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Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data

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  • Richard V. Burkhauser
  • Shuaizhang Feng
  • Stephen P. Jenkins
  • Jeff Larrimore

Abstract

Although the vast majority of US research on trends in the inequality of family income is based on public-use March Current Population Survey (CPS) data, a new wave of research based on Internal Revenue Service (IRS) tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates can largely be reconciled once one uses internal CPS data (which better captures the top of the income distribution than public-use CPS data) and defines the income distribution in the same way. Using internal CPS data for 1967–2006, we closely match the IRS data-based estimates of top income shares reported by Piketty and Saez (2003), with the exception of the share of the top 1 percent of the distribution during 1993–2000. Our results imply that, if inequality has increased substantially since 1993, the increase is confined to income changes for those in the top 1 percent of the distribution.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15320.

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Date of creation: Sep 2009
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Publication status: published as Burkhauser, Richard V., Shuaiz hang Feng, Stephen Jenkins and Jeff Larrimore. “Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data.” Review of Economics and Statistics , 94 (2) (May): 371 - 388.
Handle: RePEc:nbr:nberwo:15320

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  1. Stephen P. Jenkins & Shuaizhang Feng & Richard V. Burkhauser, 2007. "Using the P90/P10 Index to Measure US Inequality Trends with Current Population Survey Data: A View from Inside the Census Bureau Vaults," Working Papers 72, ECINEQ, Society for the Study of Economic Inequality.
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  3. Jenkins, Stephen P. & Burkhauser, Richard V. & Feng, Shuaizhang & Larrimore, Jeff, 2009. "Measuring Inequality Using Censored Data: A Multiple Imputation Approach," IZA Discussion Papers 4011, Institute for the Study of Labor (IZA).
  4. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2008. "Estimating Trends in U.S. Income Inequality Using the Current Population Survey: The Importance of Controlling for Censoring," Working Papers, Center for Economic Studies, U.S. Census Bureau 08-25, Center for Economic Studies, U.S. Census Bureau.
  5. Daniel R. Feenberg & James M. Poterba, 1993. "Income Inequality and the Incomes of Very High-Income Taxpayers: Evidence from Tax Returns," NBER Chapters, in: Tax Policy and the Economy, Volume 7, pages 145-177 National Bureau of Economic Research, Inc.
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  20. Stephen P. Jenkins, 2009. "Distributionally-Sensitive Inequality Indices And The Gb2 Income Distribution," Review of Income and Wealth, International Association for Research in Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 392-398, 06.
  21. Fabien Dell, 2005. "Top Incomes in Germany and Switzerland Over the Twentieth Century," Journal of the European Economic Association, MIT Press, MIT Press, vol. 3(2-3), pages 412-421, 04/05.
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