ABSTRACT
InChapter1,weshowedthatthepre-taxincomesof mostfamilieshavestagnated,whiletheincomesofwealthy familieshavegrownsignificantly.Thischapterbroadens ouranalysisbyexaminingtheroleplayedbythetaxsystem inthesedevelopments.Themajorfindingofthischapteris thatfederal,state,andlocaltaxeshavenotamelioratedthe economicproblemsdocumentedinChapter1.Infact, recenttaxchangeshaveworsenedthedistributionofaftertaxincomebytaxingthemiddleclassandthepoormore heavilyandgivinglargetaxcutstotherichest1%.Since 1977,federaltaxchangesaloneamountedtoanaveragetax breakof$49,262in1989fortherichestfamilies.The causesofthisshiftincludealessprogressivepersonal incometax,higherpayrolltaxes,andlowercorporatetaxes. Therehasalsobeenasteadilyincreasingrelianceonstate andlocaltaxes,whichtendtoberegressive.
