US Income Inequality Before Taxes and (Many) Transfers: Census Data

Each year, the US Census Bureau publishes three overview reports to update the annual data on income, poverty rates, and health insurance. Here, I focus on some figures from Income in the United States: 2024, by Melissa Kollar and Zach Scherer (September 2025, P60-286). Here’s a figure showing several measures of pre-tax income inequality.

It’s perhaps useful for most readers to start at the bottom. US households as a grouap are divided into five parts, or quintiles. The share of income going to the top quintile has been rising for decades, with an especially sharp jump in the 1990s. The middle figure offer several ratios with the income at the 90th percentile of the income, the 50th percentile. The 90th percentile is rising substantially compared to the 10th percentile, and rising but less so compared to the 50th percentile. The ratio of the 50th to the 10th percentile hasn’t moved much. Both of these figures suggest a rise in pre-tax income concentrated at the top of the income distribution.

The top panel shows the “Gini coefficient,” which will be less intuitively clear to many reader. I offered my own explanation of it here. But basically, it is a way of measuring the extent to which an income distribution departs from perfect equality of incomes. On this scale, perfect equality of incomes has a Gini coefficient of zero, while perfect inequality of incomes–that is, all income going to one person–has a Gini coefficient of 1. Again, this measure shows a steady rise over time.

A few thoughts here:

1) This is a measure of inequality in money income. It includes wages and salaries, rent payments, interest and dividends, as well as government cash payments like Social Security, and cash forms of public assistance. It does not include capital gains. It does not include after-tax effects, including both taxes paid and assistance to those with low incomes that happens through tax credits like the Earned Income Tax Credit. It also does not inclued the value of non-cash assistance programs like food stamps or Medicaid. But it seems safe to say that the rising inequality at the top of the distribution is being primarily driven by wage and salary payments at the top of the income distribution–which is a pattern of interest all by itself.

2) The steady rise in income inequality over time suggests that the driving factor is not something short-term, like the policies of a given president. I won’t try to run through a list of possible candidates for causal factors here. But it does seem worth noting some data on education and income also just released by the Census Bureau. This figure only goes back two decades. As the Census Bureau notes:

Overall, the income gap between householders with a bachelor’s degree or higher and those with a high school degree but no college widened during the 20-year period. In 2004, households headed by those with at least a bachelor’s degree had about twice as much income as those headed by someone with a high school degree but no college. By 2024, householders with a bachelor’s degree or higher had median household income 2.3 times higher than those with a high school degree. The makeup of educational attainment groups also changed over time. In recent decades, growth in the population with a bachelor’s degree or higher has been concentrated among racial and ethnic groups with historically low attainment. This growth has also disproportionately come from increasing educational attainment among women. 

One of the driving forces between rising inequality over time lies in the race between demand for skilled labor and supply of skilled labor. If the supply isn’t keeping up with demand, then the wage gap between the two groups will tend to rise. This is surely not the entire story of rising pre-tax, pre-transfer US income inequality, but it’s a part.

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