Janet Gornick and Nathaniel Johnson explore the reasons for growing inequality over the past decades in wealthy countries as well as the significant variation in the extent of inequality across them. Key to understanding these trends, they argue, are tax and income transfer policies that can mitigate inequalities generated through market mechanisms. National differences for these redistributive policy options shape not only the extent of inequality within countries but also the size and shape of the middle class, which has dramatically shrunk in some places but less so in others.