Top Income Inequality in the 21st Century: Some Cautionary Notes

Fatih Guvenen, Consultant

Greg Kaplan

October 2017 | Federal Reserve Bank of Minneapolis QR 38(1): 2-15

We revisit recent empirical evidence about the rise in top income inequality in the United States, drawing attention to key issues that we believe are critical for an informed discussion about changing inequality since 1980: the definition of income (labor versus total), the unit of analysis (individual versus tax unit), the importance of partnership and S-corporation income, income shifting between the corporate and personal sectors in response to tax incentives, the definition of the top of the distribution, and trends in the middle and bottom of the distribution. Our goal is to inform researchers, policymakers, and journalists who are interested in top income inequality.