CBO 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 2019.
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Summary
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 2019 (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 2019, average income, both before and after means-tested transfers and federal taxes, grew for all quintiles (or fifths) of the income distribution, but it increased most among households in the highest quintile.
Means-Tested Transfers. 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 2019, 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 41-year period, primarily driven by an increase in Medicaid spending.
Federal Taxes. Higher-income households typically paid a higher average federal tax rate than lower-income households. Average federal tax rates fell between 1979 and 2019 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 2019. (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 increased over that same period.
