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Source: US Congressional Budget Office

The Congressional Budget Office regularly analyzes the distribution of income in the United States and how that distribution has changed over time. As an update to that series, this report presents the distributions of household income, means-tested transfers, and federal taxes between 1979 and 2017 (the most recent year for which tax data were available when this analysis was conducted).

Income

Households at the top of the income distribution received significantly more income than households at the bottom. Between 1979 and 2017, average income, both before and after means-tested transfers and federal taxes, grew for all quintiles (or fifths) of the distribution, but it increased more among the highest quintile than among all others.

Means-Tested Transfers

Means-tested transfers are cash payments and in-kind benefits from federal, state, and local governments designed to assist individuals and families who have low income and few assets. Between 1979 and 2017, households in the lowest quintile received more than half of all means-tested transfers. Average means-tested transfer rates, which are the ratios of total means-tested transfers to total income before transfers and taxes, rose over the 39-year period, primarily driven by an increase in Medicaid spending.

Federal Taxes

In general, higher-income households paid a higher average federal tax rate than lower-income households. Average federal tax rates fell between 1979 and 2017 across the income distribution, with the sharpest decline in the lowest quintile.

Income Inequality

Income inequality, as measured by the Gini coefficients for income both before and after transfers and taxes, rose between 1979 and 2017. (A Gini coefficient is a standard measure of income inequality that summarizes an entire distribution in a single number.) The degree to which transfers and taxes reduced income inequality over that same period increased.

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