FW: The Federal Tax Code and Income Inequality

[le...@communityfinancialresources.net]

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Leon Sompolinsky, CIAO

Community Financial Resources

510-931-7761

 

"The poor always pay back."  -- central assumption of Grameen Bank

 

 

 

From: Center for American Progress [mailto:prog...@americanprogress.org]
Sent: Thursday, April 19, 2012 9:03 AM
To: le...@communityfinancialresources.net
Subject: The Federal Tax Code and Income Inequality

 

 

April 19, 2012| View Online
	The Federal Tax Code and Income Inequality
	How Federal Tax Policy Changes Have Affected and Will Affect Income Inequality By Michael Linden Over the past 30 years, our nation's income has grown increasingly unequal. In 1979 the average income for a household in the richest 1 percent was about 10 times higher than the average income for a household in the middle 20 percent. By 2007 that ratio had almost tripled. The average household in the richest 1 percent was now earning nearly 30 times as much as those in the middle. Yet even as income inequality increased dramatically, the effect of the federal tax code on income distribution declined substantially. Because, on average, richer households pay more of their income in federal taxes than do middle- and low-income households, the “after-tax” distribution of income is always somewhat more equitable than it was before federal taxes are taken into account. But the magnitude of this effect can vary quite a lot because policy changes make the tax code less or more progressive. From 1979 to 2007 there were a number of major tax changes, but the cumulative effect was to render the federal tax code less progressive and therefore less able to dampen income inequality. This issue brief will examine the consequences of these changes to the federal tax code on the income distribution.
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