<P> Gary Burtless of the Brookings Institution notes that many economists and analysts who use U.S. census data fail to recognize recent and significant lower - and middle - income gains, primarily because census data does not capture key information: "A commonly used indicator of middle class income is the Census Bureau's estimate of median household money income . The main problem with this income measure is that it only reflects households' before - tax cash incomes . It fails to account for changing tax burdens and the impact of income sources that do not take the form of cash . This means, for example, that tax cuts in 2001 - 2003 and 2008 - 2012 are missed in the census statistics . Furthermore, the Census Bureau measure ignores income received as in - kind benefits and health insurance coverage from employers and the government . By ignoring such benefits as well as sizeable tax cuts in the recession, the Census Bureau's money income measure seriously overstated the income losses that middle - income families suffered in the recession . </P> <P> New CBO income statistics are beginning to show the growing importance of these items . In 1980, in - kind benefits and employer and government spending on health insurance accounted for just 6% of the after - tax incomes of households in the middle one - fifth of the distribution . By 2010 these in - kind income sources represented 17% of middle class households' after - tax income . The income items missed by the Census Bureau are increasing faster than the income items included in its money income measure . What many observers miss, however, is the success of the nation's tax and transfer systems in protecting low - and middle - income Americans against the full effects of a depressed economy . As a result of these programs, the spendable incomes of poor and middle - class families have been better insulated against recession - driven losses than the incomes of Americans in the top 1% . As the CBO statistics demonstrate, incomes in the middle and at the bottom of the distribution have fared better since 2000 than incomes at the very top ." </P> <P> Inequality can be measured before and after the effects of taxes and transfer payments such as social security and unemployment insurance . </P> <Ul> <Li> Market income, or income before taxes & transfers: Expertise, productiveness and work experience, inheritance, gender, and race have had a strong influence on distribution of personal income in the United States as in other countries . </Li> <Li> After taxes & transfers: Reducing the progressivity of the income tax system and transfers increases income inequality . CBO reported in 2011 that: "The equalizing effect of transfers declined over the 1979--2007 period primarily because the distribution of transfers became less progressive . The equalizing effect of federal taxes also declined over the period, in part because the amount of federal taxes shrank as a share of market income and in part because of changes in the progressivity of the federal tax system ." </Li> </Ul>

How was the distribution of income so unequal in the united states during the 1920s