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The Evolution and Determinants of Wealth Inequality in the North Atlantic Anglo-Sphere, 1668–2013 pp 25–40Cite as

Wealth Inequality: Facts, Figures and Approaches to Its Study

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Abstract

Methodological issues include defining wealth, units of observation, biases of the data source, asset coverage, sampling, and institutional differences. Sources include survey data, estate tax data, probate, census, and income tax data. The Canadian wealth inequality figures are for 1851–2012 and come from probate records, published scholarly estimates, Statistics Canada Survey data, and federal estate tax data. The US wealth inequality estimates are for 1680–2012 and come from secondary sources using probate, census, survey, and tax data. Estimates for the United Kingdom come from primary and secondary sources for the years from 1668 to 2013, including probate and estate tax data. Inequality measures used are the Gini coefficient and the top 1 and 10 percent wealth shares.

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Notes

  1. 1.

    Wolff (1991: 94).

  2. 2.

    For example, Garbinti et al. (2016) combine income tax data, inheritance registers, national accounts, and wealth surveys to deliver consistent and unified wealth distributions, but they do so only for France from 1800 to 2014.

  3. 3.

    For a discussion, see Hardle (1991: 3–13). See also Cleveland (1979, 1985, 1993).

  4. 4.

    These data sets were collected with financial assistance via three standard research grants provided by the Social Sciences and Humanities Research Council of Canada over the periods 1991–1994, 1999–2002, and 2007–2010.

  5. 5.

    Probate data is potentially subject to a number of biases. Probated decedents were generally of higher socioeconomic status and estate taxes may have provided some incentives for estate administrators to underestimate assets. Ontario and Manitoba both brought in succession duties in the 1890s, but the exemptions were broad enough to provide little incentive to underestimate estate values. For some additional details on probate as a source of wealth data, these data sets, their construction, and previous use, see Di Matteo (1997, 1998, 2004, 2012, 2013a, 2016a, b).

  6. 6.

    A Gini coefficient is an inequality measure that takes on a value between zero and 1 with 0 denoting complete equality and 1 complete inequality. There is increasing inequality in a society as its Gini coefficients estimates increase toward 1. For a discussion of Gini coefficients and other inequality measures, see Cowell (2009).

  7. 7.

    These sources are as follows: Statistics Canada. Household Surveys Division, Statistics Canada Survey of Consumer Finances, 1977 [Canada]: Economic Family and Unattached Individuals Income, Assets and Debts Study Documentation, October 7, 2015; Statistics Canada. Household Surveys Division. Survey of Consumer Finances, 1984 [Canada]: Economic Family and Unattached Individuals Income, Assets, Debt. Study Documentation. October 7, 2015; Income Statistics Division, Statistics Canada.

    Survey of Financial Security, 1999 [Canada]: Economic Family File Study Documentation October 7, 2015; Income Statistics Division, Statistics Canada.

    Survey of Financial Security, 2005 [Canada] Study Documentation, October 7, 2015; Income Statistics Division, Statistics Canada Survey of Financial Security, 2012 [Canada] Study Documentation October 7, 2015.

  8. 8.

    These include deposits, savings bonds, cash on hand, registered retirement savings plans, registered home ownership plans, other liquid and non-liquid assets, value of vehicles owned, the value of owner occupied homes, and vacation homes.

  9. 9.

    Goodman (1995).

  10. 10.

    See Perry (1984: 125).

  11. 11.

    By the 1960s, the Federal Estate Tax for domiciled decedents allowed a basic exemption of $40,000, with additional exemptions if there were surviving spouses and children. Rates of taxation ranged from 10 to 16 percent for the first $20,000 of taxable estate value. For values of $20,000 to $200,000, the tax rate ranged from 18 to 26 percent. From $200,000 to $750,000, the rates ranged from 28 to 42 percent. From $750,000 to $1,800,000, the rates continued rising eventually reaching 52 percent. On remaining amounts, the rate was 54 percent. See Department of National Revenue, Taxation Division, Taxation Statistics 1964, Queen’s Printer, Ottawa, Canada , pp. 80–81. There was also a Gift Tax first imposed in 1935. See Perry (1984: 228). By the 1960s, the Gift Tax ranged from 10 percent on an aggregate taxable gift value of $5000 and under to 28 percent on amounts over $1,000,000. The Federal Gift Tax was also repealed in 1972. See Canada Year Book, 1962, p. 1021. For a survey of post-war Canadian fiscal and tax history, see Perry (1989).

