The Broader Market

This graphic comes courtesy of the Washington Post based on research conducted by Emmanuel Saez and Thomas Picketty.  While the graph does not prove that low taxes on high income families cause inequality, there is clearly a strong correlation between low taxes and income inequality.  Since the end of the Carter administration, the share of total income going to the top 1 percent has grown, while taxes on this income group have remained markedly lower.

As I mentioned earlier, some have argued that the reason for the growth inequality is a lack of productivity gains for lower and middle income families. Tax policy could provide some justification for this position.  Taxes provide revenues for key social programs that disproportionately benefit low and middle income families. Consider worker training programs.  If this program is not sufficiently funded, low and middle income workers may not be able to improve their skill sets to be competitive (and more productive) workers in an increasingly global labor market.  Reduced tax rates for high income families could help explain for the lack of productivity growth for low to middle income workers.