Tax policy and income inequality in the US, 1979-2007

Olivier Bargain, Mathias Dolls, Herwig Immervoll, Dirk Neumann (), Andreas Peichl, Nico Pestel and Sebastian Siegloch

No 14-001, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We assess the effects of U.S. tax policy reforms on inequality by applying a new decomposition method allowing us to disentangle the policy effect from changing market incomes. Over the period 1979-2007, the cumulative policy effect aggravated inequality by increasing the income share of the top 20% in contrast to the middle class' share. The tax policy effect accounts for up to 29% of the total change in inequality; its contribution increases up to 41% if we take into account behavioral responses. While Republican policymakers increased inequality especially at the top, Democrats increased the income share of the bottom 80%.

Keywords: Tax policy; Inequality; Redistribution; Partisan Politics; Political Economy (search for similar items in EconPapers)
JEL-codes: H23 H31 H53 P16 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-pbe, nep-pol and nep-pub
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:14001

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