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Publication Date: March 2007
Publisher: Center on Budget and Policy Priorities (Washington, D.C.)
Author(s): Aviva Aron-Dine
Research Area: Banking and finance
Keywords: Economic projections; Tax code; Household income; Income diversity
Type: Report
Abstract:
Congressional supporters of the 2001 and 2003 tax cuts have begun recycling old arguments for extending all of these tax cuts. Among these is the claim that the tax cuts have made the tax code more progressive. The reality is that the tax cuts have made the tax code more regressive. A progressive tax code is one that makes the distribution of after-tax income more equal than the distribution of pre-tax income, and one tax code is “more progressive†than another if it has a larger effect in reducing income inequality. So, in order for the 2001 and 2003 tax cuts to have made the tax code more progressive, after-tax incomes would have to be less unequal today than if the tax cuts had not occurred. In fact, however, the reverse is true: the tax cuts made the distribution of after-tax income more unequal.