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Friday, January 18, 2013

CBPP: Fiscal Cliff Tax Deal Modestly Reduces Income Inequality

Center on Budget and Policy Priorities:  The “Fiscal Cliff” Deal and Income Inequality:

Any evaluation of the recent “fiscal cliff” budget deal needs to consider its impact on one of the most powerful and troubling economic trends of recent decades:  the sharp rise in income inequality.  The deal shifts tax policy in a favorable direction by raising taxes on the nation’s highest-income people, but the increase is modest when compared to the effects of growing inequality. ...

http://taxprof.typepad.com/taxprof_blog/2013/01/cbpp-fiscal-cliff.html

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Comments

How tiresome. The base year is 1979, when the top tax rate was 70%. Could reduction of the top rate in 1986 have had anything to do with the growth in REPORTED TAXABLE income in the top 1%? Do the math: A taxpayer keeps TWICE as much money at a 40% tax rate than at a 70% tax rate.

Authors of "studies" on income inequality are wilfully blind to this probability, treating reported taxable income as exogenous, unaffected by tax rates. Their mental model has zero elasticity.

Posted by: AMTbuff | Jan 19, 2013 8:59:24 AM

"one of the most powerful and troubling economic trends of recent decades..."

Yep - much more important than the fact that the US has added well over 20 million people since 2000 - but not a single net new job.

Because we all know we are better off starving together than progressing unevenly.

Posted by: cas127 | Jan 19, 2013 11:34:12 AM