Trends in Top Incomes and their Taxation in OECD Countries

The shares of top income recipients in total pre-tax income have increased in OECD countries in the past three decades, particularly in most English-speaking countries but also in some Nordic and Southern European countries. These trends came to a halt during the first two years of the Great Recession, with falling top incomes especially during 2009. Since 2008, 21 OECD countries have increased their top PIT rate while only three countries reduced it. That halt did, however, not undo the previous surge in top incomes and it also appeared to be temporary in many countries, as top incomes largely recovered and grew faster than the majority of incomes since 2010, e.g. in Australia, Denmark, Norway, Sweden, and the US. To respond to these trends, governments have several options at hand to increase effective taxation paid by top income recipients without necessarily raising their marginal rates, to improve tax compliance and to reduce tax avoidance.