Why do you care so much about pre-tax inequality?

Because pre-tax inequality is the inequality stat most commonly cited in the press, in politics, in public debate, by Piketty and Saez, etc. It’s actually fairly rare that popular discussion of inequality uses after-tax inequality figures, as those figures show less inequality, and less growth in inequality, so rather less sensational.

Furthermore, pre-tax income shows how the market is allocating resources, and potential income if tax policy changed. Post-tax and post-transfer income matters more for a household budget, but for considering key macro variables like inequality, the market-allocated income remains very important.

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