Distributional National Accounts:
Methods and Estimates for the
United States
Thomas Piketty (PSE)
Emmanuel Saez (UC Berkeley)
Gabriel Zucman (UC Berkeley)
November 2016
There is a large disconnect today between
the study of inequality and macro
Macro: use national accounts, with no distributional information
Inequality: use survey & tax data, inconsistent with macro totals
This gap makes it hard to know growth is distributed and to
analyze the causes of the rise in inequality
How does growth of bottom 50%, middle 40%, top 10% adults
compare to total growth?
What part of rise in inequality owes to change in factor shares vs.
changes in the concentration of labor and capital?
How do taxes and gov spending affect the distribution of growth?
This paper: attempt at constructing
Distributional National Accounts (DINA)
We construct a micro database of income, wealth, taxes and
transfers consistent with national accounts totals in the US:
First income inequality series covering 100% of national income
First growth statistics by quantile consistent with macro growth
First assessment of total redistributive effects of gov. intervention
→ Getting back to Kuznets’ original intent to study growth &
inequality jointly, but with more and better data
→ Ultimate goal: being able to better compare ineq. across countries
Our objective:
Distribute national income
National income = labor income +
capital income
The share of capital and labor in national income
100%
Capital income
90%
70%
60%
50%
40%
Labor income
30%
20%
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1948
1943
1938
1933
1928
1923
0%
1918
10%
1913
% of national income
80%
Reconciling national labor income and
labor income reported on tax returns
From taxable to total labor income
80%
Tax evasion & other
70%
Employer fringe benefits &
payroll taxes
50%
Non-filers
40%
Wages and self-employment income
on tax returns
30%
20%
Source: Appendix Table I-S.A8b.
2012
2008
2004
2000
1996
1992
1988
1984
1980
1976
1972
1968
1964
1960
1956
1952
1948
1944
1940
1936
1932
1928
1924
0%
1920
10%
1916
% of national income
60%
A growing fraction of labor income is
missed by tax data
Reconciling national capital income and
capital income reported on tax returns
From taxable to total capital income
30%
20%
Retained earnings
Non-filers &
other
Corporate income tax
15%
Income paid to pensions &
insurance
10%
Imputed rents + property tax
5%
Source: Appendix Table I-S.A8.
2012
2008
2004
2000
1996
1992
1988
1984
1980
1976
1972
1968
1964
1960
1956
1952
1948
1944
1940
1936
1932
1928
1924
1920
Didivends, interest, rents & profits reported on tax returns
0%
1916
% of national income
25%
Most capital income is missed by tax data
Methodology:
How we distribute national income
How we move from fiscal income to total
national income
1. Start with public-use samples of tax returns (1962-2010)
High quality, oversamples top
2. Supplement public-use files using additional IRS data
Age and gender information since 1979
Labor split for couples & fringe benefits on W2 since 1999
3. Impute missing income using SCF and CPS
Non-taxable capital income (pension funds, imputed rents): SCF
Monetary transfers: imputed based on CPS distribution by family
income deciles and basic demographics
4. Distributionally neutral assumptions for public goods
We consider three main concepts of
income matching national income
Factor national income
Sum of all labor income and capital income
Pre-tax national income
Subtracts contributions for pensions and social insurance, adds
corresponding benefits (pensions, disability, unemployment)
Post-tax national income
Subtracts all other taxes
Adds back all other forms of government spending (individualized
transfers + public goods)
↓
Same national income total for factor, pre-tax and post-tax → gives
the broadest view of the redistributive effects of the government
Final product: a new tool for the study of
inequality & growth
Annual micro-data set representative of US pop. (1962-present):
Detailed income & wealth variables matching national accounts
aggregates
Demographic information: age, gender, marital status, children
Can be used to compute wide array of growth & inequality stats,
and simulate tax and transfer reforms
For 1913-1961: we rely on tabulated tax statistics → produce series
for specific income fractiles (top 10% and above)
The distribution of US national
income and growth:
Pre-tax vs. post-tax
DINA confirm the rise of income
inequality, but post-tax inequality % less
Top 10% national income share: pre-tax vs. post-tax
50%
Pre-tax
% of national income
45%
40%
35%
30%
Source: Appendix Tables II-B1 and II-C1
2017
2012
2007
2002
1997
1992
1987
1982
1977
1972
1967
1962
1957
1952
1947
1942
1937
1932
1927
1922
25%
1917
Post-tax
Bottom 50% share has collapsed
Bottom 50% national income share: pre-tax vs. post-tax
25%
% of national income
Post-tax
20%
Source: Appendix Tables II-B1 and II-C1
2014
2010
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
1962
10%
2006
Pre-tax
15%
Post-tax growth for bottom 50% has been
anemic, and eaten up by health spending
Real income of bottom 50%:
pre-tax vs. post-tax
Medicare +
medicaid
Post-tax
20,000
15,000
Pre-tax
10,000
Post-tax,
excluding health benefits
5,000
Source: Appendix Tables II-B7, II-C7 and II-C3c.
