Income inequality is still a huge problem , but it hasn ’ t been growing as quickly as some statistics indicate .

AN 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 .

Some background : Economists Thomas Piketty , Emmanuel Saez and Gabriel Zucman have written extensively about wealth and income inequality . From their academic posts at the School for Advanced Studies in the Social Sciences in Paris and the University of California at Berkeley , they ( and others ) have made a more specific claim : When it comes to income , the top 1 % in the U . S . has pulled away from the pack . Their finding became so deeply ingrained in the public consciousness that it was embodied in an Occupy Wall Street slogan , “ We are the 99 %!”

It now seems this claim is wrong , or at the very least unproven . That is partly because of the work of Gerald Auten and David Splinter , both of whom work for the U . S . government ( the Treasury Department and the congressional Joint Committee on Taxation , respectively ). Both have stellar reputations for understanding what the numbers mean ; their previous

Measuring The Income Of America ’ s Top 1 %

Research by Gerald Auten and David Splinter differs significantly from that of other economists .

■ Piketty-Saez-Zucman ■ Auten-Splinter ■ Piketty-Saez * Share Of Pretax National Income 20 %

15 %

10 %

5 % 1960 2019

Share Of Post-Tax National Income 20 %

Source : Gerald Auten and David Splinter , “ Income Inequality in the United States : Using Tax Data to Measure Long- Term Trends .” * Excludes capital gains from fiscal income to be more comparable to national income .

15 %

10 %

5 % 1960 2019 papers had significant impact on how tax data is understood .

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 aftertax top income shares .”

More concretely , in terms of pretax 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 the way income 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 .

Splinter has explored this theme of underreported income in detail in previous work , directly comparing his results to those of Piketty , Saez and Zucman . It appears that Auten and Splinter really do have more complete numbers .

And the earlier records of Piketty , Saez and Zucman are controversial . continued on page 58

60 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2023 WWW . FA-MAG . COM