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Table 1.

Tax Provisions Enacted in Economic Growth and Tax Relief Reconciliation Act of 2001, the Job Creation and Worker Assistance Act of 2002, and the Jobs and Growth Tax Relief Reconciliation Act of 2003, by Year, Pre-2001 Through 2011

Description Pre-EGTRRA 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

15 Percent Tax 

Bracket

Indexed

39.6 39.1 38.6 35 (38.6)

36 35.5 35 33 (35)

31 30.5 30 28 (30)

28 27.5 27 25 (27)

Rate on Capital 

Gains

Rate on Dividends

Tax Rates and Brackets

Child Credit and Dependent Care Credit

n.a.

Sunset*

Sunset*

Higher Tax 

Brackets (Percent)

10 Percent Tax 

Bracket

Limitations on Itemized Deductions and Personal Exemptions for High-Income Filers

Change in 

Limitations

No limits No change Limits reduced by one-third Sunset* Limits reduced by two-thirds

Maximum expenditure eligible 

for credit = $2,400 for one 

child and $4,800 for two or 

more; maximum credit = 

20 percent to 30 percent of 

expenditures

Sunset*

$700 $800 $1,000 

28

25

Single filers, up to $6,000; joint filers, $12,000; 

heads of household, $10,000

Maximum of $3,000 of eligible expenses for one child; $6,000 for two or more children 

Maximum credit of 35 percent, phasing down to 20 percent beginning at $15,000 in adjusted gross income

Refundable up to 10 percent of earned income above $10,000; 

threshold indexed after 2001

Refundable up to 15 percent of earned income above $10,000; threshold indexed after 2001

Single filers may have income 

of up to $6,000; joint filers, 

$12,000; and heads of 

household, $10,000

35 (37.6)

33 (34)

35

 Upper and lower thresholds 

indexed

Single filers, up to 

$7,000; joint filers, 

$14,000; heads of 

household, $10,000

Upper threshold indexed; lower threshold fixed by 10 percent bracket

Single filers, up to $7,000; joint 

filers, $14,000; and heads of 

household $10,000; indexed in 

2004 ($6,000;$12,000;$10,000)

33

Child Credit

10 percent for taxpayers in the 15 percent 

bracket or below; 20 percent for other 

taxpayers

$600 $1,000 ($600)

$500, with 

limited 

refundability

Sunset*

Dependent Care 

Credit

Ordinary rates

After May 6, 2003, 5 percent for taxpayers in the 15 percent bracket or below--and 0 in 2008; 15 

percent for other taxpayers (10 percent; 20 percent)

5 percent for taxpayers in the 15 percent bracket or below--and 0 in 2008; 15 percent for other 

taxpayers (Ordinary rates)

Sunset*

28 (29)

Sunset*

25 (26)

CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

A

CBO

PAPER

AUGUST 2004

Effective Federal

Tax Rates Under

Current Law,

2001 to 2014

The Congress of the United States O Congressional Budget Office

CBO

Effective Federal Tax Rates

Under Current Law, 2001 to 2014

August 2004

A

PAPER
Note

Table B-2, “Effective Federal Tax Rates and Shares Under Current Tax Law Excluding Provisions Affecting Partial Expensing of Investment and Net Operating Losses, Based on 2001 

Incomes, by Income Category, 2001 to 2014,” was added to this report on August 18, 2004.
Preface

This Congressional Budget Office (CBO) paper, prepared at the request of the Ranking 

Members of the Senate Budget Committee, the Senate Finance Committee, the House Budget Committee, the House Ways and Means Committee, and the Joint Economic Committee, examines how effective federal tax rates will change over the coming decade under current 

law—that is, if the provisions of tax laws enacted in 2001, 2002, and 2003 phase in, phase 

out, and “sunset” as scheduled. The paper uses the same methodology that CBO employed in 

its earlier estimates of effective tax rates, most recently in Effective Federal Tax Rates, 1997 to 

2000 (August 2003) and Effective Federal Tax Rates: 1979-2001 (April 2004).

Under current law and the assumption that incomes grow at a constant rate, the overall effective federal tax rate drops from 21.5 percent in 2001 to 19.6 percent in 2004. It then rises 

irregularly over the subsequent decade as tax provisions phase in and out. In particular, the 

rate jumps to 21.4 percent in 2005 with the expiration of most provisions of the 2003 tax law, 

climbs slowly over the succeeding five years to 22.1 percent in 2010, jumps again to 23.6 percent in 2011 following the sunset of the 2001 tax law, and then rises again to 24.1 percent in 

2014. The increases in the effective tax rate between 2005 and 2010 and between 2011 and 

2014 occur primarily because rising real incomes move taxpayers into higher tax brackets and 

the alternative minimum tax affects more taxpayers over time.

Although the basic analysis of this paper takes actual incomes in 2001 as its starting point, it 

tests the effect of that choice of a starting point by also beginning with the higher incomes of 

2000. The difference has only a small effect on the findings, most of which is attributable to 

the different levels of capital gains realized in those two years. Because realized gains in 2001 

were closer to their historical average (measured relative to national income), tax rates based 

on incomes that year may more accurately represent the impact of current tax law over the 

coming decade.

Ed Harris, David Weiner, and Roberton Williams of CBO’s Tax Analysis Division wrote the 

paper under the direction of G. Thomas Woodward. John Skeen edited the manuscript, and 

Christine Bogusz proofread it. Maureen Costantino designed the cover and prepared the 

report for publication. Lenny Skutnik produced the printed copies, and Annette Kalicki prepared the electronic versions for CBO’s Web site (www.cbo.gov).

Douglas Holtz-Eakin

Director

August 2004

Three Tax Laws 1

The Economic Growth and Tax Relief

Reconciliation Act of 2001 1

The Job Creation and Worker Assistance

Act of 2002 2

The Jobs and Growth Tax Relief Reconciliation

Act of 2003 2

Measuring Effective Tax Rates 2

Defining Income Categories 3

Calculating Effective Tax Rates 3

Incorporating Assumptions About the Growth

of Incomes 4

Estimating Changes in Tax Law 4

Effective Tax Rates in Future Years Under Current

Tax Law 4

Appendix A: Sensitivity of the Results to Base-Year

Incomes 15

Appendix B: Effects of Provisions on Partial Expensing

of Investment and Net Operating Losses 19

CONTENTS
vi EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014

Tables

1. Tax Provisions Enacted in the Economic Growth and Tax Relief

Reconciliation Act of 2001, the Job Creation and Worker

Assistance Act of 2002, and the Jobs and Growth Tax Relief

Reconciliation Act of 2003, by Year, Pre-2001 Through 2011 8

2. Effective Federal Tax Rates and Shares Under Current Tax Law,

Based on 2001 Incomes, by Income Category, 2001 to 2014 10

3. Effective Federal Tax Rates and Shares Under 2000 Tax Law,

Based on 2001 Incomes, by Income Category, 2001 to 2014 12

4. Differences in Effective Federal Tax Rates and Shares Under Current

Law and 2000 Law, Based on 2001 Incomes, by Income Category,

2001 to 2014 13

5. Differences in Total Effective Federal Tax Rates Under Current Law

and 2000 Law With and Without the Alternative Minimum Tax,

Based on 2001 Incomes, by Household Income Category,

2001 to 2014 14

A-1. Changes in Effective Federal Tax Rates in Future Years Using

Different Base Years, by Income Category 17

A-2. Changes in Shares of Federal Taxes in Future Years Using Different

Base Years, by Income Category 18

B-1. Changes in Total Effective Federal Tax Rates With and Without

Provisions Affecting Partial Expensing of Investment and

Net Operating Losses, Under Current Tax Law and 2000 Tax Law,

by Income Category, 2001 to 2014 20

B-2. Effective Federal Tax Rates and Shares Under Current Tax Law

Excluding Provisions Affecting Partial Expensing of Investment

and Net Operating Losses, Based on 2001 Incomes,

by Income Category, 2001 to 2014 21
Effective Federal Tax Rates

Under Current Law, 2001 to 2014

Tax legislation enacted in 2001, 2002, and 2003 is 

scheduled to phase in, phase out, and “sunset” entirely after 2010. As a result, federal tax rules will differ in every 

year from 2001 through 2011 and, consequently, so will 

effective tax rates—which are the total federal taxes that 

people bear measured as a percentage of their income. Because provisions have different impacts on people with 

different income and because those provisions change 

from year to year, effective tax rates fall and rise in patterns that vary over both time and income quintiles (or 

fifths of the distribution). This analysis of effective federal 

tax rates from 2002 through 2014 uses data on incomes 

in 2001, the most recent year for which information is 

available.

To test the effect of that choice of a starting point—that 

is, the sensitivity of effective tax rates to the income data 

on which they are based—the Congressional Budget Office (CBO) also analyzed effective tax rates beginning 

with the higher incomes of 2000. The choice of a beginning year causes only a small difference in the rates, much 

of which stems from the fact that realized capital gains 

were nearly twice as large a fraction of gross domestic 

product (GDP) in 2000 as in 2001—6.6 percent versus 

3.5 percent. Realized gains in 2001 were much closer to 

their historical average, so tax rates based on incomes that 

year may more accurately represent the results of current 

tax law over the coming decade.1

The analysis reflects the expected changes in tax burdens 

as measured by applying the tax law in effect in each year 

to the underlying incomes. It does not reflect any change 

in revenues that would result from changes in taxpayers’ 

behavior. For example, the analysis would not capture 

any change in tax payments that could result if a lower 

tax rate on capital gains induced taxpayers to realize more 

capital gains. Because people who realized additional 

gains could end up paying more in taxes, including that 

response by taxpayers could incorrectly suggest that they 

were worse off as a result of the rate reduction. 

