“We find that the tax system helped mitigate somewhat the increase in household income inequality over the sample period, but this attenuating effect was insufficient to significantly alter the broad trend toward rising inequality,” the researchers conclude. They put a number on the cushioning effect of the American state: 15 percent.
This study is powerful partly because the data that supports it is so robust and because the researchers investigating that data are so deeply rooted in the American establishment. This is no Occupy Wall Street critique – it is a sober analysis done by economists at the Fed and the Treasury.
Their conclusion that rising income inequality is overwhelmingly permanent is also striking because this stratification is so strongly at odds with the increasing political openness of those same 2-1/2 decades. Even as class divisions have hardened, other forms of structural inequality have been eroded.