Recent Trends in US Income Distributions in Tax Record Data Using More Comprehensive Measures of Income Including Real Accrued Capital Gains

Use of Internal Revenue Service (IRS) tax records improves researchers’ ability to track income trends, although the focus on taxable market income in this research excludes important income sources. Using IRS data in combination with other data sources, we explore the effect of measuring inequality levels and trends with income, including real accrued capital gains based on Haig-Simons principles. While median market income fell 10% from 1989 to 2016, median economic income increased by 26% using our Haig-Simons-based measure. Top 1% income shares were lower and increased by only about one-third of that estimated using previous approaches over this period.