An Analysis of the Distribution of Individual Income and Taxes 1979-2001

• Activity Number: 200
• Type: Topic Contributed
• Date/Time: Tuesday, August 5, 2003 : 8:30 AM to 10:20 AM
• Sponsor: Social Statistics Section
• Author(s): Michael Strudler*+ and Thomas B. Petska and Ryan T. Petska
• Companies: Statistics of Income, IRS and Statistics of Income, IRS and Ernst & Young, LLP
• Keywords: income distribution ; tax burden ; administrative records

Abstract

Administrative data from tax returns are a unique and reliable source of information on the distribution of personal income and tax burdens. Although the content of these data are limited by definition of taxable income in the Internal Revenue Code, and can by susceptible to inter-temporal definitional changes, they can be adjusted to provide a consistent and accurate viewpoint of the economic well being of U.S. individuals. The paper is the fifth in a series examining trends in the distribution of individual income and taxes based on a consistent and comprehensive measure of income derived exclusively from individual income tax returns. We describe a consistent measure of individual income derived as a "retrospective concept" from individual income tax returns and analyze over 20 years of aggregate time series data. Statistics from 1979 to 2001 on the distribution of individual income, the shares of taxes paid, and average tax burdens, all by size of income, are presented and analyzed. The paper continues with an analysis of estimated Lorenz curves and Gini coefficients and concludes with some thoughts on what the data show about fairness and equity.