One of the worst aspects of the federal tax code is the way it treats saving. Under ordinary circumstances, saving is treated to double taxation at the individual level, reducing after-tax returns to saving and...
- The Tax Policy Blog
- The Inequality Debate Ignores How Incomes Change Over the...
The Inequality Debate Ignores How Incomes Change Over the Life Cycle
Income data from the IRS and the Census Bureau have their uses, but measuring equality isn’t one of them. This is because income data lacks context.
A single year snapshot of income data misses how income fluctuates significantly over the course of an individual’s life. For example, a person who is a poor medical student today will later be a doctor who makes a high salary.
In fact, the average tax return for an 18- to 25-year-old shows about $15,000 in adjusted gross income where an average tax return for someone between ages 55 and 64 shows above $80,000.
The chart below illustrates how the income on the average tax return changes over the life cycle. Put simply, the average person is poor when they’re young and become relatively rich as they progress in their careers.
We expand on this example and more in a new report that illustrates the flaws in using income tax data to measure inequality.
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