This paper examines the distributional implications of tax and transfer programs in the United States using
household income data from the Panel Study of Income Dynamics from 1981-91. Income inequality is
measured for pre-tax/transfer and post-tax/transfer definitions of household income. To assess the impact of
taxes and transfers on the size distribution of income, confidence intervals are constructed for various measures
of inequality, and hypothesis tests are conducted to determine whether observed changes in the distribution
of income, before and after taxes and transfers, are statistically significant. Using decomposable measures
of inequality, the implications of number of exemptions and hence family size are investigated.