Journal article

Measuring top incomes using tax record data: a cautionary tale from Australia

Richard V Burkhauser, Markus H Hahn, Roger Wilkins



Atkinson et al. (J. Econ. Lit. 49(1):3–71, 2011) survey an important new literature using income-tax-based data to measure the share of income held by top income groups. But changes in tax legislation that expand the tax base to include income sources (e.g. capital gains, dividends, etc.) disproportionately held by these groups will conflate such an expansion with an increase in the share of income they hold. We provide a cautionary tale from Australia of how comprehensive tax reform legislation in 1985 substantially altered Australian top income series, especially those that do not separate taxable realized capital gains from other taxable income. Drawing on the Household, Income and Labour..

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Funding Acknowledgements

We thank Andrew Leigh for providing the computer code used to produce top income shares in Atkinson and Leigh [8]. We thank Daniel Feenberg, Andrew Leigh, Stephen Jenkins, Jeff Larrimore and Dean Lillard for reading earlier drafts of this paper. This paper uses the confidentialised unit record file from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Commonwealth Department of Social Services and is managed by the Melbourne Institute of Applied Economic and Social Research.