Thomas L. Hungerford

Changes in Income Inequality Among U.S. Tax Filers between 1991 and 2006: The Role of Wages, Capital Income, and Taxes

This paper examines changes in after-tax income inequality among tax filers between 1991 and 2006. In particular, how changes in wages, capital income, and tax policy contribute to changes in income inequality is investigated. To examine the role of these three possible contributors to the increase in income inequality, the Gini coefficient is decomposed by income source using the method developed by Lerman and Yitzhaki (1985). The Gini coefficient of after-tax income increased by 15 percent (0.071 points) between 1991 and 2006. By far, the largest contributor to this increase was changes in income from capital gains and dividends. Changes in wages had an equalizing effect over this period as did changes in taxes. Most of the equalizing effect of taxes took place after the 1993 tax hike; most of the equalizing effect, however, was reversed after the 2001 and 2003 Bush-era tax cuts. Similar results are obtained with other inequality measures.

The Redistributive Effect of Selected Federal Transfer and Tax Provisions

Several policy makers have voiced concern, bordering on alarm, over federal budget deficits and growing federal debt over the past decade and have advocated changes in spending and revenue policies to address their concerns. This study examines the redistributive effect of various federal tax provisions and transfer programs using methods that pick up important dimensions of redistribution often missed in analyses. Overall, the results are as expected—both U.S. taxes and transfers reduce income inequality. The redistributive effect, however, could be larger, if the reranking effect were reduced or eliminated. The reranking effect tends to be relatively more important for transfers than for taxes.

Who Doesn’t Have a Bank Account?: Implications for Social Security Privatization

Many observers think privatization of social security will result in a large proportion of the elderly having far fewer benefits than they would have had under the current system. The reason is that mismanagement of private investments is to some degree inevitable. The author believes that whether a family has a bank account suggests how competently they can manage their retirement. He presents his results.

The Social Security Surplus and Public Saving

The U.S. net national saving rate reached a postwar peak of 12.3 percent in 1965 and has since trended downward to 1.2 percent in 2007. Consequently, many analysts claim that saving is too low. Since 1983, the Social Security program has been in surplus, and the trust funds have been building up to pay for the retirement benefits for the baby boom cohort. Several recent studies have concluded that the increases in the trust funds have been more than offset by reductions in surpluses elsewhere in the federal budget. These studies therefore conclude that public saving has fallen as a result of the trust fund buildup since the mid-1980s. This study reexamines this issue. In the results, the authors cannot find evidence that the trust fund surpluses have had an impact on the rest of the federal budget.

The Social Security Trust Funds and Public Saving

The Social Security program is one of the most popular and successful government programs in the United States. At the end of 2004, the OASDI trust funds held almost

Latest Tax Cuts: History Belies Promise of Growth

1.7 trillion in Federal government bonds and notes. It is projected that the trust funds assets will be equivalent to over 20 percent of GDP by 2020. Several recent studies have concluded that the increases in the trust funds have been more than offset by reductions in surpluses elsewhere in the federal budget. Consequently, public saving has fallen as a result of the trust fund build-up since the mid-1980s. This study reexamines this issue and finds that the trust fund has had no impact on the rest of the federal budget.

How Exceptional Is the U.S. Social Welfare System

One provision of The Tax Cuts and Jobs Act (TCJA; P.L. 115–97), enacted on December 22, 2017, dramatically reduces the statutory corporate tax rate from 35 percent to 21 percent. It is projected to cost the U.S. Treasury over

We’re Not Broke: America’s Real Spending Problem and How to Fix It

1.3 trillion over the next 10 years. Given widespread Republican concerns about federal budget deficits just eight years ago, it seems odd to call for tax changes that lower rates, reduce tax revenue, and increase deficits. The putative impetus for these calls is the belief that the statutory corporate income tax rate is too high, putting an excessive burden on U.S. corporations that leads to poor economic performance. This article examines corporate income-tax rates between 1946 and 2016 (before TCJA), and the argument linking low corporate tax rates with higher economic growth. This analysis finds no evidence that high corporate tax rates have a negative impact on economic growth. The new lower corporate income-tax rate is unlikely to spur economic growth.

How Income Inequality Affects Government Redistribution: The Median Voter Versus the Elites

The American social welfare system is highly dependent on tax incentives—tax breaks. Overall, including these, the nation spends as much as many other nations do on social welfare. But is this system efficient? Is it fair? Does it protect those who need protection? The author analyzes the issue.

Reducing Federal Budget Deficits: Considerations

Fearmongering about America’s imminent demise due to high levels of debt has badly misled the nation. It keeps the nation from investing in itself and adequately pushing the economy up to its full growth potential. The author offers a needed counteranalysis to the argument.