My professor and I have been keeping in contact with each other, occasionally meeting face-to-face to go over the more detailed points of the research so far. We have been going through different sources of literature and other papers that have helped to provide us with a wonderful starting point. Prior literature on income inequality indicates that there is an ever-growing gap between the classes since the 1970’s. The reasons behind the growing income disparity are numerous. A major factor is the wage inequality. Income growth for the past three and a half decades in the American economy has been disproportionately distributed among the public, with the richest households receiving the overwhelming majority of the growth. (McNichol 2016). While the American economy is recovering from the Great Recession, the top one percent of families nationwide have received approximately 42 percent of all income growth. A further breakdown shows that in nine states, the top one percent received more than half of the income growth while the one percent in Connecticut and North Carolina have received all the income growth. In addition, from 1973 to 2007, twenty-five states had half or more of their aggregate state income growth go to the richest one percent households (Sommeiller and Price 2018).
We have dug through numerous U.S. government databases as well as state databases to gather our source data. So far, we have a breakdown of taxation incomes in the 48 contiguous states, their Gini coefficients, unemployment rates, their demographic breakdown by age, and their educational attainment breakdowns for the years 2006 to 2015. Based on our regression, we find that heavier state reliance on regressive forms of taxation worsen economic conditions for the less fortunate. In light of this information, we can come to the conclusion that despite the improvement of the United States economy over the past three decades, the growth is not a broadly shared experience. A majority of the gains have accrued to the households at the top of the income distribution, meanwhile middle and lower income households have stagnated in growth, and on some occasions, even experienced declines. As a nation, we must be more vigilant in ensuring that our nation’s economic growth benefits all segments of our population. Our nation highlights an increasingly prevalent difference between high-income families and the poor and middle-class. To counteract this trend, our policymakers, on both federal and state levels, must consider enacting more progressive taxation framework. Collecting data for this research has been relatively straightforward. Most of it can be found on government databases—it was the collection and cleaning of the data that was tedious and somewhat challenging.
We would like to continue further in this research by using a better measure of income inequality rather than relying solely on the Gini index. Professor Yarbrough and I have discussed this and we are currently working on compiling data that will use ratios of average income quintiles to compare the disparity between classes. After gathering such data and using some different methods of calculating a better measure of inequality, we would like to elaborate further on the effects of deeply divided income disparity.