![]() However, the tax system has become less progressive at the top of the income distribution and, today does less to reduce inequality in wealth than in the past.įor example, the CBO estimates that the income per person earned (pre-tax and transfers) by the lowest-income households increased 29 percent between 19, and by 39 percent among middle-income households. Among low- and middle-income households, federal tax and transfer policies have reduced poverty and increase after-tax, after-transfer incomes. ![]() The tax system plays an important role in mitigating income inequality because it is progressive on an after-tax, after-transfer basis the distribution of income is less unequal. 5 The relationship between taxes and inequality ![]() 4 Likewise, between 19, the share of wealth owned by the top 1 percent increased from about 22 percent to more than 30 percent and the share owned by the top 0.1 percent doubled (from 7 percent to 14 percent). Over that period, the top 1 percent share of market income increased from 9 percent to 19 percent. Between 19, per-capita pre-tax market income earned by the top 1 per increased 250 percent, compared to only 29 percent for the lowest-income 20 percent of the population and 39 percent for the middle class. In historical context, the concentration of income and wealth is unprecedented. These data imply that in 2017 average income of households in the top 1 percent ($1.9 million) was about 29 times greater than that of middle-income households ($66,800), and in 2019, the average wealth of the top 1 percent ($27.6 million) was about 263 times that of middle-class households ($105,100). According to the latest Federal Reserve Survey of Consumer Finances, in 2019 the top 1 percent of households held about one third of all wealth (more than the bottom 90 percent combined) and the top 10 percent 71 percent. According to estimates from the Congressional Budget Office, in 2017, the top 1 percent of households earned almost 19 percent of all market income, which includes wages, business income, and capital income before taxes and transfers, and the top 10 percent about 44 percent. Inequality in income and wealthįor perspective, the distribution of income and wealth is incredibly unequal. In short, reduced rates on high-income taxpayers have not only made the tax system less progressive but also impaired other fiscal goals. Moreover, the fact that all taxpayers got a tax cut over the past several decades, despite increases in federal spending, means that increases in transfers to low- and middle-income households came at the expense of other federal spending, including productive government investments in infrastructure and research, and rising deficits. As a result, the tax system now does less to reduce inequality in income and wealth at the top of the distribution today than it has in the past. In other words, we have reduced tax rates on the forms of income and assets that are particularly important to the wealthy-and this has diluted the effectiveness of the tax system in restraining the forces that are widening inequality in the U.S. Legislation has reduced tax rates on corporations, private businesses, capital gains and dividends, and on inherited wealth. In particular, provisions such as the Earned Income Tax Credit (EITC) and the Credit Tax Credit have substantially increased the incomes and well-being of for low- and middle-income families.Īt the same time, however, changes in tax policy have also tended to favor the highest-income taxpayers. ![]() Over the last several decades, as inequality surged, and as job opportunities for some workers stagnated, changes in federal policies partly-but not entirely-offset those headwinds. But it is also one of the most significant policy tools that the federal government uses to reduce poverty, insure Americans against risks to their health and economic wellbeing, and offset market-driven increases in inequality in income and wealth. The tax system is, of course, a means to raise revenue to fund government. ![]() One factor that contributes to the concentration of income and wealth is the tax system’s advantageous treatment of inherited wealth, corporate and non-corporate business income, and capital gains. Wealth and income are heavily concentrated in the United States-and increasingly so. Eccles Institute, University of UtahĬhair Thompson, Ranking Member Smith, and Members of the Committee, thank you for the opportunity to testify today. Nonresident Senior Fellow - Economic StudiesĮxecutive Director, Marriner S. ![]()
0 Comments
Leave a Reply. |