The Wall Street Journal’s David Wessel has an excellent piece
Monday on what academic research tells us about taxes and
inequality in the United States. The short version: Inequality
has exploded in the past three decades. Taxes, meanwhile, have
gotten more progressive — though not enough to counteract that
increase in inequality. I’ve made the graph below to illustrate
that latter fact. The red line shows how much taxes and
transfers (such as food stamps) have done to reduce inequality
between 1979 and 2009. The data comes from table nine here. The
blue line, meanwhile, shows how much more progressive taxes and
transfers would have had to be in order to maintain 1979 levels
of economic equality. In 2009, taxes and transfers reduced
inequality by 26.4 percent, around the same amount as the 24.8
percent reduction in 1979. But the tax code actually has to
become more and more progressive every year to prevent
inequality from growing. Taxes and transfers needed to reduce
inequality by 38.2 percent in 2009 to kee