Three Tax Laws

Lawmakers enacted three major tax bills between 2001 

and 2003. The Economic Growth and Taxpayer Relief 

Reconciliation Act of 2001 (EGTRRA) lowered rates, increased credits, and offered relief from marriage penalties 

and from the alternative minimum tax (AMT). The Job 

Creation and Worker Assistance Act of 2002 (JCWAA) 

increased depreciation allowances for some property and 

altered certain provisions concerning operating losses. 

The Jobs and Growth Tax Relief Reconciliation Act of 

2003 (JGTRRA) accelerated some of the provisions in 

EGTRRA and temporarily raised exemption levels for the 

AMT. None of the tax provisions in the three laws is permanent, and all of the provisions will expire by 2011. 

Furthermore, because many provisions phase in and 

phase out between 2001 and 2010, taxes change in every 

year through 2011.

The Economic Growth and Tax Relief Reconciliation 

Act of 2001

EGTRRA lowered individual income taxes for all taxpayers by restructuring tax rates and brackets, increasing the 

child credit and dependent care credit, providing relief 

from marriage penalties and the AMT, and increasing the 

earned income credit (EIC) for married couples (see Table 1). The law created a 10 percent tax bracket and lowered the rates for the top four brackets in four steps between 2001 and 2006. It raised the child credit from 

$500 to $1,000, also in four steps between 2001 and 

2010. EGTRRA increased the maximum expenditure

eligible for the dependent care credit from $2,400 to 

$3,000 per child, beginning in 2002, and raised the max1. Appendix A shows the sensitivity of the results to using 2000 data 

in place of 2001 data and the significance of the difference in capital gains realizations.
2 EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014

imum credit from 30 percent to 35 percent of eligible expenditures. To ease marriage penalties, the law widened 

the 15 percent tax bracket for joint filers from 167 percent of the bracket for single filers to twice that bracket in 

four annual steps beginning in 2005 and increased the 

standard deduction for joint filers from 167 percent to 

200 percent of the standard deduction for single filers in 

five annual steps between 2005 and 2009. Relief from the 

AMT resulted from increasing the income exemption by 

$4,000 for joint filers and $2,000 for single filers for 

2001 through 2004. EGTRRA removed the limitation 

on itemized deductions and on personal exemptions in 

three steps between 2006 and 2010. Finally, the law increased the EIC for married couples. Specifically, in each 

of 2002, 2005, and 2008, the income range over which 

benefits phase out is shifted up by $1,000; in 2009 and 

2010, the final value is indexed for inflation. All of those 

provisions sunset in 2011, and the provisions of individual income tax law return to those in effect before 2001.2

The Job Creation and Worker Assistance Act of 2002

JCWAA provided for a depreciation deduction of 30 percent of the adjusted basis for certain property for the tax 

year in which it was placed in service. That deduction is 

on top of any depreciation deduction for which that 

property already qualified. The additional deduction applies only to property purchased (or on which construction was begun) after September 10, 2001, and before 

September 11, 2004, and put into use before January 1, 

2005. The law also raised from two years to five years the 

period over which taxpayers can claim net operating 

losses incurred in 2001 or 2002 to recalculate taxes owed 

for previous years.3

The Jobs and Growth Tax Relief Reconciliation Act 

of 2003

JGTRRA accelerated the pace at which provisions of 

EGTRRA phase in, reduced taxes on capital gains and 

qualified dividends, raised the AMT exemption, and increased first-year depreciation deductions (see the shaded 

portions of Table 1). The provisions of JGTRRA all sunset by 2009. Specifically, the law broadened the 10 percent tax bracket for 2003 and 2004 and, starting in 2003, 

lowered the tax rates for the top four brackets to the levels 

that EGTRRA had set to begin in 2006. It also raised the 

child credit to $1,000 for 2003 and 2004 (when it would 

have been $600 under EGTRRA). JGTRRA widened the 

15 percent tax bracket for joint filers in 2003 and 2004 to 

twice that for single filers and set the standard deduction 

for joint filers equal to double that for single filers for 

those years. The legislation raised the AMT exemption 

for 2003 and 2004 to $58,000 for joint filers and 

$40,250 for single filers, higher than the levels set in 

EGTRRA by $9,000 and $4,500, respectively. For 2003 

through 2008, the law lowered the tax rate for capital 

gains and for qualified dividends from 20 percent to 15 

percent for taxpayers above the 15 percent bracket and 

from 10 percent to 5 percent (and to zero in 2008) for 

taxpayers in lower brackets. Finally, JGTRRA increased 

the first-year depreciation created by JCWAA to 50 percent for property acquired between May 5, 2003, and the 

end of 2004 and raised to $100,000 the maximum deduction under section 179 of the Internal Revenue Code 

for property placed into service over the 2003-2005 period.

Measuring Effective Tax Rates

This analysis uses the same methodology that CBO employed for its earlier reports on effective tax rates.4 CBO 

combines data from the Internal Revenue Service’s Statistics of Income and the Census Bureau’s Current Population Survey, classifies and ranks households into percentiles based on adjusted comprehensive household income, 

and simulates individual income tax liabilities. The income measure used includes pretax cash income plus income from other sources. Pretax cash income includes 

wages, salaries, self-employment income, rents, taxable 

and nontaxable interest, dividends, realized capital gains, 

cash transfer payments, and retirement benefits; taxes 

paid by businesses (corporate income taxes and employers’ shares of Social Security, Medicare, and federal unemployment insurance payroll taxes); and employees’ contri2. EGTRRA also expanded various education incentives and tax 

benefits for retirement saving and reduced the estate tax in stages 

between 2001 and 2009 before repealing that tax in 2010. As with 

all other provisions in the law, those changes expire in 2011.

3. That provision, known as the net operating loss carryback, was 

temporarily modified in other small ways as well. JCWAA also 

extended unemployment benefits, established special tax benefits 

for parts of New York City damaged on September 11, 2001, and 

provided other minor tax benefits.

4. For detailed discussions of the basic methodology, see Congressional Budget Office, Effective Federal Tax Rates: 1979-1997 

(October 2001) and Effective Federal Tax Rates, 1997 to 2000 

(August 2003). An April 2004 update, Effective Federal Tax Rates: 

1979-2001 (available only on the CBO Web site at www.cbo.gov) 

extends the series to 2001.
EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014 3

butions to 401(k) retirement plans. The comprehensive 

income measure also includes in-kind benefits (Medicare, 

Medicaid, employer-paid health insurance premiums, 

food stamps, school lunches and breakfasts, housing assistance, and energy assistance). 

Defining Income Categories

Income categories are defined by ranking all people by 

their comprehensive household income adjusted for the 

size of the household—that is, divided by the square root 

of the household’s size. A household consists of the people who share a housing unit, regardless of their relationships. Quintiles—or fifths of the distribution—are created by dividing the entire population into five parts, 

each containing the same number of people. Because 

households vary in size, quintiles generally contain unequal numbers of households. Effective tax rates differ 

markedly among households in the top quintile, so that 

group is further divided into the top 10 percent, top 5 

percent, and top 1 percent for some analyses.5

 Households with negative income—from business losses, for example—are excluded from the lowest income category 

but included in the totals (in the tables in this paper). 

Those households generally differ from other households 

in the bottom quintile because they typically have significant assets; including their negative income and tax payments would have significantly affected the dollarweighted results for the bottom quintile.

Calculating Effective Tax Rates

Effective tax rates equal the taxes paid by or imputed to 

households divided by their pretax income.6 For a given 

segment of the income distribution, the analysis calculates a dollar-weighted average rate as the sum of taxes 

falling on households in that segment divided by the sum 

of the pretax incomes of those households. Effective tax 

rates for individual households may differ substantially 

from the group average, particularly given the fact that 

the adjustment for the size of households results in various kinds of households with substantially different unadjusted incomes falling in the same income category. As 

a result, effective tax rates represent the situation not for 

particular taxpayers but that for groups of taxpayers with 

similar amounts of adjusted household income.

CBO estimated the effective rates for four federal taxes—

individual and corporate income taxes, payroll taxes, and 

excise taxes—under current law for each year from 2001 

through 2014. The estimates for 2001 match CBO’s historical values.7

The analysis assigns taxes to households on the basis of 

who bears the burden of the taxes. In particular, it assumes the following:

B Households bear the burden of all taxes that they pay 

directly, specifically, individual income taxes and the 

employee’s share of payroll taxes.

B Households pay excise taxes according to their consumption of taxed goods, such as tobacco and alcohol. 

In the case of excise taxes on intermediate goods, such 

as components of consumer goods, households bear 

the taxes in proportion to their overall consumption.

B The burden of taxes levied on businesses actually falls 

on households. In line with most economists, CBO 

assumes that the employer’s share of payroll taxes falls 

on employees and thus assigns those payments to employees both as income and taxes paid. The analysis 

assumes that corporate income taxes fall on the owners 

of capital and allocates those liabilities—again, both as 

income and as taxes—to households in proportion to 

their income from interest, dividends, rents, and capital gains.8

Because of uncertainty about the incidence of other taxes 

and some data limitations, the analysis excludes estate 

and gift taxes, tariffs, and other miscellaneous sources of 

revenue. It also excludes some of the lesser provisions of 

EGTRRA, such as those providing education incentives 5. The analysis does not show a comparable subdivision of the lowest 

quintile because effective tax rates and income are distributed in 

similar ways for households in different parts of that income 

group.

6. A person’s effective tax rate is his or her average rate—total taxes 

paid divided by total income. That rate generally differs from the 

marginal tax rate, which is the tax paid on the last, or marginal, 

dollar of income. When people decide how much of a taxed activity they will engage in, such as how many hours they will work, 

they are reacting to marginal rates, not average rates.

7. Congressional Budget Office, Effective Federal Tax Rates: 

1979-2001 (April 2004).

