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Drawing a Line: Comparing the Estimation of Top Incomes Between Tax Data and Household Survey Data

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  • Nishant Yonzan
  • Branko Milanovic
  • Salvatore Morelli
  • Janet Gornick

Abstract

The paper uses the flexibility of household survey data to align their income categories and recipient units with the income categories and units found in data produced by tax authorities. Our analyses, based on a standardized definition of fiscal income, allow us to locate, for top-income groups, the sources of discrepancy. We find, using the cases of the United States, Germany, and France, that the results from survey-based and tax data correspond extremely well (in terms of total income, mean income, composition of income, and income shares) above the 90th percentile and up to the top 1 percent of the distribution. Information about income composition, available in the US, allows us to investigate the determinants of this gap in the US. About three-fourths of the tax/survey gap is due to di˙erences in non-labor incomes, especially self-employment (business) income. The gap itself may be due to tax-induced re-classification of income from corporate to personal or/and to lower ability of surveys to capture top 1 percent incomes.

Suggested Citation

  • Nishant Yonzan & Branko Milanovic & Salvatore Morelli & Janet Gornick, 2021. "Drawing a Line: Comparing the Estimation of Top Incomes Between Tax Data and Household Survey Data," LIS Working papers 805, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:805
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    Cited by:

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    2. Assouad, Lydia, 2023. "Rethinking the Lebanese economic miracle: The extreme concentration of income and wealth in Lebanon, 2005–2014," Journal of Development Economics, Elsevier, vol. 161(C).
    3. Milanovic, Branko, 2024. "The three eras of global inequality, 1820–2020 with the focus on the past thirty years," World Development, Elsevier, vol. 177(C).
    4. Petar Peshev & Kristina Stefanova & Ivan Bozhikin & Radostina Stamenova & Ivanina Mancheva, 2022. "Is income inequality in Bulgaria underestimated in survey data?," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 301-326.

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    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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