America’s top one percent has not been seeing a rising income share

From Tyler Cowen. 

"That is the topic of my latest Bloomberg column.  The opener is this:

Can a single self-published paper really refute decades of work by three famous economists? If the paper is the modestly titled “Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends,” then the answer — with qualifications — is yes.

And this:

Now, in their latest study, they arrive at a conclusion that will be startling to a lot of people: “Increasing government transfers and tax progressivity have resulted in rising real incomes for all income groups and little change in after-tax top income shares.”

More concretely, looking at pre-tax income, the share of the top 1% has gone up only 2.6 percentage points since the early 1960s. For after-tax income, top income shares haven’t changed much at all.

Auten and Splinter have a methodological explanation for why their results differ. The share of true income missing in tax data has increased over time, and they attempt to adjust for that discrepancy, as well as for how income is sheltered in corporations has changed. Auten and Splinter also include cash and in-kind transfers for the lower income groups, to better measure their true incomes.

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