States Can Fight Growing Economic Inequality through Lowering Taxes on the Poor, and Stricter Labor Market Policies

While unemployment and levels of economic growth in the U.S. have returned to levels not seen since the onset of the financial crisis in 2008, inequality remains a significant problem. In new research, Megan E. Hatch and Elizabeth Rigby examine the role of state-level policies in reducing or increasing inequality. They find that inequality can be reduced through a combination of high taxes on the wealthy, low taxes on the poorest, and labor market regulations that are favorable to workers, such as minimum wages and an absence of right to work laws. Surprisingly, they also find that greater spending on the poor is associated with higher levels of income inequality.