This study uses a longitudinal sample of stable households to assess the impact of
federal taxes and transfers on the distribution of household income
during
the period
1969-1981. After controlling for the upward movement in age-income profiles across birth year cohorts, earned lifetime incomes are found to be more equally distributed
than earned annual incomes. The overall tax and transfer system is found to have a
larger redistributive effect on lifetime incomes. While taxes are relatively more
important than transfers in reducing lifetime income inequality among married
couples, the opposite is true for single-headed households. Taxes and transfers also
redistribute lifetime income from married couples to single-headed households.
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