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Article:

Why the Gap Between Rich & Poor Is Widening

An Inside Look at Why the Rich Get Richer & the Poor Stay Put

Current Tax Rates Favor the Rich

Then there's the current tax rate structure, according to a separate, recently released analysis by the Congressional Research Service. The average federal income tax rate for the highest-income taxpayers has been falling steadily for the past 60 years, according to the report. Most recently, the so-called Bush tax cuts enacted in 2001 and 2003 lowered the top marginal tax rate from 36.9 percent to 35 percent. 

The natural effect of lower tax rates is that the wealthiest get to keep more of their income, which tends to widen the gap between rich and poor, according to the CRS analysis. Lower tax rates, the report suggests, may also act as an incentive for top earners to negotiate even higher compensation; the lower the tax rate, the more of each additional dollar the worker gets to keep. 

Indeed, the report concludes, "the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution."

 

  • Sarah Shemkus

    Sarah Shemkus is an award-winning freelance journalist, marketing enthusiast, accomplished baker, occasional globetrotter and total nerd (with a particular fondness for spreadsheets). Most recently, she reported on business and real estate … Read more...