Income Inequality and the Incomes of Very High Income Taxpayers: Evidence from Tax Returns
This paper uses tax return data for the period 1951-1990 to investigate the rising share of adjusted gross income (AGI) that is reported on very high income tax returns. We find that most of the increase in the share of AGI reported by high-income taxpayers is due to an increase in reported income for the one quarter of one percent of taxpayers with the highest AGIs. The share of total AGI reported by these taxpayers rose slowly in the early 1980s, and increased sharply in 1987 and 1988. This pattern suggests that at least part of the increase in the income share of high-AGI taxpayers was due to the changing tax incentives that were enacted in the 1986 Tax Reform Act. By lowering marginal tax rates on top-income households from 50% to 28%, TRA86 reduced the incentive for these households to engage in tax avoidance activities. We also find substantial differences in the growth of the income share of the highest one quarter of one percent of taxpayers, and the share of other very high income taxpayers. This suggests that the increasing inequality of reported incomes at very high levels may not be driven by the same factors that have generated widening wage inequality throughout the income distribution and over a longer time period.
|Date of creation:||Dec 1992|
|Publication status:||published as Tax Policy and the Economy, Vol. 7, edited by James Poterba. Cambridge, MA: The MIT Press, 1993.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kevin M. Murphy & Finis Welch, 1992. "The Structure of Wages," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 285-326.
- Lawrence F. Katz & Kevin M. Murphy, 1992.
"Changes in Relative Wages, 1963–1987: Supply and Demand Factors,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 107(1), pages 35-78.
- Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc.
- Katz, L.F. & Murphy, K.M., 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Harvard Institute of Economic Research Working Papers 1580, Harvard - Institute of Economic Research.
- Woodbury, Stephen A & Hamermesh, Daniel S, 1992. "Taxes, Fringe Benefits and Faculty," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 287-296, May.
- Stephen A. Woodbury & Daniel S. Hamermesh, "undated". "Taxes, Fringe Benefits, and Faculty," Upjohn Working Papers and Journal Articles saw1992, W.E. Upjohn Institute for Employment Research.
- Daniel S. Hamermesh & Stephen A. Woodbury, 1990. "Taxes, Fringe Benefits and Faculty," NBER Working Papers 3455, National Bureau of Economic Research, Inc.
- Scholes, Ms & Wilson, Gp & Wolfson, Ma, 1992. "Firms Responses To Anticipated Reductions In Tax Rates - The Tax-Reform Act Of 1986," Journal of Accounting Research, Wiley Blackwell, vol. 30, pages 161-185.
- Myron S. Scholes & G. Peter Wilson & Mark A. Wolfson, 1992. "Firms' Responses to Anticipated Reductions in Tax Rates: The Tax Reform Act of 1986," NBER Working Papers 4171, National Bureau of Economic Research, Inc.
- R. Quandt, 1966. "Old and new methods of estimation and the pareto distribution," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 10(1), pages 55-82, December.
- Roger H. Gordon & Jeffrey K. MacKie-Mason, 1990. "Effects of the Tax Reform Act of 1986 on Corporate Financial Policy and Organizational Form," NBER Working Papers 3222, National Bureau of Economic Research, Inc.
- Poterba, James M, 1987. "Tax Evasion and Capital Gains Taxation," American Economic Review, American Economic Association, vol. 77(2), pages 234-239, May.
- James M. Poterba, 1987. "Tax Evasion and Capital Gains Taxation," NBER Working Papers 2119, National Bureau of Economic Research, Inc.
- James M. Poterba, 1987. "Tax Evasion and Capital Gains Taxation," Working papers 436, Massachusetts Institute of Technology (MIT), Department of Economics.
- Barry Bosworth & Gary Burtless, 1992. "Effects of Tax Reform on Labor Supply, Investment, and Saving," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 3-25, Winter.
- Hausman, Jerry A & Poterba, James M, 1987. "Household Behavior and the Tax Reform Act of 1986," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 101-119, Summer.
- Jerry A. Hausman & James M. Poterba, 1986. "Household Behavior and the Tax Reform Act of 1986," Working papers 437, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jerry A. Hausman & James M. Poterba, 1987. "Household Behavior and the Tax Reform Act of 1986," NBER Working Papers 2120, National Bureau of Economic Research, Inc.
- Alan J. Auerbach, 1988. "Capital Gains Taxation in the United States: Realizations, Revenue, and Rhetoric," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 595-638.
- Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-858, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4229. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.