US wealth, income inequality has declined, Baker Institute expert finds

Credit: 123RF.com/Rice University - Analysis of Federal Reserve survey data shows U.S. wealth inequality has declined for the first time in nearly 30 years, while income inequality has seen its largest decline in three decades, according to a new working paper from Rice's Baker Institute for Public Policy. The results come from the Survey of Consumer Finances (SCF), a triennial family survey conducted by the Federal Reserve. The survey data for 2019, which was released in late September, gives one of the best insights into U.S. households' wealth composition, said Jorge Barro , fellow in public finance at the Baker Institute and author of the paper, titled "Decline in U.S. Wealth and Income Inequality Between 2016 and 2019. What makes the shift particularly surprising is that it comes after a significant tax cut signed into law in 2017, Barro said. This tax reform, commonly known as the Tax Cuts and Jobs Act (TCJA), reduced the corporate tax rate from 35% to 21%. "Given that this tax cut largely benefited those who hold corporate equity, many expected this change would actually increase wealth and income inequality,” Barro wrote. "A recent working paper at the National Bureau of Economic Research, however, notes that higher corporate taxation shifts corporate income to noncorporate businesses, increasing the dispersion of income and generating a rise in income inequality - an outcome that would reverse with a decline in the corporate tax rate.