Income Inequality in the United States: A Comment∗ Thomas Piketty (Paris School of Economics) Emmanuel Saez (UC Berkeley) Gabriel Zucman (Paris School of Economics and UC Berkeley) September 16, 2024
Abstract Auten and Splinter (2024) provide estimates of income inequality in the United States, starting with income observed in tax returns and making adjustments to account for untaxed income. We uncover an empirical issue in the allocation of untaxed income. The growing amount of partnership income exempt from taxation (due to increasingly generous fiscal depreciation rules) is allocated by Auten and Splinter (2023) not to owners of partnerships but to owners of sole proprietorships, who are much less rich. This creates a bias in the level and rise of the top 1% income share. We trace the remaining difference with the top 1% income share of Piketty, Saez and Zucman (2018) to assumptions made by Auten and Splinter (2024) about the distribution of untaxed business income, untaxed capital income, and non-cash, notional income. After clarifying these assumptions and confronting them to existing evidence, the Auten and Splinter (2024) estimates become similar in level and trend to those of Piketty, Saez and Zucman (2018).
∗
Thomas Piketty: piketty@psemail.eu; Emmanuel Saez: esaez@berkeley.edu; Gabriel Zucman: zucman@berkeley.edu. We thank Andy Atkeson, John Iselin, Wojciech Kopczuk, Michael Love, Daniel Reck, John Sabelhaus, Danny Yagan, Owen Zidar, and Eric Zwick for helpful discussions and comments, and Gerald Auten and David Splinter for helping us understand their methodology and providing additional results.