For over a decade, the work of three anti–free-market French economists has dominated the debate over income inequality, distorting public policy, smothering pro-growth ideas, and creating an image of the top 1 percent of earners becoming ever more powerful.
Now we learn that Thomas Piketty, Emmanuel Saez, and Gabriel Zucman — the Three Horsemen of Inequality — have gotten it wrong, or at a minimum haven’t proven their case.
Their specific argument was that when it comes to income, the gap between the top 1 percent in the U.S. and the rest of the population was growing wider.
But a new paper — “Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends” — reaches a dramatically different conclusion: “Increasing government transfers and tax progressivity have resulted in rising real incomes for all income groups and little change in after-tax top income shares.”
The paper is the work of Gerald Auten and David Splinter. Auten works for the U.S. Treasury Department and Splinter for the Congressional Joint Committee on Taxation. Both have stellar reputations as analysts. Their work, looking at pre-tax income, finds the income share of the top 1 percent 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.
Among the many reasons that Auten and Splinter conclude inequality hasn’t grown is that they include cash and in-kind transfers for the lower income groups, to better measure their true incomes. This is an approach taken by former Texas senator Phil Gramm, which NRO’s Dan McLaughlin wrote about last year.
Economist Tyler Cowen of George Mason University has reviewed the Auten and Splinter paper and concludes in his Bloomberg column: “At the very least, the presumption in favor of Piketty, Saez and Zucman is now gone. . . . When it comes to the most commonly cited statistic about income inequality — namely, the ascendancy of the top 1% — the dominant discourse has been misleading, if not outright wrong.”
Reports of Growing Income Inequality Are Greatly Exaggerated
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17.11.2023
For over a decade, the work of three anti–free-market French economists has dominated the debate over income inequality, distorting public policy, smothering pro-growth ideas, and creating an image of the top 1 percent of earners becoming ever more powerful.
Now we learn that Thomas Piketty, Emmanuel Saez, and Gabriel Zucman — the Three Horsemen of Inequality — have gotten it wrong, or at a minimum haven’t proven their case.
Their specific argument was that when it comes to income, the gap between the top........
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