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Recent Trends in U.S. Top Income Shares in Tax Record Data Using More Comprehensive Measures of Income Including Accrued Capital Gains

Author

Listed:
  • Jeff Larrimore
  • Richard V. Burkhauser
  • Gerald Auten
  • Philip Armour

Abstract

Access to IRS personal income tax records improves researchers’ ability to track U.S. income and inequality, especially at the very top of the distribution (Piketty and Saez 2003). However, rather than following standard Haig-Simons income definitions, tax form income measures were designed to implement the Internal Revenue Code. Using IRS tax record data since 1989 statistically matched to Survey of Consumer Finances and Census data for income sources not available in tax data, we explore the robustness of levels and trends in inequality using the top income literature’s tax return market income definition (Saez 2016) compared to more comprehensive income measures. We find that focusing solely on market income misses the important redistributive effects of government taxes and transfers. In addition, we find that the use of taxable realized capital gains changes the level and trend in top incomes relative to an accrued capital gains measure that is more consistent with Haig-Simons income definitions.

Suggested Citation

  • Jeff Larrimore & Richard V. Burkhauser & Gerald Auten & Philip Armour, 2016. "Recent Trends in U.S. Top Income Shares in Tax Record Data Using More Comprehensive Measures of Income Including Accrued Capital Gains," NBER Working Papers 23007, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23007
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    References listed on IDEAS

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    1. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2009. "Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data," Working Papers 09-26, Center for Economic Studies, U.S. Census Bureau.
    2. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
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    Cited by:

    1. Richard V. Burkhauser & Nicolas Hérault & Stephen P. Jenkins & Roger Wilkins, 2018. "Survey Under‐Coverage of Top Incomes and Estimation of Inequality: What is the Role of the UK's SPI Adjustment?," Fiscal Studies, John Wiley & Sons, vol. 39(2), pages 213-240, June.
    2. Jeff Larrimore & Jacob Mortenson & David Splinter, 2021. "Household Incomes in Tax Data: Using Addresses to Move from Tax-Unit to Household Income Distributions," Journal of Human Resources, University of Wisconsin Press, vol. 56(2), pages 600-631.
    3. Richard V. Burkhauser & Nicolas Hérault & Stephen P. Jenkins & Roger Wilkins, 2017. "Survey Under-Coverage of Top Incomes and Estimation of Inequality: What Is the Role of the UK’s SPI Adjustment?," Melbourne Institute Working Paper Series wp2017n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    4. Richard V. Burkhauser & Markus H. Hahn & Roger Wilkins, 2018. "Transitioning from an Historical to a Contemporary Use of Tax Record Data for Measuring Top Incomes in Australia," Economic Papers, The Economic Society of Australia, vol. 37(2), pages 113-145, June.
    5. David Gallusser & Matthias Krapf, 2019. "Joint Income-Wealth Inequality: An Application Using Administrative Tax Data," CESifo Working Paper Series 7876, CESifo.

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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