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
0
1962
Average income in constant 2014 $
25,000
The bottom 50% does not benefit on net
from cash redistribution
Real income of bottom 50%:
pre-tax vs. post-tax
Medicare +
medicaid
Post-tax
20,000
15,000
Pre-tax
Post-tax private
10,000
Post-tax,
excluding health benefits
5,000
Source: Appendix Tables II-B7, II-C7 and II-C3c.
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
0
1962
Average income in constant 2014 $
25,000
For bottom 50% working-age adults,
pre-tax income has collapsed since 1979
Real pre-tax income of bottom 50%, by age group
45-65 years old
20,000
All age
15,000
10,000
20-45 years old
5,000
2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
0
1979
Average income in constant 2014 $
25,000
Real values are obtained by using the national income deflator and expressed in $2014. Income is divided equally among
spouses.
At the bottom, only retirees’ pre-tax
income is growing
Real pre-tax income of bottom 50%, by age group
25,000
20,000
All age
15,000
10,000
20-45 years old
>65 years old
5,000
Source: Appendix Tables II-B7 and II-B7b.
2015
2011
2007
2003
1999
1995
1991
1987
1983
0
1979
Average income in constant 2014 $
45-65 years old
Even after transfers, 0 growth in
working-age bottom 50% income since 79
Real post-tax income of bottom 50%, by age group
65+ years old
30,000
45-65 years old
All
25,000
20,000
20-45 years old
15,000
10,000
5,000
Source: Appendix Tables II-C7 and II-C7b.
2015
2011
2007
2003
1999
1995
1991
1987
1983
0
1979
Average income in constant 2014 $
35,000
The fall of the bottom 50% mirrors the
rise of the top 1%
Pre-tax national income share: top 1% vs. bottom 50%
22%
20%
% of national income
Top 1%
18%
16%
14%
12%
Source: Appendix Table II-B1
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
1962
10%
Bottom 50%
1980: Top 1% income = 27 × bottom 50
2014: Top 1% income = 81 × bottom 50
Top 1% real average pre-tax income (2014$)
2014:Top 1% = $1,305,000
52,500
1,200,000
45,000
1,000,000
37,500
800,000
30,000
1980: Top 1%
= $428,000
600,000
22,500
400,000
15,000
2014: Bottom 50%
= $16,200
1980: Bottom 50%
= $16,000
200,000
7,500
Source: Appendix Tables II-B7 and II-B10
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
0
1962
0
Bottom 50% real average pre-tax income (2014$)
Real average pre-tax income of bottom 50% and top 1% adults
1,400,000
Changes in standards of living in the
United States since 1946
Pre-tax income growth
Income group
1980-2014
Full Population
Bottom 50%
Post-tax income growth
1946-1980
1980-2014
1946-1980
61%
95%
61%
95%
1%
102%
21%
130%
Middle 40%
42%
105%
49%
98%
Top 10%
121%
79%
113%
69%
Top 1%
205%
47%
194%
58%
Top 0.1%
321%
54%
299%
104%
Top 0.01%
454%
75%
424%
201%
Top 0.001%
636%
57%
617%
163%
Gender inequality and its effect on
individual-level inequality
When assigning each spouse her own
labor income, inequality has increased less
Top 10% pre-tax income share: equal-split vs. individuals
55%
% of national income
50%
Pre-tax income per adult
(individuals)
45%
40%
35%
Source: Appendix Table II-B9.
