Top incomes in New Zealand 1921-2005: Understanding the effects of marginal tax rates, migration threat, and the macroeconomy

Using taxation statistics, we estimate the income share held by top income groups in New Zealand over the period 1921-2005. We find that the income share of the richest fell during the 1930s, rose again after the Second World War, and steadily declined from the late-1950s until the mid-1980s. From the mid-1980s until the mid-1990s, top income shares rose rapidly, particularly at the very top of the distribution. We present evidence that top marginal tax rates and changing top income shares in Australia and the United Kingdom may have contributed to fluctuations in the income share of the richest 1 percent. Past economic growth does not seem to have a strong effect on the income share of the top percentile group.