8. Some economists argue that at least part of the burden of corporate income taxes falls on workers in the form of lower wages. By 

that view, because those taxes reduce the investment in capital 

goods, the labor force has less capital with which to work, lowering workers’ productivity and hence their wages.
4 EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014

and tax benefits for retirement saving, because data are 

not available to estimate their effects among the various 

income quintiles. 

Incorporating Assumptions About the Growth of 

Incomes

The analysis, based on reported 2001 incomes, assumes 

that those incomes grow at a constant rate of 4.5 percent 

per year and that inflation is steady at a 2.2 percent annual rate—assumptions that are consistent with the average growth of GDP and the consumer price index reported in CBO’s January 2004 Budget and Economic 

Outlook.9 The analysis assumes that income growth is the 

same for all sources of income and for households 

throughout the income distribution. Thus, the share of 

income going to each quintile does not change over the 

period examined.10

Estimating Changes in Tax Law

CBO generally estimated individual income taxes by simulating the applicable provisions of law, adjusted for income growth, on tax returns filed in 2001. The analysis 

thus does not account for incomes changing in response 

to the tax cuts. CBO assumed that the reduction in the 

tax rate on dividends from corporate stock would accrue 

to the owners of capital in proportion to their income 

from interest, dividends, rents, and capital gains.11

As described, JCWAA and JGTRRA both include more 

generous depreciation allowances for businesses, and 

JCWAA changed the rules for use of net operating losses. 

CBO assumed that those provisions would cause a drop 

in revenues equal to the amount estimated by the Joint 

Committee on Taxation at the time of their enactment.12

CBO adjusted that change in revenues to align with the 

underlying 2001 level of income, using the expected 

growth in income in the absence of those legislative 

changes. CBO then divided the resulting estimated tax 

benefits between corporate income taxes and individual 

income taxes—allocating the corporate portion to taxpayers in proportion to their income from capital (as 

done with corporate income taxes) and allocating the individual income tax portion among taxpayers in proportion to their shares of total income taxes paid on noncorporate business income. 

The effects of the changes to partial expensing occur 

across years. The provisions shift the deductibility of depreciation of business assets in time: businesses can claim 

more depreciation during the 2002-2005 period and 

consequently cannot claim as much depreciation in later 

years. That shifting decreases taxes in the near term but 

increases them in subsequent years. The provision extending the period for claiming net operating losses also 

shifts some deductions to earlier years, offsetting effects 

in later years. Because tax changes for a given year reflect 

only that year’s impact and ignore any offsetting effects 

that occur in other years, no single year conveys completely the full effects of the provisions.13

Effective Tax Rates in Future Years 

Under Current Tax Law

Under current law—and the assumption that incomes 

grow at a constant rate between 2001 and 2014—the total effective federal tax rate for all taxpayers drops from 

21.5 percent in 2001 to 19.6 percent in 2004 before reversing course and climbing over the next decade (see the 

9. Congressional Budget Office, The Budget and Economic Outlook: 

Fiscal Years 2005 to 2014 (January 2004).

10. The analysis simulated taxes over the period by deflating unindexed tax parameters by the nominal annual rate of per capita 

income growth and deflating indexed parameters by the real 

annual rate of per capita income growth. Applying those adjusted 

tax parameters to fixed 2001 incomes yields the same effective tax 

rates that taxpayers would face if incomes grew at a constant rate 

of 4.5 percent per year, inflation was 2.2 percent per year, and the 

tax system was indexed for inflation as called for under current 

law. The calculated shares of taxes paid by different categories of 

taxpayers are also identical under both approaches.

11. The reduction in the rate on corporate dividends is analogous to a 

reduction in the corporate tax rate, so CBO allocated it using the 

same methods that it employed to apportion corporate income 

taxes. As with the other tax changes, the analysis does not account 

for any change in behavior and measures the tax effect against the 

level of dividends received in 2001. The amount of dividends paid 

by corporations and held by taxable investors might rise as a result 

of the lower tax rate on dividend income.

12. See Joint Committee on Taxation, Estimated Revenue Effects of the 

Job Creation and Worker Assistance Act of 2002, JCX-13-02 

(March 6, 2002); and Estimated Budget Effects of the Conference 

Agreement for H.R. 2, The Jobs and Growth Tax Relief Reconciliation Act of 2003, JCX-55-03 (May 22, 2003).

13. Appendix B shows the separate effects of the provisions concerning expensing and net operating losses on effective tax rates. Most 

of the impact is on taxpayers in the top income quintile from 

2002 through 2008.
EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014 5

top panel in Table 2). From the 2004 low of 19.6 percent, the overall effective tax rate jumps to 21.4 percent 

in 2005 as most features of JGTRRA and JCWAA disappear—decreasing the child credit, lessening the relief 

from marriage penalties, and raising the AMT. The effective rate climbs slowly over the next five years, to 22.1 

percent in 2010, primarily because the unindexed AMT 

affects more and more people and the growth of real incomes pushes taxpayers into higher tax brackets. The effective tax rate takes another jump to 23.6 percent in 

2011 after EGTRRA sunsets and thereafter resumes its 

slow climb driven by continued real income growth and 

the widening reach of the AMT (by 2014, nearly 22 million taxpayers will be subject to the alternative tax). Overall, then, under current law, the effective federal tax rate 

will increase from 21.5 percent in 2001 to 24.1 percent 

in 2014. Because tax legislation enacted since 2001 focuses primarily on the individual income tax, the pattern 

of changes for the total effective tax rate over the 2001-

2014 period derives almost entirely from changes in the 

effective individual income tax rate (see the second panel 

in Table 2).

The pattern of changes in the effective federal tax rate for 

all taxpayers is repeated for each income quintile and the 

top income percentiles, albeit with slightly different turning points and different degrees of change between 2001 

and 2014 (see Table 2). For the bottom four quintiles, the 

effective individual income tax rate turns upward in 

2004, a year ahead of the rise for the top quintile. All 

quintiles experience a jump in their overall effective tax 

rate in 2011 following the expiration of EGTRRA. They 

also all have a higher effective rate in 2014 than in 2001. 

For example, the effective rate for the lowest quintile increases from 5.4 percent in 2001 to 8.3 percent in 2014; 

in contrast, the rate for the top quintile climbs from 26.8 

percent to 28.8 percent and that for the top 1 percent of 

taxpayers rises from 33.0 percent to 33.6 percent over the 

same period.

The differential increase in effective tax rates among 

quintiles is reflected in a shift down the income distribution in shares of taxes paid (see the third and fourth panels of Table 2). The share of taxes paid by the top quintile 

falls from 65.3 percent in 2001 to 62.8 percent in 2014, 

even though that group’s share of income does not 

change. Four-fifths of that decline occurs for the top 1 

percent of taxpayers, whose share falls by 2 percentage 

points, to 20.7 percent of federal taxes in 2014. The share 

of taxes paid by each of the middle three quintiles climbs 

by about 0.7 percentage points. 

Changes in tax law explain much of the expected changes 

in effective tax rates, but as previously noted, effective tax 

rates would change over time even in the absence of 

changes in the law. Real income growth increases effective tax rates over time because the individual income tax 

is indexed not for the rise in real income but, rather, only 

for inflation or not at all. Separating the effects of 

changes in the law and income growth requires calculating the changes in rates that would result from income 

growth alone. This analysis accomplishes that by calculating effective tax rates for each year under the provisions 

of 2000 tax law as a point of comparison. For example, 

under that scenario, the overall effective tax rate would 

have been expected to rise by 1.2 percentage points, from 

22.2 percent in 2001 to 23.4 percent in 2010 (see Table 

3). In contrast, using the tax provisions that will apply in 

each year under current law, which yields the combined 

effect of changing law and income, the effective tax rate 

increases by 0.6 percentage points, from 21.5 percent to 

22.1 percent, over the same period (see Table 3). Thus, 

changes in tax law reduce the expected increase in the 

overall effective rate between 2001 and 2010 by about 

half.

Relative to the situation in 2000, the three major tax laws 

enacted between 2001 and 2003—EGTRRA, JCWAA, 

and JGTRRA—reduce effective federal tax rates for each 

quintile in every year from 2001 through 2010. For all 

but the lowest quintile, the reduction is greatest in 2004, 

when all three tax laws are in effect. Effective tax rates in 

2004 are lower than those under 2000 law by 1.5 percentage points for the lowest quintile, 3.9 percentage 

points for the highest quintile, and 6.8 percentage points 

for the top 1 percent of taxpayers (see Table 4). With the 

expiration of most provisions of JCWAA and JGTRRA 

in 2005, the reduction lessens but then is partially restored in 2008 for the top quintile and in 2010 for the 

bottom four quintiles. With the sunset of EGTRRA in 

2010, federal tax law reverts in most respects to that in effect in 2000, and by 2014, effective tax rates for all income quintiles return to the levels obtained under 2000 

law.
6 EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014

The AMT grows in importance over the next decade, but 

its impact differs among income quintiles and under different tax law.14 The AMT raises effective rates above 

what they would be in its absence, with the largest effects 

in the fourth and fifth quintiles. Over time, the AMT 

reaches down the income distribution, slightly increasing 

effective rates as far down as the second quintile by 2010. 

The AMT interacts with regular income taxes, having a 

greater impact when they are lower. The differences between tax rates under current law and tax rates under 

2000 law are therefore smaller than they would be without the AMT: for all taxpayers, the AMT lowers those 

differences by 0.2 percentage points in 2005 and 0.6 percentage points in 2010 (see Table 5). The effect is greatest 

in the highest quintile, where the AMT reduces the difference between the effective tax rate under current tax 

law and that under 2000 law by 1 percentage point in 

2010. The impact on the fourth quintile is roughly half 

as large, and the bottom three quintiles are virtually unaffected. Within the top quintile, the AMT affects the top 

percentile of taxpayers less than other households because 

those taxpayers face high regular tax rates that exceed 

AMT rates. 

