Taxes, Transfers, and Economic Mobility in the Middle Class

• In Event: 047 - Section on Inequality, Poverty and Mobility Paper Session. Inequality, Poverty, and Mobility

Abstract

Intragenerational mobility (IRM) is integral to understanding how income changes across the lifecycle and the ways in which economic, demographic, and policy change affects family finances. To identify the underlying components of stasis and change, we assess the economic and demographic characteristics of the non-elderly who move up and down the distribution and those who remain in place, capturing the effects of tax and benefit policy on each group using PSID data from 1970 - 2009. We show that there are notable changes in IRM across the distribution, systematic differences in those who move up and down in the distribution, and the contributing factors for those moves. Our results suggest that public tax and transfer policy helps maintain income stability for middle income families, but does not alter the trajectory for low or high income families.

Authors

• Jonathan Pechman Latner, University of Wisconsin-Madison

• Timothy Smeeding, University of Wisconsin-Madison