The Direct Effect of Taxes and Transfers on Changes in the U.S. Income Distribution, 1967–2015—Wimer 2020

Researchers have observed rising income disparity in the U.S. Prior studies provided an insufficient assessment of how changes to transfer programs affected income growth across the distribution. Our study decomposes tax and transfer program effects on household income distribution from 1967 to 2015. Lower-tail inequality (the ratio of the 50th to 10th percentile) decreased in the U.S. during this period due to in-kind and tax-based transfers. Food assistance and refundable tax credits account for virtually all 5th percentile income growth from 1967 to 2015 and about half of 10th percentile growth. Near the bottom, income increases are concentrated in households with children. Households without children saw smaller income growth.

Wimer, C., Parolin, Z., Fenton, A., Fox, L., & Jencks, C. (2020). The direct effect of taxes and transfers on changes in the US income distribution, 1967–2015. Demography, 57(5), 1833-1851.