2017
2012
2007
2002
1997
1992
1987
1982
1977
1972
1967
1962
1957
1952
1947
1942
1937
1932
1927
1922
1917
30%
Pre-tax income per adult
(equal split)
This is due to the decline in the inequality
of labor income between genders
Average pre-tax labor income of
men aged 20-64 / women aged 20-64
400%
350%
300%
250%
200%
Source: Appendix Table II-F1.
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
100%
1962
150%
Part of the decline in gender inequality
owes to rising female labor force particip.
Share of women in the employed population
50%
40%
30%
20%
Source: Appendix Table II-F1.
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
0%
1962
10%
Men still make 85% of the top 1% of the
labor income distribution
Share of women in the employed population,
by fractile of labor income
50%
45%
40%
35%
All
Top 10%
30%
25%
20%
Top 1%
15%
10%
Source: Appendix Table II-F1.
2014
2010
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
1962
0%
2006
Top 0.1%
5%
At the median, no growth for working-age
men over half a century
Median pre-tax labor income:
working-age men vs. working-age women
45,000
Working-age men
35,000
30,000
Working age adults
25,000
20,000
15,000
Working-age women
10,000
5,000
Source: Appendix Table II-B13.
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
0
1962
Real median pre-tax income ($2014)
40,000
Decomposing inequality:
Labor vs. capital
Capital is making a comeback in the US
The share of capital in pre-tax income
100%
90%
80%
70%
60%
50%
40%
30%
20%
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1943
1938
1933
1928
1923
1918
1913
0%
1948
Macro capital share in
national income
10%
Capital is making a comeback at the top
The share of capital in pre-tax income
100%
Top 0.1%
90%
80%
70%
Top 1%
60%
50%
Top 10%
40%
30%
All
20%
10%
Source: Appendix Table II-B2d.
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1948
1943
1938
1933
1928
1923
1918
1913
0%
Bottom 90%
Since the 1990s, top 1% rises because of
capital income
Pre-tax capital income of top 1% adult income earners
14%
12%
Interest and dividends paid to
pension plans
8%
6%
Interest
Income from equity
4%
2%
Source: Appendix Table II-B2b
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1948
1943
1938
1933
1928
1923
1918
0%
Noncorporate profits
Housing rents
1913
% of national income
10%
Labor income concentration has stopped
rising since the late 1990s
Pre-tax labor income of top 1% adult income earners
12%
8%
6%
Compensation of
employees
4%
2%
Source: Appendix Table II-B2b.
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1948
1943
1938
1933
1928
1923
1918
Labor component of mixed income
0%
1913
% of national income
10%
The top became younger in the 1980s and
1990s, since the 2000s is growing older
Average age by pre-tax income group
58
56
Top 0.1%
54
Top 1%
52
Top 10%
48
46
44
Source: Appendix Table II-F2.
2015
2012
2009
2006
2003
2000
1997
1994
1991
1988
1985
40
1982
Average age in the adult population
42
1979
Age
50
Decomposing inequality:
the role of taxes and transfers
The macro rate of tax rose until the
1960s and has been constant since then
Macroeconomic tax rate
(Federal + State + local)
45%
35%
Macroeconomic tax rate
30%
25%
20%
15%
10%
Source: Appendix Table II-G1.
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1948
1943
1938
1933
1928
1923
0%
1918
5%
1913
% of national income
40%
Tax progressivity has declined since the
1960s
Average tax rates by pre-tax income group
45%
35%
Top 1%
30%
All
25%
20%
15%
Bottom 50%
10%
Source: Appendix Table II-G1.