14. For further discussion of the AMT and its effects, see Congressional Budget Office, The Alternative Minimum Tax (April 2004).

Table 1.

Tax Provisions Enacted in the Economic Growth and Tax Relief Reconciliation Act of 2001, the Job Creation and Worker Assistance Act of 2002, and the Jobs and Growth Tax Relief Reconciliation Act of 2003, by Year, Pre-2001 Through 2011

Description Pre-EGTRRA 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

15 Percent Tax Bracket Indexed

39.6 39.1 38.6 35 (38.6)

36 35.5 35 33 (35)31 30.5 30 28 (30)28 27.5 27 25 (27)

Rate on Capital GainsRate on Dividends

Tax Rates and Brackets

Child Credit and Dependent Care Credit

n.a.

Sunset*Sunset*

10 Percent Tax BracketHigher Tax Brackets (Percent)

Limitations on Itemized Deductions and Personal Exemptions for High-Income Filers

Change in Limitations No limits No change Limits reduced by one-third Sunset* Limits reduced by two-thirds

Maximum expenditure eligible 

for credit = $2,400 for one 

child and $4,800 for two or 

more; maximum credit = 

20 percent to 30 percent of 

expenditures

Sunset*

$700 $800 $1,000 

2825

Single filers, up to $6,000; joint filers, $12,000; 

heads of household, $10,000

Maximum of $3,000 of eligible expenses for one child; $6,000 for two or more children 

Maximum credit of 35 percent, phasing down to 20 percent beginning at $15,000 in adjusted gross income

Refundable up to 10 percent of earned income above $10,000; 

threshold indexed after 2001 Refundable up to 15 percent of earned income above $10,000; threshold indexed after 2001

Single filers may have income 

of up to $6,000; joint filers, 

$12,000; and heads of 

household, $10,000

35 (37.6)

33 (34)

35

 Upper and lower thresholds 

indexed

Single filers, up to 

$7,000; joint filers, 

$14,000; heads of 

household, $10,000

Upper threshold indexed; lower threshold fixed by 10 percent bracket

Single filers, up to $7,000; joint 

filers, $14,000; and heads of 

household $10,000; indexed in 

2004 ($6,000;$12,000;$10,000)

33

Child Credit

10 percent for taxpayers in the 15 percent 

bracket or below; 20 percent for other 

taxpayers

$600 $1,000 ($600) $500, with 

limited 

refundability

Sunset* Dependent Care Credit

Ordinary rates

After May 6, 2003, 5 percent for taxpayers in the 15 percent bracket or below--and 0 in 2008; 15 

percent for other taxpayers (10 percent; 20 percent)

5 percent for taxpayers in the 15 percent bracket or below--and 0 in 2008; 15 percent for other 

taxpayers (Ordinary rates)

Sunset*Sunset*

28 (29)25 (26)
Source: Congressional Budget Office based on Joint Committee on Taxation, Summary of Provisions Contained in the Conference Agreement for H.R. 1836, The Economic Growth and Tax 

Relief Reconciliation Act of 2001, JCX-50-01 (May 26, 2001); Summary of P.L. 107-147, The Job Creation and Worker Assistance Act of 2002, JCX-22-02 (March 22, 2002); and Summary of Conference Agreement on H.R. 2, The Jobs and Growth Tax Relief Reconciliation Act of 2003, JCX-54-03 (May 22, 2003).

Notes: EGTRAA = Economic Growth and Tax Relief Reconciliation Act of 2001; n.a. = not applicable. 

Lightly shaded area indicates a change made by the Job Creation and Worker Assistance Act of 2002.Darkly shaded areas indicate changes made by the Jobs and Growth Tax Relief Reconciliation Act of 2003.Parenthetical values in those areas are those set by EGTRRA.

* = Provision returns to pre-EGTRRA levels.

Partial Expensing of Investment in Qualified Property

Starting point and 

ending point are 

increased by 

$3,000

Starting point and ending point 

are increased by $3,000; 

indexed from 2008

Depreciation Deduction of Basis of Qualified Property

No additional depreciation

30 percent of 

basis 

deductible in 

first year 

50 percent of basis deductible 

in first year Sunset*

Starting point and ending point of phaseout are 

increased by $1,000

Starting point and ending point of phaseout are 

increased by $2,000

Earned Income Credit for Joint Filers

Relief from Marriage Penalties

Relief from the Alternative Minimum Tax

Exemption for the Alternative Minimum Tax

Sunset*

$33,750 for 

single filers; 

$45,000 for 

joint filers

Sunset*

Standard deduction for joint filers = 167 

percent of that for single filers

200 percent of that for single 

filers (167 percent)

180 percent of 

that for single 

filers

187 percent of 

that for single 

filers

193 percent of 

that for single 

filers

Sunset*Sunset*

174 percent of 

that for single 

filers

184 percent of 

that for single 

filers

187 percent of 

that for single 

filers

190 percent of that 

for single filers

200 percent of that for single 

filers

200 percent of that for single filers

$35,750 for single filers; 

$49,000 for joint filers

$40,250 for single filers; 

$58,000 for joint filers 

($35,750; $49,000)

Level of income at which the 

earned income credit starts to 

phase out is indexed; end of 

phaseout depends on number 

of children

Standard Deduction for Joint Filers15 Percent Bracket for Joint Filers

Upper threshold of bracket for those who are 

married filing jointly = 167 percent of the top 

of the bracket for single filers

200 percent of that for single 

filers (167 percent)
10 EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014

Table 2.

Effective Federal Tax Rates and Shares Under Current Tax Law, Based on 2001 

Incomes, by Income Category, 2001 to 2014

Continued

Income Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total Effective Federal Tax Rate

Lowest Quintile 5.4 5.3 5.2 5.2 5.5 5.6 5.7 5.8 5.9 5.8 7.8 8.0 8.1 8.3

Second Quintile 11.6 11.6 11.0 11.1 12.0 12.1 12.3 12.4 12.4 12.3 14.2 14.4 14.5 14.7

Middle Quintile 15.2 15.0 14.5 14.6 15.6 15.7 15.9 15.9 16.1 16.1 17.6 17.8 18.0 18.2

Fourth Quintile 19.3 19.1 18.5 18.5 19.6 19.8 20.0 20.1 20.4 20.5 21.8 22.0 22.2 22.4

Highest Quintile 26.8 25.4 24.4 23.8 26.3 26.5 26.5 26.4 27.1 27.1 28.5 28.6 28.7 28.8

All Quintiles 21.5 20.7 19.9 19.6 21.4 21.6 21.7 21.7 22.1 22.1 23.6 23.8 23.9 24.1

Top 10 Percent 28.6 26.7 25.7 24.9 27.8 28.0 28.0 27.9 28.6 28.5 30.1 30.2 30.2 30.3

Top 5 Percent 30.1 27.7 26.7 25.6 29.0 29.3 29.2 29.0 29.8 29.7 31.5 31.5 31.5 31.6

Top 1 Percent 33.0 29.6 28.4 26.7 31.1 31.2 30.9 30.4 31.6 31.2 33.8 33.7 33.7 33.6

Effective Individual Income Tax Rate

Lowest Quintile -5.6 -5.6 -5.8 -5.7 -5.6 -5.4 -5.3 -5.2 -5.2 -5.2 -3.2 -3.0 -2.9 -2.7

Second Quintile 0.3 0.4 -0.2 -0.1 0.6 0.8 1.0 1.0 1.1 1.0 2.9 3.1 3.2 3.4

Middle Quintile 3.8 3.9 3.3 3.5 4.1 4.3 4.5 4.5 4.7 4.8 6.3 6.5 6.7 6.9

Fourth Quintile 7.2 7.3 6.5 6.6 7.5 7.7 7.9 8.0 8.3 8.4 9.7 9.9 10.1 10.3

Highest Quintile 16.3 15.8 14.4 14.2 15.4 15.6 15.7 15.7 16.4 16.5 17.9 18.0 18.2 18.3

All Quintiles 10.4 10.2 9.1 9.0 10.0 10.2 10.4 10.4 10.8 10.9 12.4 12.6 12.7 12.9

Top 10 Percent 18.7 18.0 16.4 16.0 17.5 17.6 17.7 17.6 18.4 18.5 20.1 20.2 20.3 20.4

Top 5 Percent 20.8 19.9 18.2 17.6 19.2 19.3 19.4 19.2 20.2 20.1 22.0 22.1 22.1 22.2

Top 1 Percent 24.1 22.8 20.7 19.7 21.4 21.3 21.3 20.9 22.3 22.0 24.7 24.7 24.7 24.7

Share of Total Federal Tax Liabilities

Lowest Quintile 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.4 1.4 1.4 1.5

Second Quintile 5.0 5.1 5.1 5.2 5.1 5.2 5.2 5.2 5.2 5.1 5.5 5.6 5.6 5.6

Middle Quintile 10.0 10.3 10.4 10.5 10.3 10.3 10.4 10.4 10.3 10.3 10.6 10.6 10.7 10.7

Fourth Quintile 18.5 19.1 19.2 19.5 19.0 19.0 19.1 19.2 19.1 19.2 19.1 19.1 19.2 19.2

Highest Quintile 65.3 64.2 64.1 63.5 64.3 64.2 64.0 63.8 64.1 64.1 63.2 63.1 62.9 62.8

All Quintiles 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Top 10 Percent 50.0 48.5 48.5 47.6 48.8 48.7 48.5 48.3 48.6 48.5 47.9 47.7 47.6 47.4

Top 5 Percent 38.5 36.9 36.9 35.9 37.3 37.3 37.0 36.7 37.1 36.9 36.6 36.5 36.3 36.1

Top 1 Percent 22.7 21.2 21.1 20.1 21.5 21.3 21.1 20.7 21.1 20.8 21.2 21.0 20.8 20.7
EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014 11

Table 2.

Continued

Source: Congressional Budget Office.

Notes: Effective tax rates are calculated by dividing taxes by comprehensive household income. A household consists of the people who 

share a housing unit, regardless of their relationships.

The income measure, comprehensive household income, comprises pretax cash income plus income from other sources. Pretax cash 

income is the sum of wages, salaries, self-employment income, rents, taxable and nontaxable interest, dividends, realized capital 

gains, cash transfer payments, and retirement benefits plus taxes paid by businesses (corporate income taxes and the employer’s

share of Social Security, Medicare, and federal unemployment insurance payroll taxes) and employees’ contributions to 401(k) retirement plans. Other sources of income include all in-kind benefits (Medicare, Medicaid, employer-paid health insurance premiums, food 

stamps, school lunches and breakfasts, housing assistance, and energy assistance). Households with negative income are excluded

from the lowest income category but are included in the totals.

Income categories are defined by ranking all people by their comprehensive household income adjusted for the size of the household 

—that is, divided by the square root of the household’s size. Quintiles, or fifths, contain equal numbers of people.

Individual income taxes are generally distributed directly to households paying those taxes. Social insurance, or payroll, taxes are distributed to households paying those taxes directly or paying them indirectly through their employers. Corporate income taxes are distributed to households according to their share of capital income. Federal excise taxes are distributed to them according to their 

consumption of the taxed good or service.

The calculations of income taxes from 2002 through 2014 are based on the assumption that inflation is 2.2 percent per year and that 

nominal incomes grow at 4.5 percent per year. Most changes to individual income taxes are estimated by simulating the effects of 

applicable law on 2001 incomes. The reduced tax rate on dividends is allocated to households according to their share of capital 

income. The estimated effects of partial expensing are allocated to taxpayers on the basis of capital income and noncorporate business income. See the text for further detail.

Income Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Share of Individual Income Tax Liabilities

Lowest Quintile -2.3 -2.3 -2.7 -2.7 -2.3 -2.3 -2.2 -2.1 -2.0 -2.0 -1.1 -1.0 -1.0 -0.9

Second Quintile 0.3 0.4 -0.2 -0.1 0.6 0.7 0.9 0.9 0.9 0.8 2.2 2.3 2.3 2.4

Middle Quintile 5.2 5.5 5.2 5.4 5.9 6.0 6.1 6.2 6.2 6.2 7.2 7.3 7.4 7.6

Fourth Quintile 14.3 14.8 14.8 15.2 15.4 15.5 15.7 15.9 15.7 15.9 16.1 16.3 16.4 16.5

Highest Quintile 82.5 81.7 83.0 82.1 80.6 80.0 79.5 79.1 79.2 79.1 75.6 75.2 74.8 74.4

All Quintiles 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Top 10 Percent 67.7 66.6 67.9 66.7 65.3 64.8 64.2 63.7 63.9 63.7 60.8 60.3 59.9 59.5

Top 5 Percent 55.2 54.0 55.1 53.7 52.6 52.1 51.5 50.9 51.3 50.8 48.7 48.3 47.9 47.4

Top 1 Percent 34.4 33.3 33.6 32.3 31.6 31.0 30.4 29.8 30.3 29.9 29.4 29.0 28.7 28.3
12 EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014

Table 3.

Effective Federal Tax Rates and Shares Under 2000 Tax Law, Based on 2001 

Incomes, by Income Category, 2001 to 2014

Source: Congressional Budget Office.

Note: The notes that appear in Table 2 also apply to this table.

Income Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Lowest Quintile 6.2 6.4 6.5 6.7 6.8 7.0 7.2 7.3 7.5 7.6 7.8 8.0 8.1 8.3

Second Quintile 12.8 12.9 13.1 13.2 13.3 13.5 13.6 13.8 13.9 14.0 14.2 14.4 14.5 14.7

Middle Quintile 16.1 16.3 16.4 16.5 16.6 16.8 16.9 17.1 17.2 17.4 17.6 17.8 18.0 18.2

Fourth Quintile 20.1 20.3 20.4 20.6 20.7 20.9 21.1 21.2 21.4 21.6 21.8 22.0 22.2 22.4

Highest Quintile 27.3 27.4 27.5 27.6 27.7 27.8 28.0 28.1 28.2 28.3 28.4 28.5 28.7 28.8

All Quintiles 22.2 22.4 22.5 22.6 22.7 22.9 23.0 23.1 23.3 23.4 23.6 23.7 23.9 24.1

Top 10 Percent 29.0 29.1 29.2 29.3 29.4 29.5 29.6 29.7 29.8 29.9 30.0 30.1 30.2 30.3

Top 5 Percent 30.5 30.6 30.7 30.8 30.8 30.9 31.0 31.1 31.1 31.2 31.3 31.4 31.5 31.6

Top 1 Percent 33.4 33.4 33.4 33.4 33.5 33.5 33.5 33.5 33.5 33.6 33.6 33.6 33.6 33.6

Lowest Quintile -4.8 -4.6 -4.4 -4.3 -4.2 -4.0 -3.8 -3.7 -3.5 -3.4 -3.2 -3.0 -2.9 -2.7

Second Quintile 1.5 1.6 1.8 1.9 2.0 2.2 2.3 2.5 2.6 2.7 2.9 3.1 3.2 3.4

Middle Quintile 4.8 4.9 5.0 5.2 5.3 5.4 5.6 5.7 5.9 6.1 6.3 6.5 6.7 6.9

Fourth Quintile 8.0 8.2 8.3 8.5 8.6 8.8 9.0 9.1 9.3 9.5 9.7 9.9 10.1 10.3

Highest Quintile 16.8 16.9 17.0 17.1 17.2 17.3 17.4 17.6 17.7 17.8 17.9 18.0 18.1 18.3

All Quintiles 11.1 11.2 11.3 11.5 11.6 11.7 11.8 12.0 12.1 12.3 12.4 12.6 12.7 12.9

Top 10 Percent 19.1 19.2 19.3 19.4 19.4 19.5 19.6 19.7 19.8 19.9 20.0 20.2 20.3 20.4

Top 5 Percent 21.2 21.2 21.3 21.4 21.5 21.5 21.6 21.7 21.8 21.9 21.9 22.0 22.1 22.2

Top 1 Percent 24.4 24.4 24.4 24.5 24.5 24.5 24.5 24.6 24.6 24.6 24.6 24.6 24.6 24.7

Lowest Quintile 1.2 1.2 1.2 1.3 1.3 1.3 1.3 1.3 1.4 1.4 1.4 1.4 1.4 1.5

Second Quintile 5.3 5.3 5.3 5.3 5.4 5.4 5.4 5.5 5.5 5.5 5.5 5.6 5.6 5.6

Middle Quintile 10.3 10.3 10.3 10.4 10.4 10.4 10.4 10.5 10.5 10.5 10.6 10.7 10.7 10.7

Fourth Quintile 18.7 18.7 18.8 18.8 18.8 18.9 18.9 19.0 19.0 19.1 19.1 19.2 19.2 19.2

Highest Quintile 64.4 64.3 64.2 64.0 64.0 63.8 63.7 63.6 63.4 63.3 63.2 63.0 62.9 62.8

All Quintiles 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Top 10 Percent 49.1 48.9 48.8 48.7 48.6 48.5 48.4 48.2 48.1 48.0 47.8 47.7 47.6 47.4

Top 5 Percent 37.8 37.6 37.5 37.4 37.3 37.2 37.1 36.9 36.8 36.7 36.5 36.4 36.3 36.1

Top 1 Percent 22.2 22.1 22.0 21.9 21.8 21.7 21.5 21.4 21.3 21.2 21.1 20.9 20.8 20.7

Lowest Quintile -1.8 -1.7 -1.7 -1.6 -1.5 -1.4 -1.4 -1.3 -1.2 -1.2 -1.1 -1.0 -1.0 -0.9

Second Quintile 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0 2.0 2.2 2.3 2.3 2.4

Middle Quintile 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 7.0 7.2 7.3 7.4 7.6

Fourth Quintile 14.9 15.1 15.2 15.3 15.4 15.5 15.7 15.8 15.9 16.0 16.2 16.3 16.4 16.5

Highest Quintile 79.5 79.1 78.7 78.4 78.1 77.6 77.2 76.8 76.4 76.0 75.6 75.2 74.8 74.4

All Quintiles 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Top 10 Percent 64.8 64.3 63.9 63.5 63.2 62.8 62.4 61.9 61.5 61.2 60.7 60.3 59.9 59.5

Top 5 Percent 52.6 52.1 51.8 51.4 51.1 50.7 50.3 49.9 49.5 49.1 48.7 48.2 47.9 47.4

Top 1 Percent 32.6 32.2 31.9 31.6 31.4 31.0 30.7 30.3 30.0 29.7 29.3 29.0 28.7 28.3

Total Effective Federal Tax Rate

Effective Individual Income Tax Rate

Share of Total Federal Tax Liabilities

Share of Individual Income Tax Liabilities
EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014 13

Table 4.

Differences in Effective Federal Tax Rates and Shares Under Current Law and 

2000 Law, Based on 2001 Incomes, by Income Category, 2001 to 2014

(Percentage points)

Source: Congressional Budget Office. Notes: The values in this table equal the differences between comparable entries in Tables 2 and 3.

* = less than 0.05 percentage points. The notes that appear in Table 2 also apply to this table.

