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Rising Income Inequality and the Role of Shifting Market-Income Distribution, Tax Burdens and Tax Rates

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Rising Income Inequality and the Role of Shifting Market-Income Distribution, Tax Burdens and Tax Rates

EPI,

5 min read
5 take-aways
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What's inside?

US tax policy has been a significant driver of rising inequality in the United States.

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Editorial Rating

7

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  • Scientific

Recommendation

US income inequality “has surpassed Gilded Age levels.” Federal budget policy analyst Andrew Fieldhouse looks at how the US tax regime exacerbated this disparity. He offers a new policy direction to reverse this trend and to generate revenue to reduce deficits. Though statistics-heavy, this paper is cogent and comprehensive. getAbstract recommends it to experts and laypeople interested in the relationship between tax policy and income inequality.

Summary

After World War II, the United States underwent vigorous economic growth. People at all income levels enjoyed its benefits. Since 1979, the majority of income gains have accrued to those at the top of the earnings scale, resulting in a sharp rise in the Gini index, a measure of income inequality. Market forces account for the lion’s share of this growing disparity. But while the Gini index has risen 23.2% since 1979, “post-tax, post-transfer inequality” has risen 33.2%, signaling that federal tax and transfer policy accounts for roughly one-third of the increase in inequality.

This expanding gap materialized due to...

About the Author

Andrew Fieldhouse is a federal budget policy analyst and a fellow at the Century Foundation.

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