  12. 12.

    Bird (1978: 140) also notes a report of the Ontario Government’s Taxation Committee in 1967 that notes that wealth taxation and death taxes in particular had a significant role in controlling extremes of wealth.

  13. 13.

    Data sources: 1950, Estates (Table J, p. 119), Department of National Revenue, Taxation Division, Taxation Statistics 1952, Queen’s Printer, Ottawa, Canada; 1951, Estates (Table 10, p. 71), Department of National Revenue, Taxation Division, Taxation Statistics 1953, Queen’s Printer, Ottawa, Canada ; 1952, Estates (Table 10, p. 70), Department of National Revenue, Taxation Division, Taxation Statistics 1955, Queen’s Printer, Ottawa, Canada; 1959–1960, Table 2, Estate Tax Department of National Revenue, Taxation Division, Taxation Statistics 1961, Queen’s Printer, Ottawa, Canada; 1960–1961, Table 2, Estate Tax Department of National Revenue, Taxation Division, Taxation Statistics 1962, Queen’s Printer, Ottawa, Canada.

  14. 14.

    Distribution of these estates by age categories was not available in these tables, and therefore estate multiplier estimates were not possible. It should be noted that work in progress by Davies and Di Matteo (2017) is constructing wealth distribution estimates using the estate multiplier for the top 1 percent using more detailed Canadian federal estate tax data, and the preliminary results have generated inequality estimates somewhat higher than the ones generated here.

  15. 15.

    It should again be noted that the wealth inequality estimates done here are not in any way adjusted for social class or mortality. As a result, the inequality estimates here show somewhat greater equality in the wealth distribution than would be the case if there was such adjustments.

  16. 16.

    Accessed January 2016. https://www.chartbookofeconomicinequality.com/

  17. 17.

    US federal taxes on wealth at death have been enacted since 1797, often in response to revenue needs in time of war or crisis. For example, they were enacted to cover expenses in both the US Civil War and the Spanish-American War and then repealed.

  18. 18.

    Congressional Budget Office (2009: 1).

  19. 19.

    DeLong (2003: Figure 4).

  20. 20.

    Changes in 1981 came with the passage of the Economic Recovery Tax Act (ERTA) that expanded marital deductions.

  21. 21.

    The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) phased out the estate tax beginning in 2001, essentially by increasing the tax exempt amount of an estate and by reducing the top marginal tax rate an estate. In 2010, the estate tax was temporarily repealed. Starting in 2011, the estate tax is reinstated, with an effective exemption amount of $1 million and a maximum marginal tax rate of 55 percent. See Congressional Budget Office (2009). For a longer-term history of US Federal estate taxation , see also Johnson and Eller (1998). As well, the American Taxpayer Relief Act (ATRA) of 2012 made the reversion permanent and included a five million dollar exemption indexed for inflation as well as top rates of 40 percent.

  22. 22.

    https://www.forbes.com/sites/ashleaebeling/2017/12/21/final-tax-bill-includes-huge-estate-tax-win-for-the-rich-the-22-4-million-exemption/#482eb4801d54

  23. 23.

    See Lindert (1986).

  24. 24.

    The years used are: 1668, 1669, 1670, 1698, 1699, 1700, 1729, 1730, 1731, 1738, 1739, 1740, 1741, 1810, and 1875.

  25. 25.

    Wealth Inequality the Facts. Institute for Economic Affairs. http://www.iea.org.uk/sites/default/files/publications/files/Wealth%20inequality%20briefing%20formatted.pdf

  26. 26.

    Piketty (2014) Figure 10.5.

  27. 27.

    Accessed January 2016. https://www.chartbookofeconomicinequality.com/

  28. 28.

    Atkinson (2013: 8).

  29. 29.

    Atkinson (2013: 7).

  30. 30.

    Boadway et al. (2009).

  31. 31.

    See http://www.telegraph.co.uk/financial-services/investments/inheritance-tax/inheritance-tax-changes/

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    Livio Di Matteo

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Di Matteo, L. (2018). Wealth Inequality: Facts, Figures and Approaches to Its Study. In: The Evolution and Determinants of Wealth Inequality in the North Atlantic Anglo-Sphere, 1668–2013. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-319-89773-8_3

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