TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, January 27, 2006

Growing Income Inequality in America

The Center on Budget and Policy Priorities and Economic Policy Institute have released a new study, Pulling Apart:  A State-by-State Analysis of Income Trends, by Jared Bernstein, Elizabeth McNichol & Karen Lyons:

In most states, the gap between the highest-income families and poor and middle-income families grew significantly between the early 1980s and the early 2000s.  The study is one of the few to examine income inequality at the state as well as national level.

Here is the Conclusion:

Over the course of the two decades since the early 1980s, few states have experienced broadly shared growth. While overall the economy of the United States has grown over the period, most of the benefits of that growth have accrued to families at the top of the income distribution. Lower income families and families in the middle of the income distribution have seen their incomes grow only slowly. At the same time, incomes at the top of the distribution have increased substantially, thereby widening the gap in income between high-income families and poor and middle-class families.

Even the more broadly shared growth of the late 1990s has not reversed this long-term trend. In well over half the states, families at the bottom and the middle of the income distribution have failed to keep pace with the gains made by the richest fifth of families over the past decade, and consequently, in most states, the gap between high-income families and the middle-class and the poor has widened.

The increase in income inequality has resulted from a number of factors, including both economic trends and government policy. Both federal and state policies have contributed to the increasing gap in income, and both federal and state policies can be used to help mitigate or even reverse this trend in the future.

Among the many interesting data are:

Greatest Income Inequality Between Top and Bottom Quartiles in 2000s:

  1. New York
  2. Texas
  3. Tennessee
  4. Arizona
  5. Florida
  6. California
  7. Louisiana
  8. Kentucky
  9. New Jersey
  10. North Carolina

Greatest Increase in Income Inequality Between Top and Bottom Quartiles, 1980s to 2000s:

  1. Arizona
  2. New York
  3. Massachusetts
  4. Tennessee
  5. New Jersey
  6. West Virginia
  7. Connecticut
  8. Hawaii
  9. Kentucky
  10. South Carolina


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