Wealth & Income Inequality
The Top 1 Percent: Measuring Top Incomes
How economists use tax records to measure the share of income going to the richest, what the long-run trends show, and the debates over measurement.
Household surveys often miss the very rich, who are few and may not respond. To measure incomes at the very top, economists including Thomas Piketty and Emmanuel Saez turned to tax records, which capture high incomes more completely.
The long-run pattern
Their research, and the World Inequality Database built from it, found a striking pattern in many rich countries:
- Top income shares were high in the early twentieth century.
- They fell sharply during the world wars and the Great Depression, and stayed low in the decades after 1945.
- From around 1980, they rose substantially, especially in the United States and United Kingdom.
In the United States, Piketty and Saez estimated that the top 1 percent’s share of pre-tax income roughly doubled from around 10 percent in the late 1970s to around 20 percent in recent years. In continental Europe and Japan, increases were much smaller.
India’s top incomes
Estimates from the World Inequality Lab by Nitin Kumar Bharti, Lucas Chancel, Piketty and Anmol Somanchi suggested that the top 1 percent’s share of national income in India rose to over 20 percent by 2022 to 2023, among the highest in the world, after falling in the decades following independence.
Debates over measurement
Other economists, such as Gerald Auten and David Splinter, argue that accounting for taxes, government transfers and changes in how income is reported on tax returns makes the U.S. increase much smaller. Measuring top incomes involves many choices, such as how to treat business income and capital gains.
Why it matters
Top income shares matter for debates about taxation, political influence, economic mobility and whether the gains from growth are widely shared.
A national survey interviews thousands of households. Very rich households are rare, may refuse to participate and may underreport income. If a country has a few thousand extremely rich families, the survey might include none. Tax records, which cover everyone who files, give a better picture of the top.
Estimates depend on data sources and assumptions, and economists disagree about the size of changes. Trends are clearer than exact levels, and different methods can give quite different answers.
- Tax records help measure top incomes that surveys miss.
- In many rich countries, top income shares fell mid-century and rose from around 1980.
- Estimates suggest the U.S. top 1 percent share roughly doubled; India's top 1 percent share exceeded 20 percent by 2022 to 2023.
- Economists debate measurement, especially how to account for taxes and transfers.
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