Changes in Income and Tax Rates: The tax code has exacerbated increasing income inequality
May 3, 2012
Earnings have risen dramatically at the top since 1979—by more than 250 percent for households in the top 1 percent of the income distribution. At the same time, many households at the middle and bottom have experienced stagnating incomes or even declines in earnings. Widening income inequality for workers has had significant consequences for American families, including greater disparities in the economic situations of children. Changes in the tax system over the past thirty years have exacerbated these problems. The very people who have received the biggest income gains in the past three decades have also seen the largest tax cuts. A progressive tax code that takes ability to pay into account—in which the tax rate increases as taxable income increases—is the most significant and powerful tool available to counteract income inequity.