The composition of incomes at the top of the distribution: trends in Brazil between 2006 and 2012, using personal income tax data

Abstract Using personal income tax data, we analyze the composition of the richest 10% of the Brazilian population, and its evolution between 2006 and 2012. We reorganized the original data to produce stable categories of income over the period. Pareto interpolations produced a distribution of income from tabulated data. The results highlight that, on average, in the top 1%, less than half of the income is composed of wages and pensions and more than one third of capital related incomes. Of these, one quarter is of profits and dividends, and one sixth is of income strictly related to capital, such as financial investments and capital gains. Between 2006 and 2012 the share of capital income increased at the top of the distribution. This income is extremely concentrated: three quarters of all profits and dividends, three quarters of all financial investments and four fifths of all capital gains of the top 10% are accrued by the top 1% of the population. To some extent these shares express the concentration across the entire population. The income inequality trends between 2006 and 2012 are the result of an increase in the share of capital income at the top of the distribution compensating a decrease in the concentration of labor income below the top 1%, which explains the divergence of trends between tax and survey data. We were not able to calculate how much of the former increase is due to inflation.