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1948
1943
1938
1933
1928
1923
0%
1918
5%
1913
% of pre-tax income
40%
Taxes have increased for the bottom 50%
because of payroll taxes
Taxes paid by the bottom 50%
25%
20%
Payroll taxes
15%
Individual income taxes
10%
Capital taxes
5%
Source: Appendix Table II-G2
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1948
1943
1938
1933
1928
1923
1918
Sales taxes
0%
1913
% of bottom 50% pre-tax income
30%
Taxes have fallen at the top because of
the decline of corporate and estate taxes
Taxes paid by the top 1%
45%
35%
30%
Individual income taxes
25%
20%
Corporate taxes
15%
10%
Estate taxes
5%
Source: Appendix Table II-G2
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1948
1943
1938
1933
1928
1923
Sales + residential property + payroll taxes
1918
0%
1913
% of top 1% pre-tax income
40%
Individualized transfers have increased
since the 1960s
Average transfers:
individualized vs. collective consumption expenditure
25%
Collective consumption expenditure
15%
10%
5%
Source: Appendix Table G4
2015
2010
2005
2000
1995
1990
1985
1980
1975
1970
0%
1965
Individualized transfers (cash + in-kind)
1960
% of national income
20%
More transfers go to the middle class
than to bottom 50%
Average individualized transfer by post-tax income group
(excluding Social Security)
Middle 40%
(P50-P90)
14%
12%
10%
8%
All
6%
4%
Top 10%
2%
Source: Appendix Table II-G4.
2015
2010
2005
2000
1995
1990
1985
1980
1975
1970
Bot 50%
1965
0%
1960
% of average national income
16%
More transfers go to the middle class than
to bottom 50%, even incl. Social Security
Average individualized transfer by post-tax income group
(including Social Security)
20%
All
Middle 40%
15%
10%
Top 10%
5%
Source: Appendix Table II-G4b.
2015
2010
2005
2000
1995
1990
1985
1980
1975
1970
1965
Bottom 50%
0%
1960
% of average national income
25%
Comparison with fiscal incomes
Bottom 90% has grown more than in tax
data
Bottom 90% income growth: Pre-tax income vs. fiscal income
National income per adult
Bottom 90% fiscal income per tax unit (Piketty-Saez)
Bottom 90% pre-tax income per adult
60,000
+1.4%
50,000
+2.0%
40,000
-0.1%
+1.8%
30,000
+0.8%
+2.1%
20,000
10,000
Source: Appendix Table II-B3 and Piketty and Saez (2003, updated to 2014)
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
1962
1958
1954
1950
0
1946
Average income in constant 2014 dollars
70,000
Without fringe benefits, 0 growth for
bottom 90% since 1970s
Average pre-tax income of the bottom 90%
40,000
Capital income
30,000
Tax-exempt labor income
25,000
20,000
15,000
Taxable labor income
10,000
Source: Appendix Table II-B2e
2012
2007
2002
1997
1992
1987
1982
1977
1972
0
1967
5,000
1962
Average income in constant 2014$
35,000
Conclusion
Combining tax, survey, and national
accounts data
The DINA agenda:
Construct new series on the distribution pre- and post-tax
income consistent with macro totals
Hope will be adopted by govt agencies down the road
Results for the United States:
Collapse of working-age bottom 50% pre-tax income, 0 growth
post transfer
Boom of top-end inequality since late 1990s due to capital
Spectacular gender gap at the top, not shrinking anymore
Gov. has offset only small fraction of the % in pre-tax inequality,
due to & in tax progressivity & limited transfers to bottom 50%
Supplementary Slides
Average income is growing less in tax and
survey data than in the economy
Average real income growth: national accounts vs. survey vs. fiscal
data (1946 = 100)
National income per adult
300
CPS income per household
(CPI)
260
220
180
Fiscal income per tax unit
(CPI)
140
Source: Appendix Table A0 and Census Bureau.
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
1962
1958
1954
1950
1946
100
Three culprits: inflation, fewer marriages,
rising non-taxable income
Average real income growth: national accounts vs. fiscal data
(1946 = 100)
National income per adult
300
Fiscal income per adult
(national income deflator)
260
Fiscal income per tax unit
(national income deflator)
220
180
Fiscal income per tax unit
(CPI)
140
Source: Appendix Table A0.
