Page 164 - _21-0619 OK

The International Journal of the Royal Society of Thailand
Volume XII, 2020

context suggests that institutional and policy factors are more important. Alvaredo
et al. (2013) identify four factors contributing to the recent rise in the income
share of the top one percent in developed countries: (1) reductions in the tax rates

on top-tier incomes; (2) stronger bargaining by top executives / managers resulting
in higher pay at the expense of workers’ wages; (3) an increase in the share of
3
unearned income in total income arising partly from reductions in wealth and
inheritance taxes; and (4) a growing tendency for the same people to earn both
high earned and unearned incomes. Weighting the contribution of each of
4
these factors is difficult, but changes in tax have clearly played an important
role. There is a high correlation between reductions in the top-tier tax rates,
and the rise of the income share of the top 1 percent.

In the US where the top income tax rate was cut dramatically, this was
followed by sharp increase in the share of total annual income held by the top
one percent. In Germany, Spain, and Switzerland, where there was no significant
reduction in the top tax rate, the increase was much less marked. In France a rise
in the share of unearned income in total disposable income has been linked to
reductions in tax rates, especially on inheritance. Using time-series data on
income tax revenues, researchers in developed countries have been able to plot
the changes in the income share of the top 1 percent and to analyze the impact of
tax policy changes on the level of income inequality.

There have been no similar studies in developing countries because
similar time-series data on income tax revenues are not available to researchers.

The Revenue Department (RD) of Thailand kindly provided a randomly
selected sample of 0.3 percent of the data from the two personal income tax (PIT)

3 The argument is that when marginal tax rate is very high, top executives do not put much effort
into bargaining for higher pay; but when the marginal rate falls, and their gain is therefore greater,
they put more efforts into bargaining. This means their gain is subtracted from the worker share;
and they may spend less time making the company grow(Alvaredo et al, 2013; Galbraith, 2012).
4 Contrary to the popular belief that the top earned and unearned income are separate groups of
people and those with high unearned income tended to be concentrated among property owners
or the old wealthy. Data are difficult, but researchers have noted more correlation between the
two than in the past because: a) accumulated family wealth has a role in getting the top-earning
jobs; and b) savings from top earned income are significant source of unearned income (Alvaredo
et al, 2013).

156 Towards A Fairer Personal Income Tax

5/1/2565 BE 09:04
_21-0619(155-166)9.indd 156 5/1/2565 BE 09:04
_21-0619(155-166)9.indd 156