Taxes and inequality

Michael Barone:
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Many may find the results of the CBO study surprising. It turns out, Ryan reports, that federal income taxes (including the refundable Earned Income Tax Credit) actually decreased income inequality slightly between 1979 and 2007, while the federal payroll taxes that supposedly fund Social Security and Medicare slightly increased income inequality. That's despite the fact that income tax rates are lower than in 1979 and payroll taxes higher. 
Perhaps even more surprising, federal transfer payments have done much more to increase income inequality than federal taxes. That's because, in Ryan's words, "the distribution of government transfers has moved away from households in the lower part of the income scale. For instance, in 1979, households in the lowest income quintile received 54 percent of all transfer payments. In 2007, those households received just 36 percent of transfers." 
In effect, Social Security and Medicare have been transferring money from low-earning young people (who don't pay income but are hit by the payroll tax) to increasingly affluent old people.
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An equitable redistribution of he wealth is more difficult than Democrats will admit.  Clearly they are no better at that than they have been at trying to fine tune the earths thermostat.

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