All of the following are sources of inequality in the distribution of personal income EXCEPT

• A. Differences in skill levels
• B. Discrimination in hiring
• C. Inheritance
• D. Progressive income taxes

Answer: (A)

Differences in income come from how productive people are in the market and how the wealth of a family is passed down or taxed. When people have higher levels of skill or education, they tend to earn higher wages because they can contribute more to production. Discrimination in hiring or pay creates wage gaps even among similarly capable workers, pushing inequality up. Inheritance spreads wealth across generations, so some people start life with far more resources than others, sustaining inequality over time. Progressive income taxes, however, reduce after-tax income gaps by charging higher rates on higher incomes and funding transfers or public services for lower-income groups, which lowers overall inequality. So the option that does not create inequality is progressive income taxes.