Impact of Tax Cuts on Inequality and Wealth Gaps
Tax cuts increase inequality because they disproportionately benefit the wealthy. Since high earners pay a larger share of taxes, any rate reduction gives them the largest dollar savings. Several mechanisms drive this wealth concentration. Lower capital gains rates allow the rich to grow their assets with less tax liability compared to standard labor income taxes. Corporate tax cuts also primarily benefit shareholders instead of improving conditions for average workers. The ultra wealthy further reduce their tax burden by taking out large loans against their stock portfolios, which are not taxable. Additionally, wealthy donors use political influence to shift the tax burden away from corporate profits and onto labor income.
