1. These plots are derived from Thomas Pickety and Emmanuel Saez's famous work, http://elsa.berkeley.edu/~saez/pikettyqje.pdf http://elsa.berkeley.edu/~saez/pik

1. These plots are derived from Thomas Pickety and Emmanuel Saez's famous work, http://elsa.berkeley.edu/~saez/pikettyqje.pdf http://elsa.berkeley.edu/~saez/pikettyqje.pdf. Their research has spurred similar analyses around the world, much of which is in the World Top Income Database, http://184.168.89.58/sketch/ http://184.168.89.58/sketch/. It is based on income tax filings, which correspond to the tax unit for each country. In the US, that would be by household. You prefer talking about consumption inequality, I prefer talking about wealth inequality, but the best data that we have is for income inequality hence the choice in this plot. The defect with measuring income inequality is that it does not directly correspond to each individual's ability to bear the tax burden, which leads to issues of tax fairness. The issue with consumption inequality is that the fraction of income consumed tends to decline with increasing income, so this metric is even less tied to an individual's ability to bear the tax burden. 2. I think you are greatly overstating the importance of the 1986 Tax Reform Act. During the period covered by this plot, the income tax essentially went from - a low revenue elite tax - to wartime tax grabs of greater than 70% of income, - to a permanent tax on the middle class with top marginal rates above 85%, - to a tax allowing a plethora of deductions, - to one with our current Reaganesque rates. There have been huge changes over the years, which are mostly captured in these plots. 3. Income inequality has been rising in many countries, although this is closely related to reductions in top marginal tax rates in each country. It is also related to tax avoidance and treaty shopping by multinationals in a global economy. In addition to income tax rates, other things that affect income inequality include longevity, birth rates, and the effectiveness of estate taxes since wealth is usually divided amongst children. Also important are capital gains taxes and tax sheltering. Right now, many modern countries are in a bizarre position where the incidence of income taxes, i.e. tax on net change in wealth per year) is higher on the middle class than on the very wealthy who have greater opportunities to take deductions, reclassify, and move income.