The introduction of the paper discusses the different opinions about income inequalities and income distribution. Further the author presents the most important alternative methods for measuring income inequalities. Contrary to the traditional income distribution analysis the underlying data base for the study is incomes of the population reported to tax authorities. This is a new approach of the author as she doesn't consider the Family Expenditure Survey data reliable because of the methods used to select the sample. According to the surveys of the Hungarian Statistical Office the income ratio between the bottom and top decile doubled between 1987 and 1997 from 4.6 to 9.2. Some works made by TARKI. Institute of Economics show that after 1996 the income inequality basically didn't grow, at most structural changes occurred. Results coming from the author's analysis contradict to previous statement, income inequality kept growing, in addition, the inequality measure itself is much higher than on the basis of family budget surveys data. On the basis of drawn consequences the author makes important suggestions for economic policy. By international measure the changes in the Hungarian income inequality are tremendously high. The causes are basically originating from faulty tax system, inflation, unfavorable demographic changes, and the most important factor is how privatization happened in Hungary.