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Technology & Innovation

The Income Inequality Illusion

"As the top tax rate rises and falls, so do tax avoidance techniques—both legal and illegal. Changes in reported income, therefore, might not reflect changes in actual income."

“Remember that income inequality statistics are based on tax returns. If upper income earners manage to use legal or illegal tax avoidance techniques to reduce their reported, but not their real, income than official statistics will show a reduction in inequality even as there has been no real decrease. This also suggests that much of the apparent increase in inequality since 1979 that leftists complain about is probably an illusion. Because just as higher income tax rates will increase tax avoidance, lower income tax rates will decrease it.”

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