Thursday, October 20, 2005
The 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
For prior TaxProf Blog coverage of other pieces in the series, see:
- Countdown to Tax Reform: Ten Core Principles of Tax Policy
- Countdown to Tax Reform I: Not Your Father's Middle Class
- Countdown to Tax Reform II: Taxpayers and Non-Payers
- Countdown to Tax Reform III: Who Payns Income Tax in America?