In recent weeks, a major debate has gripped the field of economics, one with significant policy stakes. In one sense, the debate is about the nature and extent of inequality in the US: are the rich really taking more of the pie than ever before? Has their share of income been growing very fast, or gradually? Is inequality the defining challenge of our time, or simply one among many?

In another, perhaps more accurate, sense, the debate is about how to interpret IRS audit studies and assign retirement income across time.

Lots of disputes in the social sciences are like this: touching on big, societally important questions, but ultimately turning on disagreements over highly technical issues. And so it is with the great inequality battle of 2023.

On one side are Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, three French-born economists who’ve pioneered the use of tax data in the US and elsewhere to track how the income of rich individuals has grown over time. They are among the most famous and successful people in their field; Piketty’s 2013 book Capital in the Twenty-First Century was a surprise worldwide bestseller, and Saez and Zucman each won the John Bates Clark Medal, an honor that rivals the Nobel in its prestige within the profession.

On the other side are Gerald Auten and David Splinter. Both are well-respected if less publicly known government economists, the former at the Treasury Department and the latter at the Joint Committee on Taxation. The two camps have been arguing over inequality for at least half a decade now, but with the Journal of Political Economy, one of the field’s most prestigious journals, agreeing to publish Auten and Splinter’s latest paper, the debate has come to a head.

The backstory: Piketty, Saez, and Zucman have, in a series of papers going back to 2003, documented a large and ongoing increase in the share of income in the US going to the top 1 percent, and even larger increases in the share going to the top 0.1 or 0.01 or even 0.001 percent. Inequality, according to their data, is rising, and it’s rising faster the higher up the income scale you go. Their data helped popularize the notion that the 1 percent is pulling away from the 99 percent beneath them; it’s hard for me to imagine the phrase “we are the 99 percent” becoming a mainstream political slogan without this research preceding it.

Importantly, Auten and Splinter agree that inequality has increased. But they are less certain that the top 1 percent’s share, or that of the top 10 or 0.1 percent, has increased. (Notably, this is a different question from whether inequality overall has grown, because income gaps can also show up within the bottom 90 percent.) The different perspectives are summed up in the latter chart, comparing how the two groups estimate the top 1 percent’s share of income as increasing over time:

Piketty, Saez, and Zucman estimate that the top 1 percent earned 9.1 percent of national income in 1960, rising dramatically to 15.1 percent by 2019. Auten and Splinter, by contrast, show a very small increase: 8.1 percent in 1960 to 8.8 in 2019. The share is now actually lower, they find, than it was in the mid-1960s.

Auten and Splinter reach similar conclusions about the top 10 and top 0.1 percent: per their estimates, the latter grew from 29.2 to 29.7 percent from 1960 to 2019, the latter from 2.5 to 3 percent.

How can two research teams, both looking directly at US tax data, reach such different conclusions? It’s not that one group are craven “inequality deniers,” to borrow an ugly term that Piketty has slurred Auten and Splinter with, or that the other group is “thoroughly discredited,” as billionaire libertarian economist Cliff Asness has described Piketty, Saez, and Zucman. The disagreement is, at root, about how to deal with the limitations of tax data, by far the best source of information on who earns what in America.

Neither side has a monopoly on truth. On some issues, Auten and Splinter made judgment calls that seem more reasonable to me; on others, Piketty, Saez, and Zucman do; on still more, it’s wildly unclear which assumptions are most appropriate to make.

At the same time,........

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