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Tax Policy and Income Inequality in the U.S., 1978-2009: A Decomposition Approach

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

No 5910, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We assess the effects of U.S. tax policy reforms on inequality by applying a new decomposition method that allows us to disentangle mechanical effects due to changes in pre-tax incomes from direct effects of policy reforms. While tax reforms implemented under Democrat administrations, in particular the EITC reforms in the 1990s and the ARRA in 2009, had an equalizing effect at the lower half of the distribution, the disequalizing effects of Republican reforms are due to tax cuts for high-income families. As a consequence of partisan politics, overall policy effects almost cancel out over the whole time period.

Keywords: Great Recession; tax policy; inequality; redistribution; political economy (search for similar items in EconPapers)
JEL-codes: H23 H31 H53 P16 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2011-08
New Economics Papers: this item is included in nep-acc, nep-pbe, nep-pol and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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