The paper examines how changes in the US tax system impact household welfare and inequality. By analyzing how income shocks affect consumption and how tax policies help or hinder consumers from these shocks, the study reveals that tax policy plays a crucial role in shaping consumption inequality. The researchers found that without breaking down the tax system into specific mechanisms, economists might have misunderstood the role of tax policy in providing consumption insurance. Additionally, the study shows that changes in tax policies disproportionately affect different socioeconomic groups, contributing to increased inequality.