New research from economists at the Treasury and Joint Committee on Taxation, (refereed by Emmanuel Saez and Richard Burkhauser) which accounts for government transfers, non-taxed income, taxes, other sources of pass-through income, and changes in the number of taxpayers per tax unit, finds income inequality has grown much less since 1960 than Piketty and Saez claim. The study finds:
“Our measure of consistent market income [pretax, pre-government transfers] indicates that between 1960 and 2015 the top one percent income share increased by less than 4 percentage points. Using unadjusted tax-based measures, Piketty and Saez (2003 and updates) estimated that the top market income share increased by 11 percentage points.”
The 1%’s share of after-tax income has only increased even less, only 1.6 percentage points of GDP since 1960, from 8.5% to 10.1% of GDP, with the 0.1% accounting for 1.4 of the 1.6 percentage point increase.
The study also finds that:
“The average tax burden of the top one percent (not including payroll taxes) was approximately the same percent of pre-tax income in 1960 and 2015, in spite of much lower statutory rates. Since the average tax burden of the bottom 90 percent declined over this period, this suggests that the overall tax system has become moderately more progressive. Considered separately, the combined effects of payroll taxes and social insurance benefits have also become more progressive.”
The study concludes:
“Changes in the top one percent income shares over the last half century are likely to have been relatively modest.”