A note on income inequality at the state level

Abstract

The purpose of this paper is to consider how measures of income inequality change over time when the geographic scale of the assessment is taken into account. Using Internal Revenue Service (IRS) records at the state level for the adjusted gross income by tax paying unit and the Gini coefficient (GC), it is clear geography matters. Comparing the estimates of the Gini coefficient at the national level in 2008, 2016, and 2018 (the last year with IRS data available), I find there are small, but statistically significant, increases in income inequality. Comparing GC estimates for 2008 to 2016 at the state level, there is a difference in the direction of the significant changes in the estimated Gini coefficients. 58.8% of the states experienced significant increases in inequality comparing these two years, while 27.4% had significant decreases. This pattern reverses comparing 2016 to 2018. 43.1% experienced statistically significant decreases and 35.3% significant increases.