Changes in Income Inequality Among U.S. Tax Filers between 1991 and 2006: The Role of Wages, Capital Income, and Taxes—Hungerford 2013

This paper examines after-tax income inequality between 1991 and 2006. How wages, capital income, and tax policy affect income inequality is studied. Lerman and Yitzhaki's method decomposes the Gini coefficient by income source to examine these three possible contributors to income inequality (1985). Between 1991 and 2006, after-tax Gini coefficient rose 15% (0.071 points). Capital gains and dividends contributed most to this increase. Wage and tax changes equalized this period. Most of the equalizing effect of taxes occurred after the 1993 tax hike; it was reversed after the 2001 and 2003 Bush-era tax cuts. Inequality measures yield similar results.

Hungerford, T. L. (2013). Changes in income inequality among U.S. tax filers between 1991 and 2006: The role of wages, capital income, and taxes. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2207372