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

50 Pages Posted: 3 Jan 2017

See all articles by Jeff Larrimore

Jeff Larrimore

Board of Governors of the Federal Reserve System

Richard V. Burkhauser

Cornell University - Department of Policy Analysis & Management (PAM); University of Melbourne, Melbourne Institute

Gerald Auten

Government of the United States of America - Department of the Treasury

Philip Armour

Cornell University

Date Written: December 2016

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

Larrimore, Jeff and Burkhauser, Richard V. and Auten, Gerald and Armour, Philip, Recent Trends in U.S. Top Income Shares in Tax Record Data Using More Comprehensive Measures of Income Including Accrued Capital Gains (December 2016). NBER Working Paper No. w23007, Available at SSRN: https://ssrn.com/abstract=2892431

Jeff Larrimore (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
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Richard V. Burkhauser

Cornell University - Department of Policy Analysis & Management (PAM) ( email )

120 Martha Van Rensselaer Hall
Ithaca, NY 14853
United States

University of Melbourne, Melbourne Institute ( email )

Level 5, FBE Building, 111 Barry Street
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Carlton, VIC 3053
Australia

Gerald Auten

Government of the United States of America - Department of the Treasury ( email )

Philip Armour

Cornell University ( email )

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