1.1.2. Income Recipients: Who is to Count?

Individuals, households, families, tax units… The choice of the basic unit for the income recipients may not be as straightforward as it appears. Based on the same income tax returns for their inquiry on inequality in the United States, Kuznets (1953), and Piketty and Saez (2004) did not choose the same unit. Kuznets reduced tax returns to a per capita basis, while Piketty and Saez debated Kuznets’ choice and created instead a tax units series for homogeneity purposes. What are the arguments from both sides? On the one hand, Kuznets (1953, p. xxxiii) argued that a tax return “does not represent the number of income recipients, since there may be more than one recipient per return (and the number cannot be ascertained from the available data). (…) Nor does the income tax return measure, in and of itself, a family or spending unit, however defined, since a family may file more than one return”. On the other hand, Piketty and Saez (2003, p. 4) pointed out a downward bias that the per capita basis introduces in the income series, and prefer to use tax units. ³ “Because our data are based on tax returns, they do not provide information on the distribution of individual incomes within a tax unit. As a result, all our series are for tax units and not individuals. A tax unit is defined as a married couple living together (with dependents) or a single adult (with dependents), as in the current tax law.”