Other publications TiSEM eb44a9f7-b859-480d-b2e4-4, Tilburg University, School of Economics and Management.
    16. Paweł Bukowski & Filip Novokmet, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," Journal of Economic Growth, Springer, vol. 26(2), pages 187-239, June.
    17. Mauricio De Rosa & Joan Vilá, 2022. "Beyond tax-survey combination: inequality and the blurry household-firm border," Documentos de Trabajo (working papers) 22-10, Instituto de Economía - IECON.
    18. Pawel Bukowski & Pawel Chrostek & Filip Novokmet & Marek Skawinski, 2023. "Income inequality in the 21st century Poland," CEP Discussion Papers dp1966, Centre for Economic Performance, LSE.

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    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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