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How fair? Changes in federal income taxation and the distribution of income, 1978 to 1998

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  • James Alm

    (Georgia State University)

  • Fitzroy Lee

    (Office of Research and Analysis, Government of the District of Colombia)

  • Sally Wallace

    (Georgia State University)

Abstract

In this paper, we determine how tax law and income distribution changes have separately contributed to the changes in tax progressivity over time, and also how a specific pre-tax distribution of income affects the equalizing ability of a given tax change. We use information from the Current Population Survey for years that follow immediately after significant tax law changes or after the full enactment of these changes to measure the effect of income taxes on income distribution for selected years over the period 1978 to 1998. We find that, even when account is taken of the induced effect of changes in federal income tax laws on pre-tax income, the individual income tax structure has been less successful in equalizing after-tax income since the 1980s and into the early 1990s. We also find that a given tax law's equalizing effect on the distribution of income is significantly affected by the pre-tax distribution of income. © 2005 by the Association for Public Policy Analysis and Management.

Suggested Citation

  • James Alm & Fitzroy Lee & Sally Wallace, 2005. "How fair? Changes in federal income taxation and the distribution of income, 1978 to 1998," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 24(1), pages 5-22.
    • Handle: RePEc:wly:jpamgt:v:24:y:2005:i:1:p:5-22
    DOI: 10.1002/pam.20067
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    References listed on IDEAS

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    1. Suits, Daniel B, 1977. "Measurement of Tax Progressivity," American Economic Review, American Economic Association, vol. 67(4), pages 747-752, September.
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    Cited by:

    1. Nora Lustig, 2019. "Measuring the Distributional Impact of Taxation and Public Spending: The Practice of Fiscal Incidence Analysis," Commitment to Equity (CEQ) Working Paper Series 24, Tulane University, Department of Economics.
    2. Bargain, Olivier & Dolls, Mathias & Immervoll, Herwig & Neumann, Dirk & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian, 2011. "Tax Policy and Income Inequality in the U.S., 1978-2009: A Decomposition Approach," IZA Discussion Papers 5910, Institute of Labor Economics (IZA).
    3. Bargain, Olivier & Dolls, Mathias & Immervoll, Herwig & Neumann, Dirk & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian, 2013. "Partisan Tax Policy and Income Inequality in the U.S., 1979-2007," IZA Discussion Papers 7190, Institute of Labor Economics (IZA).
    4. Bargain, Olivier & Dolls, Mathias & Immervoll, Herwig & Neumann, Dirk & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian, 2014. "Tax policy and income inequality in the US, 1979-2007," ZEW Discussion Papers 14-001, ZEW - Leibniz Centre for European Economic Research.
    5. James Alm, 2017. "Is Economics Useful for Public Policy?," Southern Economic Journal, John Wiley & Sons, vol. 83(4), pages 835-854, April.
    6. Andrew V. Stephenson, 2018. "The Impact of Personal Income Tax Structure on Income Inequality for Belgium, Bulgaria, Germany, Lithuania, and Poland: A Comparison of Flat and Graduated Income Tax Structures," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 46(4), pages 405-417, December.
    7. Thor O. Thoresen & Zhiyang Jia & Peter J. Lambert, 2016. "Is there More Redistribution Now? A Review of Methods for Evaluating Tax Redistributional Effects," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 72(3), pages 302-333, September.
    8. Bebonchu Atems & Grayden Shand, 2018. "An empirical analysis of the relationship between entrepreneurship and income inequality," Small Business Economics, Springer, vol. 51(4), pages 905-922, December.
    9. Duncan, Denvil, 2014. "Behavioral responses and the distributional effects of the Russian ‘flat’ tax," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 226-240.
    10. Chiarini, Bruno & Ferrara, Maria & Marzano, Elisabetta, 2022. "Tax evasion and financial accelerator: A corporate sector analysis for the US business cycle," Economic Modelling, Elsevier, vol. 108(C).
    11. Bruno Chiarini & Maria Ferrara & Elisabetta Marzano, 2018. "Credit Channel and Business Cycle: The Role of Tax Evasion," CESifo Working Paper Series 7169, CESifo.

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