Income inequality and income taxation

This paper presents summary information on the before- and the after-tax income distribution in the United States between 1984 and 2004, along with data on effective tax rates on households in various quintiles of the income distribution. It describes two effects of tax policy on income distribution. The first involves the redistributive impact of taxes for a given pre-tax distribution of income. The second involves changes in the pre-tax distribution of income that are induced by taxpayers' behavioral responses to the tax system.