Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data
Although the vast majority of US research on trends in the inequality of family income is based on public-use March Current Population Survey (CPS) data, a new wave of research based on Internal Revenue Service (IRS) tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates can largely be reconciled once one uses internal CPS data (which better captures the top of the income distribution than public-use CPS data) and defines the income distribution in the same way. Using internal CPS data for 1967-2006, we closely match the IRS data-based estimates of top income shares reported by Piketty and Saez (2003), with the exception of the share of the top 1 percent of the distribution during 1993-2000. Our results imply that, if inequality has increased substantially since 1993, the increase is confined to income changes for those in the top 1 percent of the distribution.
The research in this paper was conducted while Burkhauser and Larrimore were Special Sworn Status researchers of the U.S. Census Bureau at the New York Census Research Data Center at Cornell University. Conclusions expressed are those of the authors and do not necessarily reflect the views of the U.S. Census Bureau. This paper has been screened to ensure that no confidential data are disclosed. Supports for this research from the National Science Foundation (award nos. SES-0427889, SES-0322902, and SES-0339191) and the National Institute for Disability and Rehabilitation Research (H133B040013 and H133B031111) are cordially acknowledged. Jenkins's research was supported by core funding from the University of Essex and the UK Economic and Social Research Council for the Research Centre on Micro-Social Change and the United Kingdom Longitudinal Studies Centre. We thank Ian Schmutte, the Cornell Census RDC Administrators, and all their U.S. Census Bureau colleagues who have helped with this project. We also thank Melissa Kearney, Andrew Leigh, Robert Moffitt, Thomas Piketty, and Emmanuel Saez for their helpful comments and suggestions on earlier drafts of this paper. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Burkhauser, Richard V., Shuaiz hang Feng, Stephen Jenkins and Jeff Larrimore. “Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data.” Review of Economics and Statistics , 94 (2) (May): 371 - 388.