Sparse, Inconsistent and Unreliable: Tax Records and the World Inequality Report 2018

This article reviews the World Inequality Report 2018, a large collaborative data project based on the work of Thomas Piketty and the late Anthony Atkinson, which critiques the entire literature of inequality measurement from survey data and purports to provide superior, unprecedented and reliable coverage of income and wealth inequalities over the entire world, based primarily on tax records. The article examines three major issues: the coverage provided by tax data in the world economy, the consistency of tax data with other sources of information on income inequality, and the peculiarities of tax-based measurement of inequality in the United States. Then a comparison is made with measures drawn from other forms of administrative data - specifically payroll records - which are generally more consistent with records of inequality measured in household surveys than are tax records. Following this, the article discusses the analysis of wealth and wealth inequality before offering a few closing remarks about policy.