Question

1. Why is it necessary to analyze pre-tax income shares when post-tax income inequality is what...

1. Why is it necessary to analyze pre-tax income shares when post-tax income inequality is what people actually feel/experience?

2. Explain how changing norms concerning wealth accumulation through inheritance can change the level of inequality through time. How does this interact with earned income to help explain the difference across countries, e.g. the U.S. and France?

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It is necessary to analyze pre-tax income shares when post-tax income inequality is what people actually feel or experience. Income inequality is the gap between the little top percentage of the population and the bottom large share of the population. Example: Top 10% of the population holds 80% of wealth and the bottom 40% percent hold 10% of the income. The tax has been used as a measure to reduce this gap between rich and poor where the rich are taxed higher than the poor. So it is important for the policymakers to analyze the pre-tax income shares to facilitate a comparison between pre-tax and post-tax income share. If the bottom section has not benefitted from the change in tax policies then taxing is not reducing income inequality.

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