In 2018, average household income after accounting for means-tested transfers and federal taxes was $37,700 among households in the lowest quintile and $243,900 among households in the highest quintile.
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The Congressional Budget Office regularly analyzes the distribution of income in the United States and how it has changed over time. This report presents the distributions of household income, means-tested transfers, and federal taxes between 1979 and 2018 (the most recent year for which tax data were available when this analysis was conducted).
Households at the top of the income distribution received significantly more income than households at the bottom. Between 1979 and 2018, average income, both before and after means-tested transfers and federal taxes, grew for all quintiles (or fifths) of the distribution, but it increased most among households in the highest quintile.
Means-tested transfers are cash payments and in-kind benefits from federal, state, and local governments that are designed to assist individuals and families who have low income and few assets. Between 1979 and 2018, households in the lowest quintile received more than half of all means-tested transfers. As a percentage of income before transfers and taxes, means-tested transfers rose over the 40-year period, primarily driven by an increase in Medicaid spending.
In general, higher-income households paid a higher average federal tax rate than lower-income households. Average federal tax rates fell between 1979 and 2018 across the income distribution, with the sharpest decline in the lowest quintile.
Changes Attributable to the 2017 Tax Act
Provisions included in the 2017 tax act reduced average federal tax rates among all quintiles in 2018. Provisions relating to individual income taxes (excluding those solely affecting pass-through businesses) reduced average federal tax rates to a similar extent in each quintile, whereas the corporate tax and pass-through business provisions reduced average tax rates most among households in the highest quintile.
Income inequality, as measured by the Gini coefficients for income both before and after transfers and taxes, rose between 1979 and 2018. (The Gini coefficient is a standard measure of income inequality that summarizes an entire distribution in a single number that ranges from zero to one.) The degree to which transfers and taxes reduced income inequality over that same period increased.