tag:blogger.com,1999:blog-26706564.post115222425580125464..comments2024-03-25T07:51:47.758-04:00Comments on Thoughts On Economics: Reversal Of Great Compression In Income Distribution In U.S.A.Robert Vienneauhttp://www.blogger.com/profile/14748118392842775431noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-26706564.post-1166221846961703632006-12-15T17:30:00.000-05:002006-12-15T17:30:00.000-05:00No, actually, they haven't -- Piketty and Saez's c...No, actually, they haven't -- Piketty and Saez's conclusions are nonsense unsupported by complete data.<BR/><BR/>In the first place, Piketty and Saez are counting not income, but tax returns. (They may be "sensitive" to this distinction but choose to ignore it in practice.)<BR/><BR/>Furthermore they don't count transfer payments (Social Security checks and the like) as income. Since such transfer payments have risen by 50% as a share of personal income in the U.S. since 1980, and since they are a proportionately much larger share of poor and middle class incomes than of large incomes, and since they are now one-seventh of personal income nationally, excluding them artificially forces the top-1%-share graph to move upward during recent decades. If there is a good reason why a Social Security or Medicaid check doesn't count as personal income I haven't heard it (I believe Grandma thinks it counts when she's spending it buying groceries).<BR/><BR/>In the third place, in the late 1980s and 1990s a series of changes in U.S. tax law moved lots of high-end incomes out of business tax returns and into individual tax returns. Since Piketty and Saez used data only from individual tax returns, naturally the large incomes they added up rose due to those changed tax rules -- not because any rich incomes actually grew but simply because they shifted columns and hence started being counted by Piketty and Saez.<BR/><BR/>In the fourth place, Piketty and Saez insist on measuring income per tax unit rather than per family or household or individual. They apply a blanket assumption that income<BR/>per tax unit is on average 28% smaller than income per household. But since there are many more two-earner couples sharing a joint tax return among high-income families than among lower-income ones, this choice once again serves to exaggerate inequality per family or per worker.<BR/><BR/>The whole thing is quite silly, and adjustment for these and other errors reveals that in fact the share of personal income received by the top 1% has virtually unchanged from what it was in 1980.Paul Bottshttps://www.blogger.com/profile/18408795160241389856noreply@blogger.com