EFFECTIVE FEDERAL TAX RATES,

1979-1997

The Congress of the United States

Congressional Budget Office
NOTES

Numbers in the text and tables may not add up to totals because of rounding.

Unless otherwise indicated, all dollar values are in 1997 dollars and all years are calendar years.

In many tables and at some points in the text, this study presents data for 1997 that are calculated

“using 2000 law.” Tax year 2000 law differs from 1997 law only for estimates of the individual

income tax portion of the tax burden. The differences arise from provisions of the Taxpayer Relief

Act of 1997 (for example, the $500 child credit and education credits), most of which were not in

effect in 1997. To calculate taxes under 2000 law, the Congressional Budget Office deflated

parameters for actual 2000 law by the change in the consumer price index between 1997 and 2000.
Preface

This Congressional Budget Office (CBO) study examines effective federal tax rates—

tax liabilities measured as a percentage of income—over the 1979-1997 period for

all households and for quintiles, or fifths, of the income distribution. The analysis

uses a comprehensive measure of household income that encompasses not only cash income but also the value of benefits received in kind, such as health care and food stamps.

The study provides information on the four major federal taxes: individual and corporate

income taxes; social insurance, or payroll, taxes; and excise taxes. It also considers the

combination of the four.

CBO issued the study in a preliminary form—some appendixes were not included—

in May of this year. As noted then, the numbers in the appendix tables were final, and

they have not changed in this version. The study was prepared at the request of the Chairman and Ranking Member of the Senate Budget Committee.

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

(TAD) wrote the study under the direction of G. Thomas Woodward. Barbara Edwards of

CBO and Rick Kasten, Frank Sammartino, and Robert Taylor (all former TAD staff)

reviewed drafts and provided valuable criticism and suggestions. The study also benefited

from discussions at a conference on distributional measurement held at CBO in March

2000.

Leah Mazade edited the manuscript, and Christine Bogusz proofread it. Simone

Thomas typed early drafts of both the text and tables, and Kathryn Winstead prepared the

report for final publication. Annette Kalicki prepared the electronic versions for CBO’s

World Wide Web site.

Dan L. Crippen

Director

October 2001

This study and other CBO publications

are available at CBO's Web site:

www.cbo.gov

Contents

SUMMARY AND INTRODUCTION xv

ONE THE DISTRIBUTION OF EFFECTIVE

TAX RATES AND INCOME 1

Factors Contributing to Changes in Effective

Tax Rates 2

Changing Sources of Federal Revenues 9

Effective Tax Rates 10

The Distribution of After-Tax Income 13

Effective Federal Tax Rates for Different

Types of Households 15

Effective Federal Tax Rates by Cash

Income Category 17

TWO METHODOLOGICAL ISSUES 19

The Unit of Analysis 19

The Definition of Income 20

Adjusting Income for Differences Among

Households 24

Assumptions About the Incidence of

Federal Taxes 25

The Time Period 25

THREE THE EFFECTS OF APPLYING ALTERNATIVE

DISTRIBUTIONAL METHODS 27

Alternative Income Rankings 27

The Effects of Using Different Income Measures 30

Effective Tax Rates and Income Under Alternative

Income Measures 36
vi EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

APPENDIXES

A A Chronology of CBO’s Work on the

Distribution of Federal Taxes 49

B CBO’s Conference on Distributional

Measurement 51

C Comparing the Distributional Methodologies

of CBO, the Treasury Department, and

the Joint Committee on Taxation 55

D CBO’s Distributional Methodology 59

E Comparing Measures of Personal Income:

CBO and the Bureau of Economic Analysis 63

F Comparing Income Statistics from CBO and

the Bureau of the Census 67

G Distributional Estimates Using Adjusted

Comprehensive Household Income,

by Quintile, 1979-1997 71

H Distributional Estimates Using Household

Cash Income, by Dollar Income Category,

1979-1997 97

I Distributional Estimates Using Alternative

Measures of Income, 1979-1997 123

J Tax Liabilities and Income Based on Tax-Return Data,

by Category of Adjusted Gross Income,

1995-1999 169

K Estimates of Total Effective Tax Rates Using

Alternative Measures of Income 173
CONTENTS vii

TABLES

3-1. Household Characteristics by Household Type, 1979-1997 28

3-2. Income Totals, 1979-1997 30

3-3. Percentages of Families Moving Among Quintiles,

by Income Measure, 1997 32

3-4. Distribution of Families Under CBO’s Historical Income

Measure and the Adjusted Comprehensive Household

Income Measure, by Income Quintile, 1997 34

3-5. Distribution of People, Families, and Households Under

the Adjusted Comprehensive Household Income Measure,

by Income Quintile and Household Type, 1997 35

A-1. Previous Congressional Budget Office Work on the

Distribution of Federal Taxes 49

C-1. Summary of Distributional Methodologies 56

E-1. Differences Between Taxable Personal Income in

the NIPAs and CBO’s Equivalent Measure, 1997 64

F-1. Shares of Income for All Households, by Income 

Quintile, Using Alternative Income Definitions, 

1979-1997 69

G-1a. Effective Federal Tax Rates for All Households,

by Income Quintile, Using Comprehensive Household

Income Adjusted for Household Size, 1979-1997 72

G-1b. Shares of Federal Tax Liabilities for All Households, 

by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size,

1979-1997 74

G-1c. Number of Households, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for All Households, by

Income Quintile, Using Comprehensive Household

Income Adjusted for Household Size, 1979-1997 76

G-2a. Effective Federal Tax Rates for Households with

Children, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size,

1979-1997 78
viii EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

G-2b. Shares of Federal Tax Liabilities for Households with

Children, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size,

1979-1997 80

G-2c. Number of Households, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for Households with

Children, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size,

1979-1997 82

G-3a. Effective Federal Tax Rates for Elderly Childless

Households, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size,

1979-1997 84

G-3b. Shares of Federal Tax Liabilities for Elderly Childless

Households, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size,

1979-1997 86

G-3c. Number of Households, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for Elderly Childless

Households, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size,

1979-1997 88

G-4a. Effective Federal Tax Rates for Nonelderly Childless

Households, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size,

1979-1997 90

G-4b. Shares of Federal Tax Liabilities for Nonelderly

Childless Households, by Income Quintile, Using

Comprehensive Household Income Adjusted for

Household Size, 1979-1997 92

G-4c. Number of Households, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for Nonelderly Childless

Households, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size,

1979-1997 94

H-1a. Effective Federal Tax Rates for All Households, by

Dollar Income Category, Using Household Cash Income

Plus Taxes Paid by Businesses, 1979-1997 98
CONTENTS ix

H-1b. Shares of Federal Tax Liabilities for All Households, by

Dollar Income Category, Using Household Cash Income

Plus Taxes Paid by Businesses, 1979-1997 100

H-1c. Number of Households, Average Pretax and After-Tax

Income, and Shares of Pretax and After-Tax Income for

All Households, by Dollar Income Category, Using

Household Cash Income Plus Taxes Paid by Businesses,

1979-1997 102

H-2a. Effective Federal Tax Rates for Households with 

Children, by Dollar Income Category, Using Household

Cash Income Plus Taxes Paid by Businesses, 1979-1997 104

H-2b. Shares of Federal Tax Liabilities for Households with

Children, by Dollar Income Category, Using Household

Cash Income Plus Taxes Paid by Businesses, 1979-1997 106

H-2c. Number of Households, Average Pretax and After-Tax

Income, and Shares of Pretax and After-Tax Income for

Households with Children, by Dollar Income Category,

Using Household Cash Income Plus Taxes Paid by

Businesses, 1979-1997 108

H-3a. Effective Federal Tax Rates for Elderly Childless

Households, by Dollar Income Category, Using Household

Cash Income Plus Taxes Paid by Businesses, 1979-1997 110

H-3b. Shares of Federal Tax Liabilities for Elderly Childless

Households, by Dollar Income Category, Using

Household Cash Income Plus Taxes Paid by Businesses,

1979-1997 112

H-3c. Number of Households, Average Pretax and After-Tax

Income, and Shares of Pretax and After-Tax Income for

Elderly Childless Households, by Dollar Income Category,

Using Household Cash Income Plus Taxes Paid by

Businesses, 1979-1997 114

H-4a. Effective Federal Tax Rates for Nonelderly Childless

Households, by Dollar Income Category, Using Household

Cash Income Plus Taxes Paid by Businesses, 1979-1997 116

H-4b. Shares of Federal Tax Liabilities for Nonelderly

Childless Households, by Dollar Income Category,

Using Household Cash Income Plus Taxes Paid by

Businesses, 1979-1997 118
x EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

H-4c. Number of Households, Average Pretax and After-Tax

Income, and Shares of Pretax and After-Tax Income for

Nonelderly Childless Households, by Dollar Income

Category, Using Household Cash Income Plus Taxes

Paid by Businesses, 1979-1997 120

I-1a. Effective Federal Tax Rates for All Families, by Income

Quintile, Using Family Cash Income, 1979-1997 124

I-1b. Shares of Federal Tax Liabilities for All Families, by

Income Quintile, Using Family Cash Income, 1979-1997 126

I-1c. Number of Families, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for All Families, by

Income Quintile, Using Family Cash Income, 1979-1997 128

I-2a. Effective Federal Tax Rates for All Households, by 

Income Quintile, Using Household Cash Income, 

1979-1997 130

I-2b. Shares of Federal Tax Liabilities for All Households,

by Income Quintile, Using Household Cash Income,

1979-1997 132

I-2c. Number of Households, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for All Households, by

Income Quintile, Using Household Cash Income, 

1979-1997 134

I-3a. Effective Federal Tax Rates for All Households, by

Income Quintile, Using Household Cash Income Plus

Taxes Paid by Businesses and Employee Contributions

to 401(k) Retirement Plans, 1979-1997 136

I-3b. Shares of Federal Tax Liabilities for All Households, by

Income Quintile, Using Household Cash Income Plus

Taxes Paid by Businesses and Employee Contributions

to 401(k) Retirement Plans, 1979-1997 138

I-3c. Number of Households, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for All Households, by

Income Quintile, Using Household Cash Income Plus

Taxes Paid by Businesses and Employee Contributions

to 401(k) Retirement Plans, 1979-1997 140
CONTENTS xi

I-4a. Effective Federal Tax Rates for All Households, by

Income Quintile, Using Household Cash Income Plus

Taxes Paid by Businesses, Employee Contributions to

401(k) Retirement Plans, and Nonhealth In-Kind Benefits,

1979-1997 142

I-4b. Shares of Federal Tax Liabilities for All Households, by

Income Quintile, Using Household Cash Income Plus

Taxes Paid by Businesses, Employee Contributions to

401(k) Retirement Plans, and Nonhealth In-Kind Benefits,

1979-1997 144

I-4c. Number of Households, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for All Households, by

Income Quintile, Using Household Cash Income Plus

Taxes Paid by Businesses, Employee Contributions to

401(k) Retirement Plans, and Nonhealth In-Kind Benefits,

1979-1997 146

I-5a. Effective Federal Tax Rates for All Households, by

Income Quintile, Using Comprehensive Household

Income, 1979-1997 148

I-5b. Shares of Federal Tax Liabilities for All Households, by

Income Quintile, Using Comprehensive Household

Income, 1979-1997 150

I-5c. Number of Households, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for All Households, by

Income Quintile, Using Comprehensive Household

Income, 1979-1997 152

I-6a. Effective Federal Tax Rates for All Households, by

Income Quintile, Based on Comprehensive Household

Income Adjusted Using Federal Poverty Thresholds,

1979-1997 154

I-6b. Shares of Federal Tax Liabilities for All Households,

by Income Quintile, Based on Comprehensive Household

Income Adjusted Using Federal Poverty Thresholds,

1979-1997 156

I-6c. Number of Households, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for All Households, by

Income Quintile, Based on Comprehensive Household

Income Adjusted Using Federal Poverty Thresholds,

1979-1997 158
xii EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

I-7a. Effective Federal Tax Rates for All Families, by Income

Quintile, Based on Family Cash Income Plus Taxes Paid

by Businesses, Adjusted Using Federal Poverty

Thresholds, 1979-1997 161

I-7b. Shares of Federal Tax Liabilities for All Families, by

Income Quintile, Based on Family Cash Income Plus

Taxes Paid by Businesses, Adjusted Using Federal

Poverty Thresholds, 1979-1997 163

I-7c. Number of Families, Average Pretax and After-Tax

Income, Shares of Pretax and After-Tax Income, and

Income Category Minimums for All Families, by Income

Quintile, Based on Family Cash Income Plus Taxes Paid

by Businesses, Adjusted Using Federal Poverty

Thresholds, 1979-1997 165

J-1. Federal Individual Income Tax Liabilities and Income

Based on Tax-Return Data, by Adjusted Gross Income,

1995-1999 170

K-1. Total Effective Federal Tax Rates, by Income Quintile,

Using Alternative Measures of Income, 1979-1997 174

FIGURES

S-1. Reduction in Total Effective Federal Tax Rates Between

1979 and 1997, by Income Quintile xv

S-2. Effective Federal Tax Rates, by Revenue Source and

Income Quintile, 1979 and 1997 xvi

S-3. Effective Federal Individual Income and Social

Insurance Tax Rates, by Income Quintile, 1997 xvii

S-4. Percentage Change in Real Pretax Comprehensive

Household Income, by Income Quintile, 1979-1997 xviii

S-5. Shares of Real Pretax Comprehensive Household Income

and Total Federal Tax Liabilities, by Income Quintile,

1979 and 1997 xix

S-6. Total Effective Federal Tax Rates, by Income Quintile,

1979-1997 xx

S-7. Effective Federal Tax Rates, by Revenue Source,

1979-1997 xxi
CONTENTS xiii

1-1. Total Effective Federal Tax Rates, 1979-1997 1

1-2. Total Effective Federal Tax Rates, by Income

Quintile, 1979-1997 2

1-3. Earnings as a Share of Income for Households in

the Lowest Quintile of the Income Distribution, 1979-1997 5

1-4. Capital Gains as a Share of Income for Households in

the Top 1 Percent of the Income Distribution, 1979-1997 6

1-5. Percentage Change from 1979 in Real Pretax

Household Income, by Income Group 7

1-6. Shares of Pretax Household Income, by Income

Group, 1979-1997 7

1-7. Shares of Total Federal Revenues, by Source, 1979-1997 9

1-8. Effective Individual Income Tax Rates, by Income

Group, 1979-1997 10

1-9. Shares of Individual Income Taxes, by Income

Group, 1979-1997 12

1-10. Effective Social Insurance Tax Rates, by Income

Group, 1979-1997 13

1-11. Effective Federal Tax Rates, by Income Quintile

and Revenue Source, 1979-1997 14

1-12. Shares of After-Tax Household Income, by Income

Group, 1979-1997 13

1-13. Effective Tax Rates for Households with Children,

by Revenue Source, 1979-1997 15

1-14. Effective Tax Rates for Elderly Childless Households,

by Revenue Source, 1979-1997 16

1-15. Total Effective Federal Tax Rates, by Income

Category, 1979-1997 18

3-1. Total Effective Federal Tax Rates, by Income

Measure, 1979-1997 38

3-2. Total Effective Federal Tax Rates, by Income

Measure and Quintile, 1979-1997 39
xiv EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

3-3. Effective Federal Tax Rates, by Income Measure

and Revenue Source, 1979-1997 40

3-4. Effective Federal Individual Income Tax Rates,

by Income Measure and Quintile, 1979-1997 41

3-5. Effective Federal Social Insurance Tax Rates,

by Income Measure and Quintile, 1979-1997 42

3-6. Effective Federal Corporate Income Tax Rates,

by Income Measure and Quintile, 1979-1997 43

3-7. Effective Federal Excise Tax Rates, by Income

Measure and Quintile, 1979-1997 44

3-8. Average Real Pretax Income by Income Measure,

1979-1997 45

3-9. Average Real Pretax Income by Income Measure 

and Quintile, 1979-1997 46

C-1. Comparing Total Effective Federal Tax Rates as

Calculated by the Department of the Treasury

and CBO, by Income Quintile, 1997 57

C-2. Comparing Total Effective Federal Tax Rates as

Calculated by the Joint Committee on Taxation

and CBO, by Dollar Income Category, 1997 58

E-1. Total Income in the NIPAs and in CBO’s Equivalent

Measure, 1979-1997 65

BOXES

1-1. Income Mobility 3

1-2. Individual Income Tax Receipts as a Percentage of GDP 8

1-3. Trends in the Individual Income Tax Since 1997 11

3-1. Measures of Income 29
Lowest Second Middle Fourth Highest Lowest Second Middle Fourth Highest

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

Percent

Using Actual Tax Law

for 1997

Using 2000 Tax Law

for 1997

Quintiles Quintiles

Summary and Introduction

The past two decades have witnessed the passage of 15 federal tax bills, the longest peacetime economic expansion in U.S. history, and

major demographic and labor-market shifts. A backward look at the period also reveals substantial

growth of real (inflation-adjusted) pretax household

income, distributed unevenly among income groups.

That higher income, although accompanied by lower

effective tax rates (total taxes as a percentage of total

income) throughout the income distribution, led to

record federal revenues that claimed the largest share

of gross domestic product since World War II. Six

major observations stand out in the analysis of taxes

and incomes reported in this study:

o Between 1979 and 1997, the effective federal

tax rate fell for every quintile, or fifth, of the

income distribution. Had 2000 tax law been in

effect in 1997, the declines in effective rates

would have been even greater (see Summary

Figure 1).

Summary Figure 1.

Reduction in Total Effective Federal Tax Rates Between 1979 and 1997, by Income Quintile

SOURCE: Congressional Budget Office.

NOTES: The effective tax rate equals total tax liabilities (individual income, corporate income, payroll, and excise) as a percentage of total

income.

Quintiles, or fifths, of the income distribution contain equal numbers of people.
xvi EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Lowest

Second

Middle

Fourth

Highest

All Quintiles

Lowest

Second

Middle

Fourth

Highest

All Quintiles

Lowest

Second

Middle

Fourth

Highest

All Quintiles

-10

-5

0

5

10

15

20

Percent

Individual Income Tax

Social Insurance Taxes

Corporate Income Tax

1979

1997

a

o Over the same period, however, the income of

households with the highest income (which

therefore face the highest tax rates) grew substantially faster than the income of other households. As a result, the effective federal tax rate

for all households as a group increased by onehalf of a percentage point, or from 22.3 percent

to 22.8 percent.

o Trends in effective tax rates varied widely

among the major sources of federal revenues.

Social insurance, or payroll, taxes (which finance Social Security, Medicare, and federal

unemployment insurance) claimed a larger

share of income in 1997 than in 1979, and corporate income taxes accounted for a smaller

share. Effective individual income tax rates

changed little overall, but they dropped for the

80 percent of households with the lowest income and rose for the 20 percent with the highest income (see Summary Figure 2).

Summary Figure 2.

Effective Federal Tax Rates, by Revenue Source and Income Quintile, 1979 and 1997

SOURCE: Congressional Budget Office.

NOTES: The effective tax rate equals tax liabilities as a percentage of total income.

Quintiles, or fifths, of the income distribution contain equal numbers of people.

a. Payroll taxes financing Social Security, Medicare, and federal unemployment insurance.
SUMMARY AND INTRODUCTION xvii

Lowest Second Middle Fourth Highest All Quintiles

-10

-5

0

5

10

15

20

25

Individual Income Tax Social Insurance Taxes

Percent

a

o Although revenues from individual income

taxes are nearly 50 percent greater than revenues from social insurance taxes, households in

the bottom 80 percent of the income distribution

on average pay nearly twice as much in payroll

tax as in income tax. In 1997, 9.6 percent of

that group’s income went to payroll taxes, compared with 5.2 percent going to income taxes

(see Summary Figure 3).

o Average real household income before taxes

rose by nearly 30 percent over the 1979-1997

period, but that growth was highly unequal

among quintiles (see Summary Figure 4). The

average income of households in the highest

quintile was more than 50 percent higher in

1997 than in 1979, while that of the bottom fifth

of households was nearly 4 percent lower. Because of substantial movement of households

among quintiles, however, those changes do not

indicate whether particular households became

better or worse off over the period.

o The rapid growth of income at the top of the

distribution sharply increased the highest quintile’s shares of pretax and after-tax income as

well as federal tax liabilities for that group (the

taxes people in the quintile owe). In 1997, the

fifth of households with the highest income

earned 53 percent of total pretax income and

paid 65 percent of federal taxes, up from 46 percent and 57 percent, respectively, in 1979 (see

Summary Figure 5). Again, however, households in the highest quintile in 1997 were not

the same households in that quintile in 1979.

This study examines in detail the effective federal tax rates faced by households in different parts of

the income distribution from 1979 through 1997.

The analysis considers the four largest sources of

federal revenues: individual income taxes, social

insurance taxes, corporate income taxes, and excise

taxes. It does not examine other federal taxes or state

and local taxes. In particular, it omits estate and gift

taxes, in part because of limitations in the data used

Summary Figure 3.

Effective Federal Individual Income and Social Insurance Tax Rates, by Income Quintile, 1997

SOURCE: Congressional Budget Office.

NOTES: The effective tax rate equals tax liabilities as a percentage of total income.

Quintiles, or fifths, of the income distribution contain equal numbers of people.

a. Payroll taxes financing Social Security, Medicare, and federal unemployment insurance.
xviii EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Lowest Second Middle Fourth Highest All Quintiles

-10

0

10

20

30

40

50

60

Percentage Change

in the study that make it hard to allocate taxes among

households and in part because of uncertainty about

whether decedents or heirs bear the burden of those

taxes. The analysis uses specific assumptions about

the incidence of each tax—who actually bears its

cost, which may differ from who nominally pays the

tax to the government. Alternative assumptions

about incidence would generate different findings.

The Congressional Budget Office’s (CBO’s)

work on effective tax rates parallels similar analyses

by the Office of Tax Analysis at the Department of

the Treasury and by the Joint Committee on Taxation. Although each office uses its own assumptions

about the components of income, the incidence of

various federal taxes, and the appropriate unit of

analysis, the results of the different analyses are

roughly comparable (see Appendix C). Nevertheless,

differences among the three methods can reveal information about federal taxes that cannot be seen in

any single study.

Trends in Effective Federal

Tax Rates

Rising real incomes have driven federal tax revenues

upward since 1979. Over the same period, changes

in tax laws first lowered and then raised effective tax

rates. For households as a group, federal taxes

claimed 22.3 percent of income in 1979; that rate fell

Summary Figure 4.

Percentage Change in Real Pretax Comprehensive Household Income, by Income Quintile, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Households are people who share a single housing unit, regardless of the relationships among them. Real pretax comprehensive

household income (which is measured in 1997 dollars) equals cash income plus income from other sources. 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. Other sources of income include the corporate income tax and the employer’s share of Social

Security, Medicare, and federal unemployment insurance payroll taxes as well as all in-kind benefits (Medicare, Medicaid, employerpaid 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 totals.

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.

Quintiles, or fifths, of the income distribution contain equal numbers of people.
SUMMARY AND INTRODUCTION xix

1979

Lowest Second

Middle

Fourth

2% 7%

13%

21% Highest

57%

1997

Lowest Second

Middle

Fourth

1% 6%

11%

18%

Highest

65%

Shares of Real Pretax Comprehensive Household Income

Lowest

Second

Middle

Fourth

1997

4%

9%

14%

20%

Highest

53%

5%

1979

11%

16%

22%

Lowest

Second

Middle

Fourth

46%

Highest

Shares of Total Federal Tax Liabilities

to 20.2 percent in 1983 and then drifted upward to

nearly 23 percent in 1997 (see the far right bars in

Summary Figure 6). If 2000 tax law had applied in

1997, the effective tax rate in that year would have

matched the rate in 1979.

The total effective federal tax rate differs from

taxes calculated as a share of gross domestic product

(GDP) because household income and GDP are not

the same. Each measure includes income from

sources that are not counted by the other.

Summary Figure 5.

Shares of Real Pretax Comprehensive Household Income and Total Federal Tax Liabilities,

by Income Quintile, 1979 and 1997

SOURCE: Congressional Budget Office.

NOTES: Households are people who share a single housing unit, regardless of the relationships among them. Real pretax comprehensive

household income (which is measured in 1997 dollars) equals cash income plus income from other sources. 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. Other sources of income include the corporate income tax and the employer’s share of Social

Security, Medicare, and federal unemployment insurance payroll taxes as well as all in-kind benefits (Medicare, Medicaid, employerpaid 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 totals. Federal tax liabilities include

individual income, corporate income, payroll, and excise taxes.

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.

Quintiles, or fifths, of the income distribution contain equal numbers of people.
xx EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

0

5

10

15

20

25

30

Lowest Middle Second Fourth Highest All

Quintiles

1979 to 1997 1979 to 1997 1979 to 1997 1979 to 1997 1979 to 1997 1979 to 1997

Percent

The small rise in the total effective tax rate,

however, masks significant variation in effective

rates for households at different points in the income

distribution. As noted earlier, every quintile faced an

average rate that was lower in 1997 than in 1979 (see

Summary Figure 6). Households in the lowest quintile experienced the greatest percentage drop, mainly

because the Congress expanded the earned income

tax credit. Nonetheless, households in the top 1 percent of the distribution had the largest percentagepoint fall in effective tax rates—a drop of 4 points,

from 37 percent to 33 percent.

A range of factors has affected tax rates over the

past two decades. The Congress enacted six major

tax bills and many smaller ones, changing both the

rates of particular taxes and the bases subject to those

rates. Income grew strongly but unevenly, with some

income types growing faster than others and a greater

share of total income going to households at the top

of the income distribution than to those at the bottom.

Demographic changes led to more childless households, many of them with elderly members. Because

tax laws treat different kinds of households differently, those changes would have shifted effective tax

rates even if laws and income had stayed the same.

Differences Among Sources of Revenue

Changes in effective tax rates varied among the four

revenue sources examined in this study (see Summary Figure 7). Overall, the effective rate for the

individual income tax first declined and then rose,

returning to the same level in 1997 as it was in 1979.

Households with the lowest income saw their rate

Summary Figure 6.

Total Effective Federal Tax Rates, by Income Quintile, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: The effective tax rate equals total tax liabilities (individual income, corporate income, payroll, and excise) as a percentage of total

income.

Quintiles, or fifths, of the income distribution contain equal numbers of people.

The bars in the figure represent odd-numbered years from 1979 to 1997.
SUMMARY AND INTRODUCTION xxi

0

10

20

30

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

Percent

Total Effective

Federal Tax Rate

Excise Taxes

Corporate Income Tax

Social Insurance Taxes

Individual Income Tax

a

drop the most—by more than 4 percentage points.

Other quintiles also faced lower rates at the end of

the period, except for the top quintile, for which rapidly rising income led to a slightly higher effective

income tax rate. In contrast, the effective rate for

social insurance taxes rose throughout the period,

from just under 7 percent in 1979 to just over 8 percent in 1997. That increase was similar for all quintiles, although it was slightly smaller for the highestincome households.

Although CBO’s database on taxes and income

ends in 1997, information from tax returns suggests

that the share of income going to the top of the distribution and the share of individual income taxes those

households pay both continued to rise rapidly in 1998

and 1999. The data also show that the total effective

rate for the individual income tax fell in 1998, as a

result of the Taxpayer Relief Act of 1997, but resumed its upward trend in 1999.

Higher effective rates for social insurance taxes

and lower effective rates for the individual income

tax meant that payroll taxes exceeded income taxes

for many more households in 1997 than in 1979, even

though income tax revenues were much larger than

payroll tax revenues in both years. In 1979, 56 percent of households with earnings paid more payroll

tax than income tax. By 1997, that percentage had

climbed to 79 percent. Because high-income households paid more than twice as much income tax as

payroll tax, however, total income taxes exceeded

payroll taxes—by about 60 percent in 1979 and by

more than a third in 1997.

The effective rate for the corporate income tax

dropped sharply after 1979 and then climbed gradually to a level in 1997 that was about half a percentage point below the 1979 rate. Because high-income

households bear a disproportionately large share of

the burden of corporate taxes, the decline over the

Summary Figure 7.

Effective Federal Tax Rates, by Revenue Source, 1979-1997

SOURCE: Congressional Budget Office.

NOTE: The effective tax rate equals tax liabilities as a percentage of total income.

a. Payroll taxes financing Social Security, Medicare, and federal unemployment insurance.
xxii EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

whole period affected them more than it did other

households. (CBO allocates corporate taxes and the

employer’s share of social insurance taxes to individuals using generally accepted assumptions about the

incidence of taxes. For further discussion, see Chapter 2.) In contrast, the greatest impact from excise

taxes fell on households in the lowest quintile. Although the effective rate for federal excise taxes was

virtually the same in 1997 as in 1979, it rose for lowincome households and fell for those with higher incomes.

Shares of Income and Taxes

The distribution of income among households grew

substantially more unequal during the 1979-1997 period. The share of pretax income going to the highest

quintile of households climbed from 46 percent in

1979 to 53 percent in 1997, while the share going to

the lowest three quintiles dropped from 32 percent to

27 percent. At the very top of the distribution, the

highest 1 percent of households took home 16 percent of total pretax income in 1997, up from 9 percent in 1979. It is important to note, however, that

substantial movement of households among quintiles

occurred over the period, so the households in a

given quintile in 1997 were not the same households

that had been in that quintile in 1979. (One study, for

example, showed that nearly one-third of individuals

moved into a higher quintile over a 10-year period

while a similar number moved to a lower one; see

Box 1-1 on page 3.) Furthermore, the increasing inequality shown in the declining share of income going to the lowest quintiles does not imply greater

poverty. Average income can grow throughout the

distribution even if relatively greater gains at the top

lead to increased inequality.

The increasing inequality within the income

distribution led to similar shifts in the distribution of

tax liabilities. Households in the highest income

quintile paid 65 percent of the four largest federal

taxes in 1997, up from 57 percent 18 years earlier. In

contrast, households in the bottom three quintiles

paid roughly 17 percent of those taxes. The shares

paid by the different quintiles varied widely among

revenue sources. In 1997, households in the highest

quintile bore 78 percent of individual income taxes,

82 percent of corporate income taxes, 44 percent of

social insurance taxes, and 32 percent of federal excise taxes. In the same year, households in the lowest

three quintiles paid 7 percent, 9 percent, 31 percent,

and 47 percent of those taxes, respectively.

The Nature of the Analysis

The primary focus of this study is effective tax rates.

Those rates vary, depending on the measure of income used to calculate them. (See the comparison of

alternative measures of income in Chapter 3.) The

primary results reported in Chapter 1 are based on

adjusted pretax comprehensive household income.

That measure includes all cash income (both taxable

and tax-exempt), taxes paid by businesses (which are

imputed to individuals on the basis of assumptions

about incidence), employee contributions to 401(k)

retirement plans, and the value of income received in

kind from various sources (including employer-paid

health insurance premiums, Medicare, Medicaid, and

food stamps, among others); CBO then adjusts income for differences in household size. Because that

income measure comprises income from more

sources than are included in alternative measures,

calculations using it yield lower estimates of effective tax rates. Effective tax rates based on other measures of income follow trends similar to those derived

using adjusted comprehensive household income (see

Chapter 3).

The choice of income measure also affects how

households are ranked within the income distribution.

Counting income from more sources moves households with income from those sources up the distribution relative to those not receiving such income.

Households are defined as people who share a single

housing unit, regardless of the relationships among

them. Using households rather than families as the

unit of analysis lifts people in multifamily households up the distribution ahead of some people in

single-family households. And adjusting income to

account for the greater needs of larger households

drops those larger households down the income distribution and consequently pushes smaller households up. The net effect of those differences can be

determined only by comparing the resulting distributions (as Chapter 3 does).
SUMMARY AND INTRODUCTION xxiii

CBO reports most of the results of its analysis

for both the entire population and parts of the income

distribution. Quintiles form the basic groups of interest. However, many tables also include information

on households in the top 10 percent, top 5 percent,

and top 1 percent of the distribution. That breakdown reveals the effects of the disproportionately

rapid growth of income—and hence of tax liabilities

—that has occurred over the past two decades at the

distribution’s top. The analysis does not show a

comparable subdivision of the lowest quintile because effective tax rates and income moved in similar

ways for households in different parts of that income

group.

Quintiles contain equal numbers of people. Because households vary in size, quintiles generally

contain unequal numbers of households. Some statistics are broken down further by type of household:

those with any members under age 18 (households

with children), those headed by a person age 65 or

older and with no member under age 18 (elderly

childless households), and all others (nonelderly

childless households). The income and size of households vary more widely across those three groups

than across all households; that means that the distributions of specific types of households among quintiles are more unequal than the distribution of all

households.

Cautionary Notes

Interpreting trends in tax rates and income based on

the results reported in this study demands caution, for

a number of reasons. First, the study compares income groups over time, showing how effective tax

rates and income have changed for each quintile.

The composition of each quintile changes, however,

from year to year. Over time, people join and leave

households, enter and leave the labor force, and experience other changes that can alter their position in

the income distribution. Trends in tax rates and income that are discussed in this study reflect what has

happened to people in the same parts of the distribution over time, not what has happened to the same

people.

Second, expanding the income measure for calculating effective tax rates to include taxes paid by

businesses, employee contributions to 401(k) plans,

and in-kind benefits makes that measure larger than

what many people think of when they consider their

own income. As a result, it may be difficult for readers to determine their own placement within the reported distributions. Third, adjusting income for the

size of households in order to rank them substantially

reorders those units throughout the income distribution. Consequently, total household income can vary

markedly among households of differing size, even

though they are closely ranked in the distribution.

Statistics based on household cash income that is unadjusted for household size and omits in-kind income

may provide information that is more consistent with

how most people think about their own tax and income situations (see the last section of Chapter 1 and

Appendix H).

A fourth issue involves drawing conclusions

based on overall statistics that mask or even misrepresent information about subgroups or specific taxes.

For example, the total effective federal tax rate can

rise between any two years, even if effective rates for

households in every income quintile fall. If income

grows more rapidly for higher-income households

facing higher tax rates, the total effective rate rises,

even if tax rates do not change for income subgroups.

Fifth, consistent but different statistics may seem to

yield contradictory conclusions if other factors are

not considered. An increase in the share of federal

taxes paid by a given quintile, for example, need not

mean that the quintile’s effective tax rate rose or that

the distribution of after-tax income changed in either

direction. Different rates of income growth among

quintiles can drive results in directions that are not

apparent in particular statistics, such as shares of

taxes paid.

Finally, any choice of a period over which to

assess changes in effective tax rates or incomes is

arbitrary. This study frequently reports the changes

that occurred between 1979 and 1997, the first and

last years for which the data needed for the analysis

are available. Changes over other periods may show

markedly different patterns. For example, between

1979 and 1997, average real pretax comprehensive

income for households in the lowest quintile fell

slightly. In contrast, between 1983 and 1997, that

measure rose by 12 percent. In fact, however, comparing values for 1979 and 1997 may provide a more
xxiv EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

valid comparison, since those years were both high

points in the business cycle whereas 1983 was the

low point of a deep recession. The tables in Appendix G give estimates of tax rates and income for every odd year of the 1979-1997 period and thus allow

an evaluation of changes between any pair of years.

Limitations

The analysis reported in this study focuses on the

effective rates of the four largest federal revenue

sources between 1979 and 1997. Integral to examining those rates is the changing distribution of income

among households over the period. Complementing

the analysis are data showing how the shares of income and tax liabilities for segments of the income

distribution have changed during the past two decades. Values for income, tax liabilities, and shares

appear in Appendixes G, H, and I.

The study’s focus on effective tax rates means

that it is not a comprehensive analysis of the federal

tax system. In particular, it does not examine how

various taxes affect people’s behavior and therefore

does not report the tax rates people face on their last

dollar subject to tax (the marginal rate). Nor does the

study look at the benefits households receive—in the

form of goods, services, and transfer payments—that

are funded by the taxes they pay. For example, the

analysis considers the burden of the Social Security

payroll tax but does not take into account the benefits

that workers who are currently paying the tax will

receive during retirement. The measures of income

that the study uses include government transfers, both

in cash and in kind, but those benefits are not balanced against tax liabilities. The data thus do not

directly reveal any ties between the taxes people pay

and the benefits they receive, even if a direct connection exists. Finally, the study looks only at annual

income and taxes. A better indication of the burden

of taxes on households at different points in the income distribution would cover a longer period—

ideally, each person’s lifetime. That kind of time

frame would remove the effects of year-to-year variations and avoid the problem that information about a

single year might differ markedly from average

values for longer periods. The lack of good longitudinal data, however, precludes such an analysis.
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

5

10

15

20

25

Percent

Chapter One

The Distribution of Effective

Tax Rates and Income

Over the past two decades, rising real incomes

—incomes adjusted for the effects of inflation—have driven federal tax revenues upward while a series of changes in tax laws has first

lowered and then raised effective tax rates (tax liabilities as a percentage of income). Federal taxes

claimed 22.3 percent of household income in 1979;

that rate fell to 20.2 percent in 1983 before climbing

to nearly 23 percent in 1997 (see Figure 1-1).

The small change in the total effective tax rate

over the period masks significant variation among

households at different points in the income distribution.1

 (Households are people who share a single

housing unit, regardless of the relationships among

them.) The average tax rate declined for households

in every income quintile, or fifth, of the distribution,

but the drop was greater for households in the lowest

quintile than for those in the higher quintiles (see

Figure 1-2). Breaking down the top quintile further,

however, reveals that the top 1 percent of households

had the largest percentage-point fall in effective tax

rates, a drop of 4 points (from 37.3 percent to 33.3

percent).

Federal taxes overall and federal income taxes

in particular are progressive: the effective rate rises

with income. Households in the top quintile face an

effective tax rate that is more than five times that of

households in the lowest quintile. Furthermore,

Figure 1-1.

Total Effective Federal Tax Rates, 1979-1997

SOURCE: Congressional Budget Office.

NOTE: The effective tax rate equals total tax liabilities (individual

income, corporate income, payroll, and excise) as a percentage of total income.

progressivity has increased over the past two decades, primarily because the rate faced by households

with the lowest incomes fell by nearly a third with

the expansion in the 1990s of the earned income tax

credit (EITC).2

 Federal taxes help narrow the gap be1. Table G-1a in Appendix G shows total effective federal tax rates for

each quintile and for subdivisions of the highest quintile.

2. Economists use the concept of progressivity in different ways. On

the one hand, progressivity of taxes indicates that effective rates

rise as income increases. On the other hand, progressivity can also

mean that taxes narrow the income gap between households at the
2 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

10

20

30

Percent

Highest Quintile

Fourth Quintile

Middle Quintile

Second Quintile

Lowest Quintile

Figure 1-2.

Total Effective Federal Tax Rates,

by Income Quintile, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: The effective tax rate equals total tax liabilities (individual income, corporate income, payroll, and excise) as a

percentage of total income.

Quintiles, or fifths, of the income distribution contain

equal numbers of people.

tween the incomes of high- and low-income households. The increased progressivity of those taxes,

however, has not offset the rising share of after-tax

income going to the top quintile of households. In

addition, federal payroll and excise taxes are regressive (their effective rate does not increase with income), which offsets some of the progressivity of income taxes.

Effective tax rates provide information that can

be used to evaluate the vertical equity of the federal

tax system (how rates vary as income rises), but they

indicate nothing about horizontal equity (the similarity of rates faced by households with similar incomes). Effective rates for quintiles average the

shares of income going to pay taxes for disparate taxpayers whose tax liabilities (what they owe) may vary

widely. Measuring that variation in rates paid by

households with similar incomes is the only way to

examine the horizontal fairness of federal taxes, an

assessment that is not part of this study.

It is important to keep in mind that people and

households move among income quintiles over time

as both the composition of households and their incomes change (see Box 1-1). Comparing effective

tax rates across years thus says nothing about how

rates have changed for individuals. Rather, the rates

shown over time for a given quintile compare the tax

liabilities of households in that quintile in one year

with those of the different group of households that

make up the quintile in another year. Substantial income mobility, observed in every examination of longitudinal data tracking individuals over time, means

that the composition of quintiles changes from year

to year. It also limits the conclusions that can be

drawn from the analysis reported in this study.

Factors Contributing

to Changes in Effective

Tax Rates

The fall and subsequent rise in the effective rates of

federal taxes over the past 20 years stem from a number of factors. The Congress has enacted multiple

laws that have changed both the bases of the various

federal taxes and the rates applied to them, raising or

lowering revenues and shifting the relative importance of different tax sources. The composition of

income—the percentages ascribable to wages, nonwage income, and capital gains—has changed, as has

the distribution of income among households facing

different tax rates. And demographic shifts have increased the number of elderly, single-parent, and

childless households, all of which face effective tax

rates that differ from those for the shrinking population of married couples with children.

bottom and top of the distribution. Although the meanings are

equivalent for taxes and income at a specific time, they may lead to

different conclusions about whether a change in taxes or income is

progressive.
CHAPTER ONE THE DISTRIBUTION OF EFFECTIVE TAX RATES AND INCOME 3

Box 1-1.

Income Mobility

This study presents a series of biennial snapshots of

household income and taxes from 1979 through

1997 for each fifth—or quintile—of each year’s

income distribution. Because people move among

households and households move among quintiles,

data for each quintile represent the experience of

different people in each year. The Congressional

Budget Office’s analysis thus offers no information

about changes in the income or taxes of particular

people or groups of people over the 18-year period.

In fact, various economic events cause substantial

income mobility: people move up and down the

distribution each year because of career advancement, unemployment, movement into and out of the

labor force, and better or worse returns on their investments. Understanding that mobility requires

longitudinal data that follow the same people over

time. Such data were unavailable for the analysis

reported in this study.

Previous analyses of income mobility confirm

the movement of individuals and families over long

periods. For example, the Department of the Treasury studied a sample of people filing tax returns

every year from 1979 through 1988 and found that

only 14 percent of taxpayers in the lowest quintile

in 1979 were still in that quintile in 1988, while 65

percent of taxpayers in the highest quintile were in

it both years.1

 A study by the Federal Reserve Bank

of Dallas that considered data from the University

of Michigan’s Panel Study of Income Dynamics—a

longitudinal database extending back to the late

1960s—reached similar conclusions by examining

1. U.S. Department of the Treasury, Office of Tax Analysis,

Household Income Mobility During the 1980s: A Statistical

Assessment Based on Tax Return Data (June 1, 1992). Limiting the analysis to people filing tax returns in all 10 years excluded people with the lowest incomes because they are not

required to file tax returns.

people who were in the labor force every year from

1975 through 1991.2

 Both of those studies, however, looked at only part of the population, omitting

significant groups that probably had the most volatile incomes, because of either periods out of the

labor force or events that lowered their incomes below levels that required them to file tax returns.

More representative is an Urban Institute study of

all people appearing in the Michigan data over two

different 10-year periods.3

 That analysis found that

in both the 1970s and 1980s, about half of the people in either the lowest or highest quintile at the beginning of the period were in the same quintile 10

years later.

Income mobility has many causes, perhaps the

most important of which relate to life-cycle movements. Most workers advance over their careers

and see their earnings rise until they near retirement. That natural progression alone generates upward movement through the income distribution.

At the same time, other events such as spells of unemployment, leaving the labor force temporarily to

rear children, and retirement can move people down

the distribution. Changes in living arrangements

can also have different effects. Marriage can move

people up the distribution whereas divorce can

move them down; a child who leaves her parents’

home may drop into a lower quintile while her parents move up. Only careful analysis that disentangles the multiple factors driving income mobility

can determine the significance of people’s observed

movement among quintiles.

2. W. Michael Cox and Richard Alm, By Our Own Bootstraps:

Economic Opportunity and the Dynamics of Income Distribution, Federal Reserve Bank of Dallas (1995). Because it excluded people who reported being out of the labor force in any

year, the study omitted many people with the greatest income

volatility.

3. Isabel V. Sawhill and Mark Condon, “Is U.S. Income Inequality

Really Growing?” Policy Bites, Urban Institute (June 1992),

pp. 1-4.
4 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Changes in Tax Law

The Congress has enacted 15 tax bills since 1979, 11

of which boosted revenues.3

 Those laws shifted the

relative amounts of revenue raised by different taxes

as well as the distribution of each tax among households. Some of the legislation focused on corporate

and excise taxes; six of the laws made major changes

in individual income and social insurance taxes,

which together account for about five-sixths of all

federal revenues.4

 Those six laws and their important

features include the following:

o The Economic Recovery Tax Act of 1981

(ERTA) cut individual income tax rates by a

cumulative 25 percent over three years, dropping the top rate from 70 percent to 50 percent.5

ERTA also indexed tax brackets for inflation,

reducing the bracket “creep” that subjected taxpayers to ever higher rates as their income rose

to keep pace with higher prices. Firms benefited from increases in accelerated depreciation

and provisions for so-called safe-harbor leasing,

which allow corporations with tax deductions

they cannot use to transfer those deductions to

other corporations that can.6

o The Social Security Amendments of 1983 sped

up scheduled social insurance tax increases,

thus raising revenues in 1984, 1988, and 1989.

The amendments also set those tax rates for

self-employed people equal to the combined

employer-employee taxes for other workers.

The law made some Social Security benefits

subject to income tax for the first time, assigning all revenues from that tax to the Social Security trust funds.

o The Tax Reform Act of 1986 (TRA-86) made

major changes in the tax base and tax rates for

the individual income tax. Under the law, many

deductions and exclusions were limited or eliminated. In addition, the number of rate brackets

was collapsed from 14 to two, and prior statutory rates that had ranged as high as 50 percent

were cut to 15 percent and 28 percent. (Some

taxpayers were subject to a marginal rate of 33

percent as the benefits of the 15 percent rate and

exemptions were phased out.) TRA-86 also

increased the levels of the personal exemption

and the standard deduction. The act further

changed the taxation of capital gains: it removed the 60 percent deduction and made all

gains subject to ordinary tax rates, thus making

the maximum rate on long-term gains for top

income earners 28 percent. The law increased

the amount of the EITC and indexed the credit

for inflation. Finally, the structure of the current law’s alternative minimum tax (AMT) was

established by TRA-86. (However, subsequent

legislation changed the AMT’s rates.)

o The Omnibus Budget Reconciliation Act of 1990

expanded the EITC and raised the top individual

income tax rate to 31 percent. The maximum

statutory rate on long-term capital gains remained at 28 percent. The law also instituted a

phaseout of exemptions and limited itemized

deductions for upper-income taxpayers. A further provision removed the cap on earnings subject to taxation for Medicare.

o The Omnibus Budget Reconciliation Act of 1993

added two new tax brackets—36 percent and

39.6 percent—for high-income taxpayers. In

addition, it raised the EITC further for families

with children and extended the credit to childless taxpayers. The cap on wage income subject

to the health insurance payroll tax was removed,

thus increasing payroll taxes on high-income

workers. The law also increased to 85 percent

the percentage of Social Security benefits subject to income taxes for high-income taxpayers.

o The Taxpayer Relief Act of 1997 (TRA-97) established a tax credit of $500 for each dependent child under age 17, created education tax

credits for postsecondary school costs, made

3. See U.S. Treasury, Revenue Effects of Major Tax Bills, Working

Paper 81 (December 1998).

