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Piketty and Saez Revisited

Summary:
This paper by Gerald Auten (Office of Tax Analysis, U.S. Treasury Department) and David Splinter (Joint Committee on Taxation) seems important.  The abstract (emphasis added):Top income share estimates based only on individual tax returns, such as Piketty and Saez (2003), are biased by tax-base changes, major social changes, and missing income sources. Addressing these issues requires numerous assumptions, especially for broadening income beyond that reported on tax returns. This paper shows the effects of adjusting for technical tax issues and the sensitivity to alternative assumptions for distributing missing income sources. Our results suggestthat top income shares are lower than other tax-based estimates, and since the early 1960s, increasing government transfers and tax

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This paper by Gerald Auten (Office of Tax Analysis, U.S. Treasury Department) and David Splinter (Joint Committee on Taxation) seems important.  The abstract (emphasis added):

Top income share estimates based only on individual tax returns, such as Piketty and Saez (2003), are biased by tax-base changes, major social changes, and missing income sources. Addressing these issues requires numerous assumptions, especially for broadening income beyond that reported on tax returns. This paper shows the effects of adjusting for technical tax issues and the sensitivity to alternative assumptions for distributing missing income sources. Our results suggestthat top income shares are lower than other tax-based estimates, and since the early 1960s, increasing government transfers and tax progressivity resulted in little change in after-tax top income shares.

A key figure:

Piketty and Saez Revisited
Click on graphic to enlarge.
Greg Mankiw
I am the Robert M. Beren Professor of Economics at Harvard University, where I teach introductory economics (ec 10). I use this blog to keep in touch with my current and former students. Teachers and students at other schools, as well as others interested in economic issues, are welcome to use this resource.

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