Comments on Progressive Taxation conference on ... · 10/18/2019 · “Facts” about wealth...

Comments on Progressive Taxation conference on “Rethinking InequalityPolicies”

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Wojciech Kopczuk Columbia University

Peterson Institute for International Economics October 2019

“Facts” about wealth inequality — Saez-Zucman (2019)

(a) Top 0.1% wealth share

5%

0%

10%

15%

20%

25%

1913

1918

1923

1928

1933

1938

1943

1948

1953

1958

1963

1968

1973

1978

1983

1988

1993

1998

2003

2008

2013

ltiplierEsta (adju

te mu sted)

SCF+Forbes 400

Capitalization

Revised capitalization

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“Facts” about wealth inequality —Smith-Zidar-Zwick (2019)

A. Top 0.1% Share of Total Wealth

510

1520

25S

hare

of T

otal

Hou

seho

ld W

ealth

(%)

1915 1925 1935 1995 2005 20151945 1955 1965 1975 1985

Baseline Saez and Zucman (2016)Estate tax data (Kopczuk and Saez, 2004) Our Preferred EstimateRaw SCFRaw SCF + Forbes 400

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“Facts” about income inequality

0%4/22

5%

10%

15%

20%

1960 1970 1980 1990 2000 2010

Auten-Splinter

PSZ

PSZ vs AS — imputations, things we do notknow

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Table 4: Decomposition of top one percent income shares by approaches

Auten-Splinter approach PSZ approach Percentage point Percentage point

1962 1979 2014 1979–2014 1962–2014

Pre-tax incomeUnderreported income by IRS audit data Underreported income by positive income 0.1 1.0 2.2 1.2 2.1Include distributed & other retirement income PSZ private retirement distribution 0.3 0.2 1.3 1.1 1.1Non-retirement pre-tax corporate income PSZ non-retirement pre-tax corp. income 0.5 0.2 0.7 0.4 0.2Other taxes by disposable income less savings Other taxes by factor income less savings 0.4 0.2 0.7 0.5 0.3Various corrections to tax income definition Use uncorrected tax return market income -0.1 -0.1 0.4 0.6 0.5Imputed rent by property tax deductions Imputed rent by housing wealth estimates 0.5 0.2 0.3 0.1 -0.2Limit returns to adult residents No adjustment -0.1 0.2 0.2 -0.1 0.3Groups by individuals/size-adjusted incomes Groups by adults/equal-split married inc. -0.2 0.1 0.2 0.1 0.4Non-profits/govt. income half per capita Non-profits/govt. income all by income * * 0.1 * *Social insurance benefits/deficit excluded Social insur. ben./def. incl., taxes deducted 0.2 * -0.1 -0.1 -0.2Federal Reserve payments by mortgage interest Fed. Res. payments by income * * 0.1 0.1 0.1Inflation correction No correction * -0.5 -0.1 0.5 *

Pre-tax differences (PSZ less AS) & totals 1.6 1.7 5.9 4.3 4.4

After-tax incomeGovt. consumption allocated half per capita Govt. consumption all by after-tax income 0.8 0.7 1.2 0.5 0.4Non-SS deficits by federal income taxes Half by government transfers, half taxes -0.2 0.1 0.6 0.5 0.7Government transfers as described in text PSZ transfers distribution -0.3 -0.2 * 0.2 0.3Estate tax by prior decade decedent income Estate tax by wealth distribution * * * * *Corporate taxes by wages and corp. ownership Corporate taxes by capital ownership -0.2 -0.3 -0.3 * -0.1Other taxes by disposable income less savings Other taxes by factor income less savings -0.2 -0.1 -0.3 -0.2 -0.1After-tax differences (PSZ less AS) & totals 0.2 0.3 1.1 0.8 0.9

level difference difference in changes

“Facts” about progressivity — SZ (2019) vs PSZ (2018)

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International comparisons — data problems in Norway(!), Alstadsæter et al. (2019)

0.05

0.10

0.15

0.20

0.25

Shar

e of

tota

l inc

ome

accr

uing

to to

p1%

● ● ● ● ●

●● ● ● ● ● ● ●

● Overall Income before Capital Gains and Dividends,ICOverall Income with Dividends before Capital Gains, IB

0.002000 2002 2004 2006 2008 2010 2012 7/22

BOverall Income with Dividends and Capital Gains, ICG


0.05

0.10

0.15

0.20

0.25

Shar

e of

tota

l inc

ome

accr

uing

to to

p1%

● ● ● ● ●

●● ● ● ● ● ● ●

● Overall Income before Capital Gains and Dividends,ICOverall Income with Dividends before Capital Gains, IB

0.002000 2002 2004 2006 2008 2010 2012 8/22

Overall Income with Dividends and Capital Gains, ICGB

Overall Income with Retained Earnings before Capital Gains, ID


0.05

0.10

0.15

0.20

0.25

Shar

e of

tota

l inc

ome

accr

uing

to to

p1%

●

●

●●

●

●

●● ● ● ● ● ●

● Overall Income with Dividends before Capital Gains,IBOverall Income, Imputed Based on DividendsOverall Income with Retained Earnings before Capital Gains, ID

0.002000 2002 2004 2006 2008 2010 2012 9/22

Revenue (%GDP) — VAT andexcise%

GD

P

10

20

30

40

Revenue: 25.9%

Revenue: 32.7%

Revenue: 34.0%

4.4% 6.8%

Highest VAT revenue: Denmark 9.4%New Zealand 9.4%Hungary 9.3%Sweden 9.2%Finland 9.1%

Specific/excise VAT Sales All other sources

0United States Canada OECD − Average

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Revenue (%GDP) — income and corporatetax

10

20

30

40

All consumption Corporate Income All other sources


11/22

Revenue (%GDP) — Social Security and payroll taxes

10

20

30

40

Consumption+Income+Corporate


12/22

Social Security/payroll All other sources

Revenue (%GDP) — estate/gift and wealth taxes

10

20

30

40

All other sources Wealth Estate, gift, inheritance


13/22

Incidence changes

14/22


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