Yet again and again [economists and other researchers not named Hacker or Pierson] have found themselves at dead ends or have missed crucial evidence. After countless arrests and interrogations, the demise of broad-based prosperity remains a frustratingly open case, unresolved even as the list of victims grows longer.
All this, we are convinced, is because a crucial suspect has largely escaped careful scrutiny: American politics.
– Jacob Hacker and Paul Pierson, Winner Take All Politics
Here's a chart showing trends in the share of income received by the top one percent for all the modern industrialized nations for which data is available going back to the early twentieth century:
From 1910 to 1970, American inequality trends follow the broad international pattern, and inequality levels are in the middle of the pack. That's basically still true from 1970 to 1986:
It helps to know that the 1986 tax reform created big incentives for people who had previously reported income on corporate returns (where it is invisible to the datasets above) to report on individual income tax returns (where it appears as an out-of-the-blue increase). And if this may be considered a permanent change in the tax regime, then the effect is for more income to show up on individual returns after 1986 than before, artificially lifting the top income share in every subsequent year.
Hmmm...which possibility is more likely? Let's look at another chart showing the trends just for the northern hemisphere Anglophone countries, to which I'll add a new line:
Of course, if the 1988 to 2006 top share levels are more accurate in the U.S. after 1988 than before 1986, then rather than lowering the post-1986 trend, we should raise the pre-1988 trend. That would make U.S. levels uniformly higher than in the U.K. and Canada. But of course, the measured U.K. and Canadian top share levels may also be artificially low due to tax avoidance. And of course, the common trend over the three countries would remain.
So, to review, when the post-1986 U.S. trend is corrected, the U.S. experience with inequality over the past 100 years is broadly consistent with the rest of the modern world. Here's the summary chart for 1910-2006, with the revised U.S. trend.
Update: I've received several responses offline that it's going to far to say the experience of the U.S. is like that "everywhere else" and that it is really only like the other Anglophone countries. To some extent, that's a fair criticism. But of 15 countries shown here, only Germany, the Netherlands, and Switzerland haven't experienced an increase in inequality since 1980. And the increases in Norway and Finland are as big or bigger than in the U.S., U.K., and Canada. Sweden's increase is also nearly as great in relative terms (starting from a much lower level of course). But even if this is a story about the U.S., U.K., and Canada or the Anglophone countries versus the rest of the world, that's still a problem for Hacker's and Pierson's U.S.-centric theory.