Taxation and Inequality: A Time-Exposure Perspective
In: Tax Policy and the Economy, Volume 6
Conclusions about inequality based on cross-sectional snapshots of annual income can give a misleading picture of the inequality of a more permanent notion of income, due to the mobility of individuals across annual income classes. This paper reassesses some of the issues about taxation and inequality using two longitudinal tax return data bases. Replacing annual income with "time-exposure" income, defined as average real income over the period, does not significantly reduce the measured degree of inequality in the 1979-1985 period, although the fraction of income received by the lowest increase substantially. The procedure does, though, reduce the contribution to inequality of certain sources of income such as capital gains and increase the contribution of other sources such as interest and dividends. There is no systematic evidence that the comparison of snapshots between the 1967-1973 and 1979-1985 periods overstates the growth in inequality of a more permanent notion of income. The inequality of pre-tax income has been increasing steadily in the past two decades. Changes in income taxation have neither stemmed nor contributed significantly to this trend; since 1980 the contribution of the income tax to decreasing inequality has declined slightly.
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
10841.||Handle:|| RePEc:nbr:nberch:10841||Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Fitzgerald & Tim Maloney, 1990. "The Impact of Federal Income Taxes and Cash Transfers On the Distribution of Lifetime Household Income, 1969-1981," Public Finance Review, SAGE Publishing, vol. 18(2), pages 182-197, April.
- Poterba, J.M., 1989.
"Lifetime Incidence And The Distributional Burden Of Excise Taxes,"
510, Massachusetts Institute of Technology (MIT), Department of Economics.
- Poterba, James M, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," American Economic Review, American Economic Association, vol. 79(2), pages 325-30, May.
- James M. Poterba, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," NBER Working Papers 2833, National Bureau of Economic Research, Inc.
- Charles M. Beach, 1989. "Review: Dollars and Dreams: A Reduced Middle Class? Alternative Explanations," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 162-193.
- Danziger, Sheldon & Gottschalk, Peter & Smolensky, Eugene, 1989. "How the Rich Have Fared, 1973-87," American Economic Review, American Economic Association, vol. 79(2), pages 310-14, May.
- Shorrocks, Anthony, 1978. "Income inequality and income mobility," Journal of Economic Theory, Elsevier, vol. 19(2), pages 376-393, December.
- Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
- Christian, Charles W. & Frischmann, Peter J., 1989. "Attrition in the Statistics of Income Panel of Individual Returns," National Tax Journal, National Tax Association, vol. 42(4), pages 495-501, December.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:10841. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.