In 2021, the federal response to the economic disruption caused by the coronavirus pandemic significantly affected the distribution of household income. Means-tested transfers—which mainly benefit low-income households—were nearly as large in 2021 as in 2020, and federal taxes were lower for low-income households, largely because of temporary tax credits. Nevertheless, income inequality both before and after transfers and taxes was greater in 2021 than in 2020, largely because of a surge in realized capital gains.
