I n Chapter 1, we showed that the pre-tax incomes of most families have stagnated while the incomes of wealthy families have grown significantly.

This chapter broadens the analysis by examining the role played by the tax system in these developments. The major finding of this chapter is that federal, state, and local taxes have not ameliorated the economic problems documented in Chapter 1. In fact, between 1977 and 1989, tax changes worsened the distribution of after-tax income by taxing the middle class and the poor more heavily and giving large tax cuts to the richest 1%. Regressive federal tax changes between 1977 and 1989 amounted to an average tax break of $52,621 in 1989 for the richest families.