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RECENT INCOME TRENDS FOR TOP EXECUTIVES: EVIDENCE FROM TAX RETURN DATA
"... We examine income trends for top executives, focusing on the years 2000 to 2010, with special emphasis on the period surrounding the Great Recession. First, we merge Execucomp executive compensation records with IRS tax records. We com-pare incomes from our Execucomp sample to top incomes reported b ..."
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We examine income trends for top executives, focusing on the years 2000 to 2010, with special emphasis on the period surrounding the Great Recession. First, we merge Execucomp executive compensation records with IRS tax records. We com-pare incomes from our Execucomp sample to top incomes reported by Piketty and Saez (2003). We disaggregate executive income trends by industry, showing which industries are driving the divergence in top executive incomes. We compare our results to fi ndings from Bakija, Cole, and Heim (2010) and Kaplan and Rauh (2010), who examine trends in top incomes for broad occupation and industry categories for years prior to the Great Recession. We also decompose these income trends by income source to see which components are driving the observed changes. We fi nd that stock options are by far the most volatile component of executive pay. Options are the key driver of both short-term swings and longer-term trends in top executive pay. However, stock awards are also a large and growing component. We fi nd much greater variation in income across years than across industries. Executive incomes are most volatile at the very top of income distribution. In general, trends for top executives in fi nance and non-fi nance industries are quite similar; however; for those above the 99.9th percentile of the income distribution, the decline in income
INCOME INEQUALITY AND GROWTH: PROBLEMS WITH THE ORTHODOX APPROACH
"... Abstract. This paper discusses the main issues about increasing inequality, whether it matters and its impact on economic activity and growth. It starts by briefly considering the empirical evidence of the share of income going to the top one percent since 1945 in the advanced countries. It then co ..."
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Abstract. This paper discusses the main issues about increasing inequality, whether it matters and its impact on economic activity and growth. It starts by briefly considering the empirical evidence of the share of income going to the top one percent since 1945 in the advanced countries. It then considers whether this represents an increase in the productivity of the top one percent or merely an extraction of economic rent. The empirical evidence suggests the latter is generally the case and, as a consequence, there is not likely to be a trade-off between greater income equality and efficiency (the latter being reflected in a lower economic growth rate). This is reinforced by considering the mainstream explanation of the distribution of income and by a consideration of the argument as to whether labor is paid its marginal product, which is found to be problematic. Hence, some reservations about the use of the aggregate production function are raised. The paper turns next to the question of whether or not a greater degree of inequality causes a slower economic growth, both for the advanced and the developing countries. It next considers if the increasing gap between the top one percent and the rest of the income distribution has been either responsible for, or exacerbated, the Great Recession. It concludes that the degree of inequality is an important factor in determining economic activity and one that has been ignored for too long in macroeconomics.
IT
, 2015
"... Central Banking in the Aftermath of the Crisis: Back to the past? ..."
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PROBLEMS WITH THE ORTHODOX APPROACH
, 2015
"... This paper discusses the main issues about increasing inequality, whether it matters and its impact on economic activity and growth. It starts by briefly considering the empirical evidence of the share of income going to the top one percent since 1945 in the advanced countries. It then considers whe ..."
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This paper discusses the main issues about increasing inequality, whether it matters and its impact on economic activity and growth. It starts by briefly considering the empirical evidence of the share of income going to the top one percent since 1945 in the advanced countries. It then considers whether this represents an increase in the productivity of the top one percent or merely an extraction of economic rent. The empirical evidence suggests the latter is generally the case and, as a consequence, there is not likely to be a trade-off between greater income equality and efficiency (the latter being reflected in a lower economic growth rate). This is reinforced by considering the mainstream explanation of the distribution of income and by a consideration of the argument as to whether labour is paid its marginal product, which is found to be problematic. Hence, some reservations about the use of the aggregate production function are raised. The paper turns next to the question of whether or not a greater degree of inequality causes a slower economic growth, both for the advanced and the developing countries. It next considers if the increasing gap between the top one percent and the rest of the income distribution has been either responsible for, or exacerbated, the Great Recession. It concludes
Job creators, job creation and the tax code.
, 2014
"... This paper considers the role of the tax code in determining income disper-sion and vacancy creation. A "span-of-control " model is embedded into a search and matching environment. A cut to the tax on pro
ts in isolation improves job creation and reduces before-tax income inequality. The i ..."
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This paper considers the role of the tax code in determining income disper-sion and vacancy creation. A "span-of-control " model is embedded into a search and matching environment. A cut to the tax on pro
ts in isolation improves job creation and reduces before-tax income inequality. The impact of a budget-balancing increase in the wage tax depends on the bargaining power of
rms. When it is high,
rms pick up the lions share of the tax burden. The tax acts like a barrier to entry: it bene
ts large
rms at the expense of marginal ones. Net e¤ects are an increase in unemployment and before-tax income dispersion. Low
rm bargaining power means workers pick up more of the tax burden. It acts like a subsidy to entrepreneurship reinforcing the impact of the pro
t tax reduction. Taxes on the returns to capital leave everyone worse o¤. Tax hikes destroy jobs especially an increase on the magni-tude set for January 1st. John Boehners address to Peter G. Peterson Foundation 2012 Fiscal Summit. We need serious tax reform to make the tax code fairer and simpler. The most pro
table corporations should have to pay their fair share...those who already have made it big have a re-sponsibility to pay a little bit forward- so the next kid coming along has a chance to make it too.Elizabeth Warren for Senate, Issues website. 1
On the Economic Efficiency of Progressive Taxation∗
, 2014
"... This paper suggests two mechanisms by which a progressive distribution of tax burdens may promote economic efficiency. First, a progressive tax rate structure indexed to the median income may discourage rent seeking by powerful interest groups. Second, progressive taxation favors income streams that ..."
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This paper suggests two mechanisms by which a progressive distribution of tax burdens may promote economic efficiency. First, a progressive tax rate structure indexed to the median income may discourage rent seeking by powerful interest groups. Second, progressive taxation favors income streams that are long-sustained over those that pay off over a shorter time span; this bias is likely to favor more socially productive activities. Consistent with these propositions, a marked retreat from progressivity for the top 0.1 percent of earners followed two decades of post-war economic expansion and preceded the productivity slowdown of the 1970s and the serial crises that have followed. The analysis suggests that progressivity is especially important at the top of the income distribution and that a top marginal rate that sets in too low—as would a single rate that applied to the top 0.1 percent of earners— would not achieve the right incentives.
