While on the topic, don't miss Saez and Piketty's response to Alan Reynolds criticism in the Wall Street Journal of their work.
Looks to me like a major can of whupass. Also, I am glad to say that, after reading only DeLong's takedown of Reynolds, I anticipated that they would respond to his claim about tax avoidance by noting the similarity of the increase in the inequality of income plus capital gains to the increase in the inequality of income.
Alan Reynolds points out that reported incomes may not reflect true incomes because of tax evasion or tax avoidance. This is a legitimate concern and we, along with a number of colleagues, have actually spent substantial time investigating this issue. Alan Reynolds has picked some of the facts in order to provide a very skewed view. Most of the scenarios described by Alan Reynolds, such as a shift from corporate income to individual income or from qualified stock-options to non-qualified stock options, would imply that high incomes used to receive capital gains instead of ordinary income. For example, a closely held C-corporation which does not distribute its profits increases in value and those accumulated profits would appear as realized capital gains on the owner individual tax return when the business is sold. Yet, our top 1% income share series including realized capital gains has also doubled from 10.0% in 1980 to 19.8% in 2004.
Brad DeLong Piles on. The last link puts Reynolds in a class with Lott (except for the sock puppetry of course).
Simply begin from the 2004 finding that the top 1% of households control 57.8% of American owned corporate shares. Then look to the basics of tax structure in which the maximum dividend and realized long term capital gains tax is 15%. Also, remember that unrealized capital gains are not taxed.
ReplyDeleteThis alone will give a sense of what we are dealing with in terms of wealth and income concentration. there is though far more.
anne
http://www.nytimes.com/2006/01/29/national/29rich.html?ex=1296190800&en=784822e4b0735ee5&ei=5090&partner=rssuserland&emc=rss
ReplyDeleteJanuary 29, 2006
Corporate Wealth Share Rises for Top-Income Americans
By DAVID CAY JOHNSTON
New government data indicate that the concentration of corporate wealth among the highest-income Americans grew significantly in 2003, as a trend that began in 1991 accelerated in the first year that President Bush and Congress cut taxes on capital.
In 2003 the top 1 percent of households owned 57.5 percent of corporate wealth, up from 53.4 percent the year before, according to a Congressional Budget Office analysis of the latest income tax data. The top group's share of corporate wealth has grown by half since 1991, when it was 38.7 percent.
In 2003, incomes in the top 1 percent of households ranged from $237,000 to several billion dollars.
For every group below the top 1 percent, shares of corporate wealth have declined since 1991. These declines ranged from 12.7 percent for those on the 96th to 99th rungs on the income ladder to 57 percent for the poorest fifth of Americans, who made less than $16,300 and together owned 0.6 percent of corporate wealth in 2003, down from 1.4 percent in 1991....
anne
The inequality figures through 2006 will have shown a continued sharp jump since we are going through what I am arguing is the braodest and deepest international bull market in stocks since at least 1945. Only a fiscal re-structuring and changes in manager-owner-employee relations can change the inequality tendency.
ReplyDeleteanne
David Cay Johnston has a slew of fine articles in the New York Times on the statistics of inequality and on tax structure.
ReplyDeleteThere is a brief reply to Piketty and Saez in this exchange:
ReplyDeletehttp://www.cato-unbound.org/2007/02/19/alan-reynolds/why-change-the-subject/
The CBO did not say "the top 1% owned 57.4% of corporate wealth." They said the top 1% reported 1% of all dividends, capital gains, interest and rent that appeared on tax returns (as opposed to being sheltered in a IRA and 401k).
Emmanuel Saez estimates that the top 1% own about a fifth of all wealth; Arthur Kennickel at the Fed says it's about a third. Nobody finds any sustained increase in the top 1 percent's share of wealth, corporate or otherwise.
There's a typo in my comment, which I should have previewed. It should read:
ReplyDelete"The CBO did not say "the top 1% owned 57.4% of corporate wealth." They said the top 1% reported 57.4% of all dividends, capital gains, interest and rent that appeared on tax returns (as opposed to being sheltered in a IRA and 401k)."