If the rich are getting richer, then where are they hiding it?

Income inequality rose significantly in the last decades of the 20th century, yet wealth inequality fell throughout most of the century. Why? Partly because of the home ownership boom. But the top 1%’s share of wealth fell from 60% before 1920 to under 20% by the 1980s.

In part, this shows that both war and inheritance tax are bad for the landed gentry. But are we missing something? Or, more specifically, are the rich hiding something? That’s the excellent question asked by new research into the wealth of our Victorian elite.

Inheritance tax is low today but was a much bigger deal historically, topping almost 80% in the 1950s. The research exploits a particularly large tax increase around 1920 to see if the wealth that the very richest dynasties declared before 1920 is still visible after the incentive to hide it increased.

The answer? Lots of it goes awol, not being declared when members of the dynasty die. For individual families this could be the result of incompetence, but overall that can’t explain the scale of what is going on. The richest 1,500 dynasties of 1892-1920 had at least 20%-32% of their wealth hidden by their descendants in the second half of the 20th century, with richer families hiding more of their wealth.

We should take this work seriously – it matches up well with families appearing in the Offshore Leaks database, of Panama papers fame. And it might even give HMRC a head start in tracking down some pretty wealthy tax dodgers.

• Read more from Torsten Bell’s Top of the Charts at resolutionfoundation.org