‘The Myth Of American Income Inequality’: The Federal Government Drastically Overestimates Earnings Disparity, Study Says

‘The Myth Of American Income Inequality’: The Federal Government Drastically Overestimates Earnings Disparity, Study Says


The federal government drastically overestimates income inequality in the United States by failing to account for certain welfare programs and income taxes on the wealthiest earners, according to a study released on Tuesday by the Cato Institute.

The analysis, written by Cato Institute adjunct scholar John Early, says that official statistics fail to account for more than two-thirds of transfer payments provided to low-income households and do not consider income loss from taxes, which average 35% of income for the wealthiest quintile of taxpayers. Poverty counts are 10 times higher than the true figure, while income inequality is overestimated by a factor of four, according to the study.

The Census Bureau’s official accounting method “excludes $1.9 trillion given to households in transfer payments and pretends that the $4.4

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