In his story “The Snows of Kilimanjaro,” Ernest Hemingway wrote a snappy retort to F. Scott Fitzgerald’s line about how “the very rich are different from you and me.” Yes, Hemingway’s character replies, “they have more money.”
Economist Gabriel Zucman of UC Berkeley and two colleagues add a gloss to this exchange in a new paper. The very rich also are vastly better than you and me at evading taxes, they conclude — so much better that global statistics may understate the scale of wealth inequality by as much as 25%.
“Tax evasion is really concentrated at the top of the income distribution,” Zucman told me.
That may seem intuitive — the richer one is, the larger the temptation to dodge the tax authorities — but it’s not the received wisdom among tax experts. They often point to the small business cash sector.