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
1962
1958
1954
1950
1946
100
Top 1% income share: pre-tax vs.
post-tax
Top 1% national income share: pre-tax vs. post-tax
% of national income
20%
Pre-tax
15%
10%
Source: Appendix Tables II-B1 and II-C1
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
1948
1943
1938
1933
1928
1923
1918
5%
1913
Post-tax
For bottom 50% elderly, all the growth
comes from health transfers
Post-tax income of the bottom 50% of elderly Americans (65+)
30,000
Post-tax income
25,000
Medicare
+ Medicaid
20,000
15,000
Post-tax income excluding health benefits
10,000
5,000
Source: Appendix Table II-C7c.
2015
2011
2007
2003
1999
1995
1991
1987
1983
0
1979
Average income in constant 2014 dollars
35,000
Still a lot of inequality between genders,
especially for older workers
Average labor income of all men aged 20-64 / all women aged
20-64, by age group
350%
300%
All
250%
45 to 64
200%
Source: Appendix Table F1.
2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1991
1989
1987
1985
1983
1981
1979
100%
1993
20 to 44
150%
Capital is making a comeback in the US:
robust to assuming fixed return on capital
The share of capital in pre-tax income,
assuming constant 5% return on capital
50%
45%
Top 0.1%
40%
35%
Top 1%
30%
25%
Top 10%
20%
15%
All (macro capital share in national income)
10%
2011
2006
2001
1996
1991
1986
1981
1976
1971
1966
1961
1956
1951
0%
1946
5%
Top-end inequality is high and growing at
all ages
Top 0.1% pre-tax national income share by age group
12%
45-65
8%
All
65+
6%
4%
Source: Appendix Table II-B11b.
2015
2012
2009
2006
2003
2000
1997
1994
1991
1988
1985
0%
1982
20-45
2%
1979
% of pre-tax income
10%
Transfers have softened blow to the
middle-class during Great Recession
Real income of the middle 40%:
the role of transfers
60,000
Transfers
Post-tax income
50,000
40,000
30,000
Post-tax income excluding transfers
20,000
10,000
Source: Appendix Table II-C3b.
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
0
1962
Average income in constant 2014 dollars
70,000
Pre-tax national income inequality has
risen less than fiscal income inequality
Top 10% income share: comparison of estimates
50%
45%
Pre-tax income per adult
40%
35%
Source: Appendix Table II-B1 and Piketty and Saez (2003, updated to 2014).
2012
2007
2002
1997
1992
1987
1982
1977
1972
1967
1962
1957
1952
1947
1942
1937
1932
1927
1922
1917
Fiscal income per tax unit (Piketty-Saez)
30%
Part of the difference owes to income
missing from tax returns in 1950s-1970s
Top 10% income share: fiscal income vs. pre-tax income
50%
Pre-tax income per tax unit
45%
40%
Missing
income
35%
Source: Appendix Tables II-B9 and Piketty and Saez (2003, updated to 2014)
2012
2007
2002
1997
1992
1987
1982
1977
1972
1967
1962
1957
1952
1947
1942
1937
1932
1927
1922
1917
Fiscal income per tax unit (Piketty-Saez)
30%
Rest of the difference owes to adults vs.
tax units
Top 10% income share: tax units vs. equal-split adults
55%
% of total income
50%
45%
Pre-tax national income
per tax unit
40%
35%
Source: Appendix TablesII- B1 and II-D1.
2012
2007
2002
1997
1992
1987
1982
1977
1972
1967
1962
1957
1952
1947
1942
1937
1932
1927
1922
1917
30%
Pre-tax national income per
adult (equal split)
Bottom 50% income with different
treatment of education spending
Real post-tax income of bottom 50%:
Different allocation of education spending
Eduction lump sum
per child
20,000
Education proportional to disposable
income (excluding health)
15,000
10,000
5,000
Source: Appendix Tables II-C3d.
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
0
1962
Average income in constant 2014 $
25,000