Top income shares vs. top marginal tax rates
Just look at that slope.
The authors identify four key drivers of the massive increase in income of the top 1 percent:
- Tax policy, which has varied over time and differs across countries. Top tax rates have moved in the opposite direction from top income shares.
- "A richer view of the labor market", where we contrast the standard supply-side model with one where pay is determined by bargaining and the reactions to top rate cuts may lead simply to a redistribution of surplus. Top rate cuts may lead managerial energies to be diverted to increasing their remuneration at the expense of enterprise growth and employment.
- Capital income. Inherited wealth is, in Europe if not in the United States, making a return.
- The correlation between earned income and capital income, which has substantially increased in recent decades in the United States. This has hardly been investigated.
Source: Road to Riches: Tracking the Journey of the Global Superwealthy