In a forthcoming paper, we describe the extent to which various forms of economic income generated in the economy actually show up on tax forms. This information gives perspective on the extent to which such income is taxed, since a pure income tax would tax all forms of income. Tax data alone provides incomplete insights about this question because the income recorded on tax forms is already affected by tax rules, avoidance strategies, and non-compliance.
To address these issues, we use aggregate economic income data from the National Income and Product Accounts (NIPA) and Financial Accounts of the United States. Published IRS Statistics of Income (SOI) tables provide our measures of aggregate incomes reported on tax returns.
We group the various income flows into three categories: closely held business incomes; financial incomes such as interest and dividends; and a broad “other” income category that includes wages…
