The recent recession has had a substantial impact on income, the amount of taxes owed, and average tax rates. Average before-tax income for all households fell 12 percent from 2007 to 2009 in real (inflation-adjusted) terms, and the overall average federal tax rate of 17.4 percent in 2009 was the lowest in the 1979–2009 period. The changes in average income and tax rates differed markedly across the income distribution.
In a report prepared at the request of the Chairman of the Senate Finance Committee, CBO extends its estimates of the distribution of income and federal taxes through 2008 and 2009, the latest year for which comprehensive data are available, and compares those estimates with estimates for 2007 and for the 1979–2009 period. This report builds on the work in previous CBO publications—in particular, Trends in the Distribution of Household Income Between 1979 and 2007 (October 2011) and Average Federal Taxes by Income Group (June 2010).
This study was prepared by Edward Harris of CBO’s Tax Analysis Division.