Income inequality in the United States in the context of "Great Divergence (inequality)"

The United States has a highly developed diversified market-oriented mixed economy. It is the world's largest economy by nominal GDP and second largest by purchasing power parity (PPP). As of 2025, it has the world's ninth-highest nominal GDP per capita and eleventh-highest GDP per capita by PPP. According to the World Bank, the U.S. accounted for 14.8% of the global aggregate GDP in 2024 in purchasing power parity terms and 26.2% in nominal terms. The U.S. dollar is the currency most used in international transactions and the world's foremost reserve currency, backed by a large U.S. treasuries market, its role as the reference standard for the petrodollar system, and its linked eurodollar. Several countries use it as their official currency and in others it is the de facto currency. Since the end of World War II, the economy has achieved relatively steady growth, low unemployment and inflation, and rapid advances in technology.

The American economy is fueled by high productivity, well-developed transportation infrastructure, and extensive natural resources. Americans have the sixth highest average household and employee income among OECD member states. In 2021, they had the highest median household income among OECD countries, although the country also had one of the world's highest income inequalities among the developed countries. The largest U.S. trading partners are Mexico, Canada, China, Japan, Germany, South Korea, the United Kingdom, Taiwan, India, and Vietnam. The U.S. is the world's largest importer and second-largest exporter. It has free trade agreements with several countries, including Canada and Mexico (through the USMCA), Australia, South Korea, Israel, and several others that are in effect or under negotiation. The U.S. has a highly flexible labor market, where the industry adheres to a hire-and-fire policy, and job security is relatively low. Among OECD nations, the U.S. has a highly efficient social security system; social expenditure stood at roughly 30% of GDP.

Progressivism in the United States is a left-leaning political philosophy and reform movement. Into the 21st century, it advocates policies that are generally considered social democratic and part of the American Left. It has also expressed itself within center-right politics, such as New Nationalism and progressive conservatism. It reached its height early in the 20th century. Middle/working class and reformist in nature, it arose as a response to the vast changes brought by modernization, such as the growth of large corporations, pollution, and corruption in American politics. Historian Alonzo Hamby describes American progressivism as a "political movement that addresses ideas, impulses, and issues stemming from modernization of American society. Emerging at the end of the nineteenth century, it established much of the tone of American politics throughout the first half of the century."

Progressive economic policies incorporate the socioeconomic principles and views of social democracy and political progressivism. These views are often rooted in the concept of social justice and have the goal of improving the human condition through government regulation, social protections, and the maintenance of public goods. It is based on the idea that capitalist markets left to operate with limited government regulation are inherently unfair, favoring big business, large corporations, and the wealthy. Specific economic policies that are considered progressive include progressive taxes, income redistribution aimed at reducing inequalities of wealth, a comprehensive package of public services, universal health care, resisting involuntary unemployment, public education, social security, minimum wage laws, antitrust laws, legislation protecting labor rights, and the rights of labor unions. While the modern progressive movement may be characterized as largely secular in nature, the historical progressive movement was by comparison to a significant extent rooted in and energized by religion.

The inequality of wealth (i.e., inequality in the distribution of assets) has substantially increased in the United States since the late 1980s. Wealth commonly includes the values of any homes, automobiles, personal valuables, businesses, savings, and investments, as well as any associated debts.

Although different from income inequality, the two are related. Wealth is usually not used for daily expenditures or factored into household budgets, but combined with income, it represents a family's total opportunity to secure stature and a meaningful standard of living, or to pass their class status down to their children. Moreover, wealth provides for both short- and long-term financial security, bestows social prestige, contributes to political power, and can be leveraged to obtain more wealth. Hence, wealth provides mobility and agency—the ability to act. The accumulation of wealth enables a variety of freedoms, and removes limits on life that one might otherwise face.

The United States has separate federal, state, and local governments with taxes imposed at each of these levels. Taxes are levied on income, payroll, property, sales, capital gains, dividends, imports, estates and gifts, as well as various fees. In 2020, taxes collected by federal, state, and local governments amounted to 25.5% of GDP, below the OECD average of 33.5% of GDP.

U.S. tax and transfer policies are progressive and therefore reduce effective income inequality, as rates of tax generally increase as taxable income increases. As a group, the lowest earning workers, especially those with dependents, pay no income taxes and may actually receive a small subsidy from the federal government (from child credits and the earned income tax credit). Taxes fall much more heavily on labor income than on capital income. Divergent taxes and subsidies for different forms of income and spending can also constitute a form of indirect taxation of some activities over others. Taxes are imposed on net income of individuals and corporations by the federal, most state, and some local governments. Citizens and residents are taxed on worldwide income and allowed a credit for foreign taxes. Income subject to tax is determined under tax accounting rules, not financial accounting principles, and includes almost all income from whatever source, except that as a result of the enactment of the Inflation Reduction Act of 2022, large corporations are subject to a 15% minimum tax for which the starting point is annual financial statement income.

The Great Society was a series of domestic programs enacted by President Lyndon B. Johnson in the United States between 1964 and 1968, aimed at eliminating poverty, reducing racial injustice, and expanding social welfare in the country. Johnson first used the phrase in a May 7, 1964, speech at Ohio University. The Great Society sought to build on the legacy of former President Franklin D. Roosevelt's New Deal reforms of the 1930s, and planned to use the power of the federal government in order to address economic inequality, improve education and healthcare, and promote civil rights.

The post–World War II economic expansion had raised living standards for many Americans, but significant disparities remained, particularly for racial minorities and those living in impoverished rural and urban areas. The civil rights movement was gaining momentum, highlighting systemic racism and discrimination. Some of the Great Society initiatives were derived from New Frontier proposals which had stalled during the administration of John F. Kennedy, whom Johnson had succeeded in 1963. Johnson's success depended on his skills of persuasion and the Democratic Party's landslide victory in the 1964 elections, which made the 89th Congress the most liberal since 1938, with a supermajority in both chambers. In the 88th Congress it was estimated that there were 56 liberals and 44 conservatives in the Senate, and 224 liberals and 211 conservatives in the House. In the 89th Congress, by contrast, it was estimated that there were 59 liberals and 41 conservatives in the Senate, and 267 liberals and 168 conservatives in the House.

The Chicago Freedom Movement, also known as the Chicago open housing movement, was led by Martin Luther King Jr., James Bevel and Al Raby. It was supported by the Chicago-based Coordinating Council of Community Organizations (CCCO) and the Southern Christian Leadership Conference (SCLC).

The movement included a large rally, marches and demands to the City of Chicago. These demands covered a range of areas beside housing discrimination in the United States, including educational inequality, transportation andemployment discrimination, income inequality, health inequality, wealth inequality, crime in Chicago, criminal justice reform in the United States, community development, tenants rights and quality of life. Operation Breadbasket, in part led by Jesse Jackson, sought to harness African-American consumer power.