How State Policymakers Can Decrease Income Inequality

Over the last 35 years, income gains in the American economy have accrued largely to the richest households, while many middle- and lower-income Americans haven’t shared in the nation’s growing prosperity.

In a new paper from CBPP, we explain how this income disparity has reduced opportunities for working people striving to get ahead and weakened our overall economy. Choices by state policymakers can make can make matters worse or improve them.

As Elizabeth McNichol writes:

“Virtually all states collect more taxes from moderate- and lower-income families, as a share of their income, than high-income families. This increases inequality by reducing after-tax incomes more deeply among low- and middle-income families than high-income families.”

State policymakers have numerous tools to ensure that high-income earners pay their fair share and lower-income earners don’t face increased tax responsibility. These include expanding taxes on inherited wealth, strengthening taxes on corporations, and enacting state earned income tax credits.  They should take these steps to make sure everyone benefits from economic prosperity.

Read the Report

Download the PDF (23pp)

The above information was provided by the Center on Budget and Policy Priorities in an email.