TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Thursday, October 20, 2005

Tax Foundation's Countdown to Tax Reform IV: Life Cycle and Income Inequality

Tax_foundation_9The Tax Foundation today published Countdown to Tax Reform, Part IV: Life Cycle and Income Inequality, as part of a series in anticipation of the expected November 1 release of the report of the President’s Advisory Panel on Federal Tax Reform,  Here is a taste:

One of the more overlooked explanations for the difference in incomes between taxpayers is the issue of life cycle. In our younger years, we typically work part-time, low-income jobs as we complete high school or college. In our 20s, we begin our formal careers with our first full-time position. By the time we reach our 30s and 40s, we are well into the swing of our careers as we advance up the job ladder of our chosen fields. By the time we are ready to retire, we’ve reached the peak of our earning potential. When we do retire, we circle back to the bottom of the income scale living on a fixed income....

[H]igher-income taxpayers are 50% older than their low-income neighbors. Overall, the lowest-income taxpayers (those in the bottom 10%) have a median age of 31 years. Looking at the remaining income groups reveals the progression of taxpayers’ incomes as they age in the workforce. Taxpayers in the middle 10% group have a median age of 40, while those in the top 10% have a median age of 47.

Table 1 shows in greater detail the age composition of each income quintile. The lowest income groups are overwhelmingly populated by younger taxpayers, while the upper income groups are overwhelmingly populated by much older taxpayers.:

Wealthier Taxpayers Are Older Taxpayers

Income

                                                     Age

Income

18-24

25-43

35-44

45-54

55-64

65+

Bottom 20%

30.6%

19.2%

16.0%

11.2%

8.0%

15.0%

Second 20%

15.9%

25.0%

21.8%

14.0%

9.0%

15.0%

Middle 20%

6.1%

24.5%

27.1%

20.2%

10.0%

12.0%

Fourth 20%

1.6%

19.5%

29.6%

25.6%

13.0%

11.0%

Top 20%

0.6%

12.6%

29.6%

34.3%

14.0%

9.0%

Subtotal

12.5%

20.6%

24.1%

19.8%

10.0%

13.0%

For prior TaxProf Blog coverage of other pieces in the series, see:

http://taxprof.typepad.com/taxprof_blog/2005/10/tax_foundations_4.html

Think Tank Reports | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef00d8355632fe69e2

Listed below are links to weblogs that reference Tax Foundation's Countdown to Tax Reform IV: Life Cycle and Income Inequality: