Monday, December 23, 2019
CBO, Projected Changes in the Distribution of Household Income, 2016 to 2021 (Dec. 19, 2019):
In this report, the Congressional Budget Office builds on its past analyses of the distribution of household income in the United States by projecting what that distribution would look like in 2021 under current law and comparing those projections with the actual distribution in 2016. In particular, this analysis focuses on how two factors—means-tested transfers and federal taxes—affect the distribution of income. Means-tested transfers are cash payments and in-kind benefits from federal, state, and local governments that are designed to provide assistance to individuals and families with low income and few assets. Such transfers include benefits provided through programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP) but not social insurance benefits, such as Social Security and Medicare. Federal taxes consist of individual income taxes, payroll taxes, corporate income taxes, and excise taxes.
Average Household Income
Average inflation-adjusted household income is projected to grow for all groups. Growth in average income—both before and after means-tested transfers and federal taxes are accounted for— is projected to be fastest for households in the highest quintile (or fifth) of the income distribution.
Cumulative Income Growth
Growth in income before transfers and taxes is generally slower than growth in income after transfers and taxes. That pattern reflects rising means-tested transfer rates and decreasing federal tax rates from 1979 (the first year for which data are available) to 2016.