Must-Read: Marshall Steinbaum: How Much Would Increasing Top Income Tax Rates Reduce Inequality?

Must-Read: Marshall Steinbaum: How Much Would Increasing Top Income Tax Rates Reduce Inequality?: “William Gale, Melissa Kearney, and Peter Orszag… increasing top-bracket ordinary income tax rates…

would have little impact on inequality…. There are two key reasons why [their] tax scenarios do not affect [their measure of] inequality very much. First of all, the rich earn a great deal of their income in categories other than “ordinary income,” to which these tax rates apply…. The other reason… is that GKO measure inequality by the Gini Coefficient. But the scenarios only affect individuals comfortably within the top 1% of the income distribution…. The Gini Coefficient is insensitive to measuring inequality in that group….. [But] the reduction in the top 1% income share as a result of the GKO scenario is just under 20% of the total increase in inequality over the whole period the CBO analyzes…