Income Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Lowest Quintile -0.8 -1.1 -1.4 -1.5 -1.4 -1.4 -1.4 -1.5 -1.6 -1.9 * * * 0

Second Quintile -1.1 -1.3 -2.1 -2.1 -1.3 -1.3 -1.3 -1.4 -1.5 -1.7 * * * 0

Middle Quintile -1.0 -1.3 -1.8 -1.9 -1.0 -1.0 -1.0 -1.1 -1.1 -1.3 * * * 0

Fourth Quintile -0.8 -1.1 -1.9 -2.1 -1.1 -1.0 -1.0 -1.1 -1.0 -1.1 * * * 0

Highest Quintile -0.5 -2.1 -3.1 -3.9 -1.5 -1.4 -1.4 -1.6 -1.1 -1.2 0.1 0.1 * 0

All Quintiles -0.7 -1.7 -2.6 -3.0 -1.3 -1.3 -1.3 -1.4 -1.2 -1.3 0.1 * * 0

Top 10 Percent -0.4 -2.4 -3.5 -4.5 -1.6 -1.5 -1.6 -1.8 -1.2 -1.3 0.1 0.1 * 0

Top 5 Percent -0.4 -2.9 -3.9 -5.2 -1.8 -1.7 -1.8 -2.1 -1.3 -1.6 0.2 0.1 * 0

Top 1 Percent -0.3 -3.8 -5.0 -6.8 -2.4 -2.3 -2.6 -3.1 -2.0 -2.4 0.2 0.1 * 0

Lowest Quintile -0.8 -1.0 -1.3 -1.4 -1.4 -1.4 -1.4 -1.5 -1.6 -1.9 * * * 0

Second Quintile -1.1 -1.2 -2.0 -2.0 -1.4 -1.4 -1.3 -1.4 -1.5 -1.8 * * * 0

Middle Quintile -1.0 -1.0 -1.7 -1.7 -1.1 -1.1 -1.1 -1.2 -1.2 -1.3 * * * 0

Fourth Quintile -0.8 -0.9 -1.8 -1.8 -1.1 -1.1 -1.1 -1.2 -1.1 -1.1 * * * 0

Highest Quintile -0.5 -1.1 -2.6 -3.0 -1.8 -1.8 -1.7 -1.9 -1.3 -1.3 * * * 0

All Quintiles -0.7 -1.1 -2.2 -2.4 -1.5 -1.5 -1.5 -1.6 -1.3 -1.3 * * * 0

Top 10 Percent -0.4 -1.2 -2.8 -3.3 -2.0 -2.0 -2.0 -2.1 -1.4 -1.5 * * * 0

Top 5 Percent -0.4 -1.3 -3.1 -3.8 -2.3 -2.3 -2.3 -2.5 -1.6 -1.7 0.1 * * 0

Top 1 Percent -0.3 -1.6 -3.8 -4.8 -3.1 -3.2 -3.3 -3.6 -2.3 -2.6 0.1 * * 0

Lowest Quintile -0.1 -0.1 -0.1 -0.1 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 * * * 0

Second Quintile -0.3 -0.2 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 -0.4 * * * 0

Middle Quintile -0.3 * * 0.2 -0.1 -0.1 * * -0.2 -0.2 * * * 0

Fourth Quintile -0.2 0.4 0.4 0.7 0.1 0.1 0.1 0.2 * 0.1 * * * 0

Highest Quintile 0.9 * * -0.6 0.3 0.4 0.3 0.3 0.7 0.8 0.1 * * 0

All Quintiles 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Top 10 Percent 0.9 -0.4 -0.3 -1.1 0.2 0.2 0.2 * 0.5 0.5 0.1 * * 0

Top 5 Percent 0.8 -0.8 -0.6 -1.5 * 0.1 * -0.2 0.3 0.2 0.1 0.1 * 0

Top 1 Percent 0.5 -0.9 -0.9 -1.8 -0.3 -0.3 -0.5 -0.7 -0.2 -0.4 0.1 * * 0

Lowest Quintile -0.5 -0.6 -1.0 -1.1 -0.8 -0.8 -0.8 -0.8 -0.8 -0.9 * * * 0

Second Quintile -0.9 -0.9 -1.6 -1.6 -1.0 -1.0 -0.9 -1.0 -1.1 -1.2 * * * 0

Middle Quintile -0.9 -0.8 -1.1 -1.0 -0.6 -0.6 -0.5 -0.6 -0.7 -0.8 * * * 0

Fourth Quintile -0.6 -0.3 -0.4 -0.1 * * * 0.1 -0.2 -0.1 * * * 0

Highest Quintile 2.9 2.6 4.2 3.8 2.5 2.4 2.2 2.3 2.8 3.0 * * * 0

All Quintiles 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Top 10 Percent 2.9 2.3 3.9 3.2 2.1 2.0 1.8 1.8 2.4 2.5 * * * 0

Top 5 Percent 2.6 1.8 3.3 2.3 1.5 1.4 1.2 1.1 1.8 1.7 0.1 * * 0

Top 1 Percent 1.8 1.0 1.7 0.6 0.2 -0.1 -0.3 -0.5 0.3 0.2 0.1 * * 0

Change in Total Effective Federal Tax Rate

Change in Effective Individual Income Tax Rate

Change in Share of Total Federal Tax Liabilities

Change in Share of Individual Income Tax Liabilities
14 EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014

Table 5.

Differences in Total Effective Federal Tax Rates Under Current Law and 2000 Law 

With and Without the Alternative Minimum Tax, Based on 2001 Incomes, by Household Income Category, 2001 to 2014

(Percentage points)

Source: Congressional Budget Office.

Notes: AMT = alternative minimum tax; * = less than 0.05 percentage points.

The notes that appear in Table 2 also apply to this table.

Income Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Lowest Quintile -0.8 -1.1 -1.4 -1.5 -1.4 -1.4 -1.4 -1.5 -1.6 -1.9 * * * 0

Second Quintile -1.1 -1.3 -2.1 -2.1 -1.3 -1.3 -1.3 -1.4 -1.5 -1.7 * * * 0

Middle Quintile -1.0 -1.3 -1.8 -1.9 -1.0 -1.0 -1.0 -1.1 -1.1 -1.3 * * * 0

Fourth Quintile -0.8 -1.1 -1.9 -2.1 -1.1 -1.0 -1.0 -1.1 -1.0 -1.1 * * * 0

Highest Quintile -0.5 -2.1 -3.1 -3.9 -1.5 -1.4 -1.4 -1.6 -1.1 -1.2 0.1 0.1 * 0

All Quintiles -0.7 -1.7 -2.6 -3.0 -1.3 -1.3 -1.3 -1.4 -1.2 -1.3 0.1 * * 0

Top 10 Percent -0.4 -2.4 -3.5 -4.5 -1.6 -1.5 -1.6 -1.8 -1.2 -1.3 0.1 0.1 * 0

Top 5 Percent -0.4 -2.9 -3.9 -5.2 -1.8 -1.7 -1.8 -2.1 -1.3 -1.6 0.2 0.1 * 0

Top 1 Percent -0.3 -3.8 -5.0 -6.8 -2.4 -2.3 -2.6 -3.1 -2.0 -2.4 0.2 0.1 * 0

Lowest Quintile -0.8 -1.1 -1.4 -1.5 -1.4 -1.4 -1.4 -1.5 -1.6 -1.9 * * * 0

Second Quintile -1.1 -1.3 -2.1 -2.1 -1.3 -1.3 -1.3 -1.4 -1.5 -1.8 * * * 0

Middle Quintile -1.0 -1.2 -1.8 -1.9 -1.1 -1.1 -1.1 -1.2 -1.2 -1.4 * * * 0

Fourth Quintile -0.8 -1.1 -1.9 -2.0 -1.2 -1.2 -1.3 -1.5 -1.5 -1.6 * * * 0

Highest Quintile -0.5 -2.1 -3.2 -4.0 -1.9 -1.9 -2.0 -2.4 -2.0 -2.2 0.1 0.1 * 0

All Quintiles -0.7 -1.7 -2.6 -3.0 -1.6 -1.6 -1.7 -1.9 -1.7 -1.9 0.1 * * 0

Top 10 Percent -0.4 -2.5 -3.6 -4.6 -2.0 -2.1 -2.2 -2.7 -2.1 -2.4 0.1 0.1 * 0

Top 5 Percent -0.4 -2.9 -4.1 -5.3 -2.2 -2.3 -2.4 -3.0 -2.2 -2.6 0.2 0.1 * 0

Top 1 Percent -0.3 -3.8 -5.1 -6.9 -2.6 -2.6 -2.8 -3.5 -2.3 -2.8 0.2 0.1 * 0

Change in Total Effective Federal Tax Rate with the AMT

Change in Total Effective Federal Tax Rate Without the AMT
A

Sensitivity of the Results to Base-Year Incomes

The choice of a base year has only a small effect on 

estimated effective tax rates. The results discussed in the 

body of this paper derive from incomes in 2001. Incomes 

in that year were generally lower than those in 2000, particularly at the upper end of the distribution. Nonetheless, substituting incomes in 2000 for those in 2001 and 

repeating the analysis yields only slightly higher estimates 

of effective tax rates, with much of the observed difference reflecting a change in the amount of capital gains realized.

Economic circumstances differed markedly between 

2000 and 2001 (see Table A-1). Average income for 

households rose sharply during the 1990s—a period of 

rapid economic growth and a booming stock market—

peaking at $76,200 in 2000. In 2001, the economy went 

into recession, the stock market fell, and average income 

dropped 6 percent, to $71,800. The decline in income 

varied across the income distribution. While average income for the top quintile fell by 10.5 percent, from 

$202,000 in 2000 to $182,700 the following year, it fell 

by about 1 percent for the fourth quintile and by less 

than 1 percent for each of the three lower quintiles.

A large part of the difference in incomes between 2000 

and 2001 resulted from capital gains realizations, which 

fell from $644 billion, or 6.6 percent of gross domestic 

product (GDP), in 2000 to $344 billion, or 3.5 percent 

of GDP, in 2001. That $300 billion drop constituted 

about two-fifths of the total decline in income between 

the two years. At 3.5 percent, realizations for 2001 were 

close to the historical average of capital gains relative to 

GDP.

