Economics at your fingertips  

U.S. Inequality and Fiscal Progressivity -- An Intragenerational Accounting

Alan Auerbach, Laurence Kotlikoff and Darryl Koehler
Additional contact information
Laurence Kotlikoff: Boston University and The Fiscal Analysis Center
Darryl Koehler: Economic Security Planning, Inc. and The Fiscal Analysis Center

No WP2020-004, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: This study measures inequality and fiscal progressivity. It differs from prior such analyses by measuring inequality based on remaining lifetime spending rather than particular resources, like wealth and current income, that only partially determine lifetime spending, and by considering inequality and progressivity within generations. To estimate the distribution of remaining lifetime spending, we run the 2016 Federal Reserve Survey of Consumer Finances (after imputing missing data from other surveys) through The Fiscal Analyzer (TFA), a life-cycle consumption-smoothing program that incorporates remaining life-time resources, borrowing constraints and all major federal and state tax and transfer programs. We find that inequality in wealth and income dramatically overstate inequality in remaining lifetime spending. For example, the richest 1 percent of forty year olds, where resources are measured as the sum of human plus non-human wealth, have 34.1 percent of the cohort’s total non-human wealth, but account for only 14.5 percent of the cohort’s total remaining lifetime spending. The poorest quintile of forty year olds own just 0.6 percent of the cohort’s wealth, but account for 7.3 percent of its remaining lifetime spending. We also find that within-cohort inequality differs considerably from inequality across the entire population, regardless of age, and that, for particular age cohorts, current-year net tax rates substantially understate the degree of progressivity. Finally, as we illustrate by for the 2017 Tax Cuts and Jobs Act, the progressivity of tax reform may be significantly misstated using conventional current-year analysis.

Pages: 52 pages
Date: 2016-04, Revised 2019-08
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... essivity-8-31-19.pdf

Related works:
Working Paper: U.S. Inequality and Fiscal Progressivity: An Intragenerational Accounting (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Program Coordinator ().

Page updated 2023-12-08
Handle: RePEc:bos:wpaper:wp2020-004