Tax Records (Knowledge)

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    How are tax records used by Piketty to measure and analyze inequality and what does the tax data tell us?



    Tax records are used by Picketty in combination with other data in order to complement the surveys taken by the Census Bureau and Federal Reserve, creating a clearer picture of incomes in America and the disparities associated with them. Due to the fact that taxes tell us much more about the top percentage of earners, and have data that goes much further back then your average survey, Picketty is able to gather the information and produce a summary of the rise and fall of inequality over the last century. The figures show us that while Europe has medium inequality and Scandinavian nations have low inequality, the United States currently suffers from very high inequality. This is displayed in further figures such as the fact that 90% of wealth for the top 1% of Americans is inherited, and while wages for them have risen by 165%, wages for the top 0.1% have risen 362%. The figures also show that although this select group of people is making a great deal more than the rest of the nation, they’re tax rate, which is considerably similar to much lower income earners allows them to hold onto the majority of their wealth and thereby maintain the gap.



    Tax records are used by Piketty to measure and analyse inequality by merging data with other sources, including surveys, to produce information that goes farther back in time and gives us a more complete overview of inequality as a whole. In particular, tax records are used to examine the top quintile in far more detail than they could be before in both France, the United States and Britain.

    The tax data provided gives us the breakdown of income shares in historical times of low, medium and high inequality. The conclusion it ultimately draws is that modern USA faces similar inequality to Europe during 1910, whereas modern Europe as a whole has become much more equal in terms of income since that time period.



    Piketty uses the tax records along with data from other surveys to measure and analyse the inequality in order to have a complete picture of the inequality in a country. The tax records are used to examine the top earners who tend to not be represented in the surveys. This information is used by Piketty to show the varying changes of inequality over the last century. What can be pulled from this data is that the USA currently suffers from high inequality that was equal to Europe’s in the early 1900, but, Europe currently has lower inequality.

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