Income inequality in the US continues to rise, according to a report from the Congressional Budget Office. That report, which presents data from 2018, finds that average income before taxes and transfers among households in the lowest fifth of the income distribution was $22,500, while income for households in the highest fifth averaged $321,700. Below is background on the trends in income inequality since 1979, as well as an explanation of how government policies can affect those trends.
Income inequality increased. The rate of poverty at the end of Reagan's term was the same as in 1980. Cutbacks in income transfers during the Reagan years helped increase both poverty and inequality. Changes in tax policy helped increase inequality, but reduced poverty. These policy shifts are not the only reasons for the lack of progress against poverty and the rise in inequality. Broad social and economic factors have been widening income differences and making it harder for families to stay out of poverty. Policy choices during the Reagan Administration reinforced those factors.
