Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends

By Gerald Auten & David Splinter. Gerald Auten is with The Office of Tax Analysis, U.S. Treasury Department. Splinter  is with The Joint Committee on Taxation, U.S. Congress.

"Abstract 

Concerns about income inequality emphasize the importance of accurate income measures. Estimates of top income shares based only on individual tax returns are biased by tax-base changes, social changes, and missing income sources. This paper addresses these shortcomings and presents new estimates of the distribution of national income since 1960. Our analysis of pre-tax income shows that top income shares are lower and have increased less since 1980 than other studies using tax data. In addition, 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."