Shifting the base year for incomes from 2001 to 2000 

moves estimated changes in effective tax rates by no more 

than one-tenth of a percentage point for any quintile in 

2004 (see Table A-1). The differences are greater for 

households with the highest incomes: the top 1 percent 

of households shows a 6.8 percentage-point reduction using 2001 incomes but only a 6.1 percentage-point drop 

using 2000 incomes. That difference results from the fact 

that some of the tax reductions for 2004, such as the expensing provisions, are measured in fixed dollar amounts 

and are not a function of income. Those fixed dollar 

amounts cause a bigger percentage-point change in effective tax rates when based on the lower incomes in 2001.

In 2006, the effects of using incomes from alternative 

years are greater, primarily for the top quintile. Effective 

tax rates again differ by no more than one-tenth of a percentage point for the first four quintiles, but the top 

quintile shows a reduction of 1.4 percentage points using 

2001 incomes, compared with a reduction of 1.7 percentage points using 2000 incomes. The difference rises 

to 0.5 percentage points for the top 1 percent of households. Those differences derive from different levels of 

capital gains realizations between the two years interacting with the Jobs and Growth Tax Relief Reconciliation 

Act’s reduction in the maximum tax rate on long-term 

capital gains. Adjusting the levels of realizations in the 

2001 data to be consistent with the higher 2000 levels 

eliminates most of the difference in effective tax rates (see 

the bottom panel of Table A-1). Thus, the larger impact 

of legislative changes in 2006 measured using 2000 incomes results from the unusually high level of capital 

gains realizations in 2000.

In 2010, the results are almost identical using the 2000 

data and the 2001 data, within one-tenth of a percentage 

point for all groups. The rate reductions on capital gains 

are not in effect in that year, and the impact of tax 

changes measured in fixed dollars is very small. By 2010, 

then, the choice of a base year for incomes has little effect 

on the changes in effective tax rates.

APPENDIX
16 EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014

The choice of a base year has a greater impact on the 

changes in the share of taxes paid by each income segment (as opposed to the effective tax rate for each segment), although the impact is still not dramatic (see Table A-2). The largest differences are for the top quintile 

and the subcategories within it. For example, under 2004 

law, the share of taxes paid by the highest quintile falls by 

0.6 percentage points using the 2001 data compared with 

0.4 percentage points with the 2000 data. 

Some of the difference in shares of taxes resulting from 

the choice of a base year comes from the difference in realized capital gains. Under 2006 law, the 2001 data show 

a 0.1 percentage point increase in the share of taxes paid 

by the top 5 percent of households, while the 2000 data 

show a decrease of 0.3 percentage points. However, if the 

2001 data are adjusted to reflect the higher realizations in 

2000, the changes in shares for the top 10 percent, 5 percent, and 1 percent of households are identical.
APPENDIX A EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014 17

Table A-1.

Changes in Effective Federal Tax Rates in Future Years Using Different Base 

Years, by Income Category

Source: Congressional Budget Office.

Note: The notes that appear in Table 2 also apply to this table.

Income Category

Lowest Quintile 22.2 14,900 -1.5 -1.4 -1.9

Second Quintile 21.1 34,200 -2.1 -1.3 -1.7

Middle Quintile 21.6 51,500 -1.9 -1.0 -1.3

Fourth Quintile 21.5 75,600 -2.1 -1.0 -1.1

Highest Quintile 22.5 182,700 -3.9 -1.4 -1.2

All Quintiles 109.4 71,800 -3.0 -1.3 -1.3

Top 10 Percent 11.4 259,000 -4.5 -1.5 -1.3

Top 5 Percent 5.7 379,800 -5.2 -1.7 -1.6

Top 1 Percent 1.1 1,050,100 -6.8 -2.3 -2.4

Lowest Quintile 22.1 15,000 -1.5 -1.4 -1.8

Second Quintile 20.8 34,200 -2.1 -1.3 -1.7

Middle Quintile 21.6 51,700 -2.0 -1.0 -1.3

Fourth Quintile 21.1 76,600 -2.1 -1.1 -1.1

Highest Quintile 22.4 202,000 -3.9 -1.7 -1.3

All Quintiles 108.3 76,200 -3.1 -1.4 -1.3

Top 10 Percent 11.4 294,300 -4.4 -1.8 -1.4

Top 5 Percent 5.7 446,400 -5.0 -2.1 -1.6

Top 1 Percent 1.1 1,326,900 -6.1 -2.8 -2.3

Lowest Quintile 22.3 15,000 -1.5 -1.4 -1.9

Second Quintile 21.0 34,300 -2.1 -1.3 -1.7

Middle Quintile 21.6 51,600 -1.9 -1.0 -1.3

Fourth Quintile 21.5 75,800 -2.1 -1.1 -1.1

Highest Quintile 22.5 195,300 -3.9 -1.6 -1.2

All Quintiles 109.4 74,500 -3.1 -1.4 -1.3

Top 10 Percent 11.4 283,100 -4.5 -1.8 -1.3

Top 5 Percent 5.7 426,500 -5.1 -2.0 -1.5

Top 10 Percent 1.1 1,242,300 -6.5 -2.8 -2.1

Households Current Law and 2000 Law (Percentage points)

(Millions)

Base-Year Income Level

(2001 dollars) 2004

Average Change in Effective Tax Rate Between

2006 2010

Using 2001 Data

Using 2000 Data

Using 2001 Data with Capital Gains in 2000
18 EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014

Table A-2.

Changes in Shares of Federal Taxes in Future Years Using Different Base Years, 

by Income Category

Source: Congressional Budget Office.

Note: * = less than 0.05 percentage points.

The notes that appear in Table 2 also apply to this table.

Income Category

Lowest Quintile 22.2 4.2 -0.1 -0.2 -0.3

Second Quintile 21.1 9.2 -0.2 -0.2 -0.4

Middle Quintile 21.6 14.2 0.2 -0.1 -0.2

Fourth Quintile 21.5 20.7 0.7 0.1 0.1

Highest Quintile 22.5 52.4 -0.6 0.4 0.8

All Quintiles 109.4 100.0 0 0 0

Top 10 Percent 11.4 37.6 -1.1 0.2 0.5

Top 5 Percent 5.7 27.5 -1.5 0.1 0.2

Top 1 Percent 1.1 14.8 -1.8 -0.3 -0.4

Lowest Quintile 22.1 4.0 -0.1 -0.2 -0.2

Second Quintile 20.8 8.6 -0.1 -0.2 -0.4

Middle Quintile 21.6 13.5 0.2 * -0.2

Fourth Quintile 21.1 19.6 0.6 0.2 0.1

Highest Quintile 22.4 54.8 -0.4 0.1 0.7

All Quintiles 108.3 100.0 0 0 0

Top 10 Percent 11.4 40.6 -0.9 -0.1 0.4

Top 5 Percent 5.7 30.7 -1.3 -0.3 0.1

Top 1 Percent 1.1 17.8 -1.5 -0.7 -0.4

Lowest Quintile 22.3 4.1 -0.1 -0.2 -0.3

Second Quintile 21.0 8.8 -0.1 -0.2 -0.4

Middle Quintile 21.6 13.7 0.2 * -0.2

Fourth Quintile 21.5 20.0 0.7 0.2 0.1

Highest Quintile 22.5 54.0 -0.7 0.2 0.8

All Quintiles 109.4 100.0 0 0 0

Top 10 Percent 11.4 39.6 -1.3 -0.1 0.5

Top 5 Percent 5.7 29.8 -1.7 -0.3 0.2

Top 1 Percent 1.1 17.1 -2.0 -0.7 -0.3

Households

(Millions)

Base-Year

Income Share 2004 2006

Using 2001 Data

Using 2000 Data

Using 2001 Data with Capital Gains in 2000

Change in Share of Taxes Between 

2010

Current Law and 2000 Law (Percentage points)
B

Effects of Provisions on Partial Expensing

of Investment and Net Operating Losses

The Job Creation and Worker Assistance Act of 

2002 (JCWAA) and the Jobs and Growth Tax Relief 

Reconciliation Act of 2003 (JGTRRA) both provided incentives for businesses to invest between September 10, 

2001, and January 1, 2005. JCWAA allowed an additional deduction of first-year depreciation equal to 30 

percent of the basis of qualified property, and JGTRRA 

increased that percentage to 50 percent. JGTRRA also 

raised, from $25,000 to $100,000, the limit on the expensing of business property put into service during the 

2003-2005 period. The provisions serve to shift the deductibility of depreciation of business assets, decreasing 

taxes in the near term but increasing them in later years, 

when firms can no longer deduct depreciation because it 

was claimed earlier.

Those provisions to encourage business investment have 

a significant impact on effective tax rates in each year 

during the 2002-2008 period, lowering rates in the first 

three years but raising them in later years (see Tables B-1 

and B-2). That impact can be measured by comparing 

the change in total effective federal tax rates under current tax law and 2000 tax law, with and without the provisions to encourage investment.

APPENDIX
20 EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014

Table B-1.

Changes in Total Effective Federal Tax Rates With and Without Provisions Affecting Partial Expensing of Investment and Net Operating Losses, Under Current Tax Law and 2000 Tax Law, by Income Category, 2001 to 2014

(Percentage points)

Source: Congressional Budget Office.

Notes: * = less than 0.05 percentage points.

The notes that appear in Table 2 also apply to this table.

