Looking a bit more into this question of the link between higher income tax rates and lower levels of inequality, I stumbled on this paper examining precisely this correlation from the perspective of executive pay.
Check out these two figures, which appear to tell a pretty clear story.
Source: Frydman and Molloy, see link in text.
In both the top slide and the left-hand panel in the bottom one, the negative correlations between high tax rates and executive compensation are clear. And the right panel provides an interesting contrast—you don’t really see much of a correlation at all when it comes to middle managers. So there does seem to be a clear inequality linkage here.
On the other hand, correlation is not causation, and the statistical analysis in the article doesn’t find evidence that compensation responds to tax changes in the short run. The authors wonder if maybe such things just take a while to evolve over time, as social norms adjust in such a way that tolerates more inequality, lower taxes on the wealthy, and the very large growth in the gap between the compensation of executives and that of the typical worker. They hypothesize that perhaps: “social pressure prevented firms from aligning pay with tax rates mid-century, but as these norms changed, compensation packages became more flexible to adapt to tax advantages.”