than inequality. The disadvantages however are significant too. Let me run through some of them. Historically, income tax returns have been filed by a small percentage of the population even in today’s rich countries so the long-term series can be of dubious quality. The same is true of developing countries now. At best we might know the top of an income distribution (the richest tax-filers) but have no information about the bulk of the population. Whether the highest tax-filers are really the richest people is also questionable. Not only because of the obvious incentive to underreport income or because in the past some particularly rich classes were exempt from taxation. There is also an important, even if technical, detail. Taxes are paid by fiscal units, not by individuals: so the richest fiscal units may change with the tax rules (e.g., whether it is more advantageous to file jointly or separately). Also, the income that is reported to tax authorities is fiscal income, not economists’ concept of income. For example, until 1987, interest on government bonds does not appear in US tax returns because it was not subject to taxation; every economist would include it in income however.

Even if we disregard these problems, Piketty’s calculations refer mostly to market income, that is, income before government transfers and taxes. It is quite possible that an increased concentration of market income (such as Piketty and Saez report for the United States) is not accompanied by increased concentration of disposable income if taxes and transfers have become more redistributive.<sup>19</sup> It could even happen that disposable income inequality declines. It did not happen in the case of the United States, as we know from the detailed work by Burkhauser et al. (2012) who have compared non-topcoded US household surveys with Piketty’s results.<sup>20</sup> But such a divergent movement cannot be excluded in principle.

19 Direct (and somewhat mindless) comparison between household surveys that generally present the data on the distribution of post-fisc income and fiscal data which are pre-fisc are thus biased. The differences, even among the top, are much less when we compare like with the like. Using the 2010 US publicly-available micro data from the Current Population Survey (CPS), top decile’s income share in market income is 37% vs. Piketty’s 45%. For the top 1%, the corresponding numbers are 10% and 16%. (My calculations are from the “lissified” version of CPS; Piketty’s numbers from Figures 8.7 and 8.8, p. 472.) 20 These are internal Current Population Survey data where highest incomes are not top-coded (that is, reduced so as not to allow the identifications of rich individuals) as they normally are in the surveys made available to the public. But even the latter data do confirm a steady increase in US income inequality when measured by disposable income across persons or households (see e.g., Brandolini and Smeeding 2006, OECD 2011). Thus in the US, household surveys and fiscal data do agree on the trend. In some other countries, most notably in India, they do not: household surveys show much more sluggish changes than fiscal data (see Banerji and Piketty 2005; Deaton 2005).

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