Income Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Lowest Quintile -0.8 -1.1 -1.4 -1.5 -1.4 -1.4 -1.4 -1.5 -1.6 -1.9 * * * *

Second Quintile -1.1 -1.3 -2.1 -2.1 -1.3 -1.3 -1.3 -1.4 -1.5 -1.7 * * * *

Middle Quintile -1.0 -1.3 -1.8 -1.9 -1.0 -1.0 -1.0 -1.1 -1.1 -1.3 * * * *

Fourth Quintile -0.8 -1.1 -1.9 -2.1 -1.1 -1.0 -1.0 -1.1 -1.0 -1.1 * * * *

Highest Quintile -0.5 -2.1 -3.1 -3.9 -1.5 -1.4 -1.4 -1.6 -1.1 -1.2 0.1 0.1 * *

All Quintiles -0.7 -1.7 -2.6 -3.0 -1.3 -1.3 -1.3 -1.4 -1.2 -1.3 0.1 * * *

Top 10 Percent -0.4 -2.4 -3.5 -4.5 -1.6 -1.5 -1.6 -1.8 -1.2 -1.3 0.1 0.1 * *

Top 5 Percent -0.4 -2.9 -3.9 -5.2 -1.8 -1.7 -1.8 -2.1 -1.3 -1.6 0.2 0.1 * *

Top 1 Percent -0.3 -3.8 -5.0 -6.8 -2.4 -2.3 -2.6 -3.1 -2.0 -2.4 0.2 0.1 * *

Lowest Quintile -0.8 -1.0 -1.3 -1.4 -1.4 -1.4 -1.4 -1.5 -1.6 -1.9 0 0 0 0

Second Quintile -1.1 -1.2 -2.0 -1.9 -1.4 -1.4 -1.4 -1.4 -1.5 -1.8 0 0 0 0

Middle Quintile -1.0 -1.0 -1.7 -1.7 -1.1 -1.1 -1.1 -1.2 -1.2 -1.3 0 0 0 0

Fourth Quintile -0.8 -0.9 -1.8 -1.8 -1.1 -1.1 -1.1 -1.2 -1.1 -1.1 0 0 0 0

Highest Quintile -0.5 -0.7 -2.3 -2.4 -1.9 -1.9 -1.9 -2.0 -1.4 -1.4 0 0 0 0

All Quintiles -0.7 -0.8 -2.1 -2.1 -1.6 -1.6 -1.6 -1.6 -1.3 -1.4 0 0 0 0

Top 10 Percent -0.4 -0.6 -2.5 -2.6 -2.2 -2.2 -2.2 -2.3 -1.5 -1.5 0 0 0 0

Top 5 Percent -0.4 -0.6 -2.6 -2.8 -2.5 -2.6 -2.5 -2.7 -1.7 -1.8 0 0 0 0

Top 1 Percent -0.3 -0.6 -3.1 -3.5 -3.4 -3.6 -3.6 -3.9 -2.5 -2.7 0 0 0 0

Lowest Quintile 0 -0.1 -0.1 -0.1 * * * * * * * * * 0

Second Quintile 0 -0.2 -0.1 -0.2 * 0.1 0.1 * * * * * * 0

Middle Quintile 0 -0.3 -0.1 -0.2 0.1 0.1 0.1 0.1 * * * * * 0

Fourth Quintile 0 -0.3 -0.2 -0.3 0.1 0.1 0.1 0.1 * * * * * 0

Highest Quintile 0 -1.4 -0.8 -1.4 0.4 0.6 0.5 0.3 0.2 0.2 0.1 0.1 * 0

All Quintiles 0 -0.8 -0.5 -0.9 0.2 0.3 0.3 0.2 0.2 0.1 0.1 * * 0

Top 10 Percent 0 -1.8 -1.0 -1.8 0.5 0.7 0.6 0.4 0.3 0.2 0.1 0.1 * 0

Top 5 Percent 0 -2.2 -1.3 -2.3 0.7 0.9 0.8 0.6 0.4 0.3 0.2 0.1 * 0

Top 1 Percent 0 -3.2 -1.8 -3.3 1.0 1.3 1.1 0.8 0.6 0.4 0.2 0.1 * 0

Change with Provisions Affecting Partial Expensing and Net Operating Losses

Change Without Provisions Affecting Partial Expensing and Net Operating Losses

Difference Attributable to Provisions Affecting Partial Expensing and Net Operating Losses
APPENDIX B EFFECTIVE FEDERAL TAX RATES UNDER CURRENT LAW, 2001 TO 2014 21

Table B-2.

Effective Federal Tax Rates and Shares Under Current Tax Law Excluding Provisions Affecting Partial Expensing of Investment and Net Operating Losses, Based on 2001 Incomes, by Income Category, 2001 to 2014

Source: Congressional Budget Office.

Note: The notes that appear in Table 2 also apply to this table.

Income Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total Effective Federal Tax Rate

Lowest Quintile 5.4 5.4 5.2 5.3 5.4 5.6 5.7 5.8 5.8 5.7 7.8 8.0 8.1 8.3

Second Quintile 11.6 11.7 11.1 11.3 11.9 12.1 12.3 12.3 12.4 12.3 14.2 14.4 14.5 14.7

Middle Quintile 15.2 15.3 14.7 14.8 15.5 15.6 15.8 15.9 16.1 16.1 17.6 17.8 18.0 18.2

Fourth Quintile 19.3 19.4 18.6 18.8 19.6 19.7 19.9 20.1 20.3 20.5 21.8 22.0 22.2 22.4

Highest Quintile 26.8 26.8 25.2 25.2 25.8 25.9 26.0 26.1 26.8 26.9 28.4 28.5 28.7 28.8

All Quintiles 21.5 21.5 20.4 20.5 21.2 21.3 21.4 21.5 22.0 22.0 23.6 23.7 23.9 24.1

Top 10 Percent 28.6 28.5 26.8 26.7 27.2 27.3 27.4 27.4 28.3 28.3 30.0 30.1 30.2 30.3

Top 5 Percent 30.1 30.0 28.0 27.9 28.3 28.3 28.4 28.4 29.4 29.4 31.3 31.4 31.5 31.6

Top 1 Percent 33.0 32.8 30.3 30.0 30.0 29.9 29.9 29.6 31.0 30.8 33.6 33.6 33.6 33.6

Effective Individual Income Tax Rate

Lowest Quintile -5.6 -5.6 -5.8 -5.7 -5.6 -5.4 -5.3 -5.2 -5.2 -5.3 -3.2 -3.0 -2.9 -2.7

Second Quintile 0.3 0.4 -0.2 -0.1 0.6 0.8 1.0 1.0 1.1 1.0 2.9 3.1 3.2 3.4

Middle Quintile 3.8 3.9 3.3 3.5 4.2 4.3 4.5 4.5 4.7 4.7 6.3 6.5 6.7 6.9

Fourth Quintile 7.2 7.3 6.5 6.7 7.5 7.6 7.8 8.0 8.2 8.4 9.7 9.9 10.1 10.3

Highest Quintile 16.3 16.2 14.7 14.7 15.3 15.4 15.5 15.6 16.3 16.4 17.9 18.0 18.1 18.3

All Quintiles 10.4 10.4 9.3 9.3 10.0 10.1 10.3 10.3 10.8 10.9 12.4 12.6 12.7 12.9

Top 10 Percent 18.7 18.5 16.8 16.7 17.3 17.3 17.5 17.5 18.3 18.4 20.0 20.2 20.3 20.4

Top 5 Percent 20.8 20.6 18.7 18.5 19.0 19.0 19.1 19.0 20.1 20.1 21.9 22.0 22.1 22.2

Top 1 Percent 24.1 23.9 21.3 21.0 21.1 20.9 20.9 20.7 22.1 21.9 24.6 24.6 24.6 24.7

Share of Total Federal Tax Liabilities

Lowest Quintile 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.4 1.4 1.4 1.5

Second Quintile 5.0 5.0 5.0 5.0 5.2 5.2 5.2 5.3 5.2 5.1 5.5 5.6 5.6 5.6

Middle Quintile 10.0 10.1 10.2 10.3 10.4 10.4 10.5 10.5 10.4 10.4 10.6 10.7 10.7 10.7

Fourth Quintile 18.5 18.6 18.9 18.9 19.1 19.2 19.2 19.3 19.2 19.2 19.1 19.2 19.2 19.2

Highest Quintile 65.3 65.1 64.7 64.5 64.0 63.9 63.7 63.6 64.0 64.0 63.2 63.0 62.9 62.8

All Quintiles 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Top 10 Percent 50.0 49.7 49.2 49.0 48.4 48.2 48.1 48.0 48.4 48.3 47.8 47.7 47.6 47.4

Top 5 Percent 38.5 38.3 37.8 37.5 36.9 36.7 36.5 36.4 36.9 36.7 36.5 36.4 36.3 36.1

Top 1 Percent 22.7 22.5 21.9 21.6 21.0 20.8 20.6 20.4 20.9 20.7 21.1 20.9 20.8 20.7

Share of Individual Income Tax Liabilities

Lowest Quintile -2.3 -2.3 -2.6 -2.6 -2.4 -2.3 -2.2 -2.1 -2.0 -2.0 -1.1 -1.0 -1.0 -0.9

Second Quintile 0.3 0.4 -0.2 -0.1 0.6 0.7 0.9 0.9 0.9 0.8 2.2 2.3 2.3 2.4

Middle Quintile 5.2 5.4 5.1 5.3 5.9 6.0 6.2 6.2 6.2 6.2 7.2 7.3 7.4 7.6

Fourth Quintile 14.3 14.5 14.6 14.8 15.5 15.7 15.8 16.0 15.8 16.0 16.2 16.3 16.4 16.5

Highest Quintile 82.5 82.0 83.2 82.5 80.4 79.9 79.4 79.0 79.1 79.0 75.6 75.2 74.8 74.4

All Quintiles 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Top 10 Percent 67.7 67.2 68.2 67.5 65.1 64.5 64.0 63.6 63.8 63.6 60.7 60.3 59.9 59.5

Top 5 Percent 55.2 54.7 55.5 54.7 52.3 51.7 51.2 50.7 51.1 50.8 48.7 48.2 47.9 47.4

Top 1 Percent 34.4 34.0 34.1 33.3 31.2 30.6 30.2 29.6 30.2 29.8 29.3 29.0 28.7 28.3