Le Financial Times didn’t come back. “How would you feel if you discovered that income inequality in the United States has not increased over the last sixty years? That the rich have not taken the lion’s share of economic growth since the 1980s; and that the poorest half of American society had roughly the same share of total income in 2020 as in 1960? I suspect that many, like me, would experience pleasure tinged with skepticism”writes the British daily.
Yet this is what emerges from the very serious study written by economists Gerald Auten and David Splinter, members of the Treasury Department and Congress respectively, and which has just been accepted by the Journal of Political Economy from the University of Chicago (“ Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends “).
The authors start from the same data as those used by French economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman – nicknamed “PSZ” – but reach opposite conclusions. The figures from American tax returns, which have fueled the “PSZ” thesis on American inequality since the conservative revolution of Ronald Reagan, show that the share of pre-tax income (including capital gains) earned by the top 1% rich increased from 9% of the total in 1960 and 1979 to 19.4% in 2019.
Except that MM. Auten and Splinter make very important technical corrections to these raw figures (on the impact of the 1985 tax reform, on the number of households, which is different from that of the tax declarations and evolved differently with the collapse marriage which did not affect the rich) and methods – they reintegrate employer contributions, taxes, financial transfers and state benefits.
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Ultimately, they reach the conclusion that the share of income of the richest 1% has increased from 7.4% to 8.8% only in forty years. “Using only income from tax returns, Piketty and Saez argued that the 1 percent’s share of income had more than doubled since 1962. This analysis, however, did not include transfers and other sources of income not included in individual tax returns, nor the effects of major tax reforms and changes in marriage rates. As a result, it gave a distorted picture of the level and trend of inequality”the authors conclude. “The growth of transfers and the progressivity of the tax offset the increase in the share of highest income before taxes”they write.
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