February 11, 2003
Migratory Lucky Duckies
Arnold KlingOne of the weaknesses of using income variation in a single year as a measure of the distribution of income is that people change income brackets over time. In general, the trend for any given household is upward, as households move up the ladder and their places on the lower rungs are taken by younger households and immigrant families.
This year's Economic Report of the President points out that the same factors are at work in the distribution of the burden of the Federal income tax. On p. 198, Box 5.4, the reports points out
About 66 percent of the taxpayers in the bottom (zero tax bracket) in [1987] had moved to a higher bracket after 10 years
Based on this analysis, it would appear that the Wall Street Journal was misleading when it implied that there is a permanent underclass of non-income-taxpaying Lucky Duckies.
For Discussion . What implications does the fluidity of income have for the most desirable characteristics of the tax system?
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