4. Social insurance taxes—also referred to as payroll taxes—are those

revenues that finance Social Security, Medicare, and federal unemployment insurance.

5. A maximum rate of 50 percent already applied to earnings; ERTA

extended it to other sources of income.

6. The Tax Equity and Fiscal Responsibility Act of 1982 in part reversed both of those provisions. It also raised individual income

taxes with provisions affecting itemized deductions.
CHAPTER ONE THE DISTRIBUTION OF EFFECTIVE TAX RATES AND INCOME 5

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

10

20

30

40

50 Percentage of Total Income

interest on student loans deductible, and reduced the tax rate on long-term capital gains.

These and other changes in tax law during the 20-

year period also affected the level of corporate taxes

as well as the level and mix of excise taxes and are

thus reflected in the effective tax rates for those two

sources of revenue as well.

Changes in tax law influence the effective rate

in two ways. Most directly and most obviously, they

affect the taxes people pay. But they also affect the

behavior of households and corporations, influencing

both how much income taxpayers receive and the

form in which they receive it. For example, a reduction in the tax on capital gains may induce people to

realize more gains and, consequently, have more reported income. The effective tax rates shown in this

study derive from income reported and taxes paid in

each year and therefore reflect both current tax laws

and transitory effects caused by anticipated changes

in the tax code.

In combination, changes in tax law since 1979

have first lowered effective individual income tax

rates and then, for high-income taxpayers, moved

them back up. Expansions of the EITC sharply lowered income tax rates for low-income working households, but higher social insurance taxes offset some

of those gains. In addition, removing the cap on

wages subject to health insurance taxes increased

payroll taxes for high-income taxpayers.

The Changing Composition of Income

The federal government imposes different taxes on

the various forms of income that taxpayers receive.

Wage and salary and self-employment income face

both income and social insurance taxes; in contrast,

investment income is not subject to social insurance

levies. Through most of the period of this analysis,

realizations of capital gains received favored tax

treatment, with maximum rates below those on ordinary income.

How the composition of income influences effective tax rates can be seen by considering changes

in that composition for the lowest quintile of the income distribution. For those households, the effective social insurance tax rate fell from 7.2 percent in

1989 to 6.8 percent in 1993 before rising to 7.2 percent in 1995 and 7.4 percent in 1997. That pattern

resulted directly from the fall and subsequent rise

over that period in the share of income that came

from earnings and was thus subject to the payroll tax

(see Figure 1-3).

In general, the composition of income does not

affect the individual income tax since most forms of

income receive the same tax treatment. For most of

the 1979-1997 period, however, the tax rate on realizations of long-term capital gains differed from the

rate on income from other sources. Before 1987,

Figure 1-3.

Earnings as a Share of Income for Households

in the Lowest Quintile of the Income

Distribution, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Quintiles, or fifths, of the income distribution contain

equal numbers of people.

Households are people who share a single housing unit,

regardless of the relationships among them. Household

income (which is measured in 1997 dollars) is the sum

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

gains, cash transfer payments, and retirement benefits.

Income also includes the corporate income tax and the

employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes as well as all

in-kind benefits (Medicare, Medicaid, employer-paid

health insurance premiums, food stamps, school

lunches and breakfasts, housing assistance, and energy

assistance).
6 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

10

20

30

40 Percentage of Total Income

Figure 1-4.

Capital Gains as a Share of Income for

Households in the Top 1 Percent of the

Income Distribution, 1979-1997

SOURCE: Congressional Budget Office.

NOTE: Households are people who share a single housing unit,

regardless of the relationships among them. Household

income (which is measured in 1997 dollars) is the sum of

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

and nontaxable interest, dividends, realized capital gains,

cash transfer payments, and retirement benefits. Income

also includes the corporate income tax and the employer’s share of Social Security, Medicare, and federal

unemployment insurance payroll taxes as well as all inkind benefits (Medicare, Medicaid, employer-paid health

insurance premiums, food stamps, school lunches and

breakfasts, housing assistance, and energy assistance).

those gains faced the same rate as did other income,

but the tax applied to only 40 percent of them. Between 1987 and 1990, the same tax rate applied to

both gains and income from other sources. Since

1990, the maximum tax rate for long-term gains has

been below the highest rates on other income. That

maximum was 28 percent through 1996 and 20 percent since 1997.7

The difference between the tax rate on gains and

the rate on other income has the greatest impact on

the effective tax rate for households at the top of the

income distribution. For those households, realized

capital gains are a relatively large share of income,

and the tax rate on the last dollar of income from

sources other than capital gains is highest, at 39.6

percent. Furthermore, because taxpayers can decide

when to sell assets and realize gains, they have considerable control over the amount of gains they realize and therefore over the share of their income coming from those gains. Any change in that share affects the effective tax rate those households face.

Capital gains make up a large and highly variable share of income for households in the top 1 percent of the income distribution (see Figure 1-4).8

 For

example, between 1995 and 1997, income from capital gains and income from other sources both grew

rapidly for that income group. The growth in gains

far outpaced its counterpart, however, pushing up the

gains share of total income from 21 percent to 28 percent. Meanwhile, TRA-97 cut the maximum tax rate

on gains from 28 percent in 1995 to 20 percent in

1997. The higher share of income from capital gains

and the reduced tax rate applicable to them offset a

higher effective tax rate on income from other

sources, causing most of the decline—from 23.4 percent in 1995 to 23.0 percent in 1997—in the effective

individual income tax rate for the top 1 percent of

households. Of course, some of the rise in realized

gains stemmed from the lower rate.

The Changing Distribution 

of Pretax Income

Average household income before taxes grew in real

terms by nearly one-third between 1979 and 1997,

but that growth was shared unevenly across the income distribution (see Figure 1-5). The average income for households in the top fifth of the distribution rose by more than half. In contrast, average income for the middle quintile climbed 10 percent and

that for the lowest fifth dropped slightly. Furthermore, income growth at the very top of the distribution was greater yet: average income in 1997 dollars

7. The new, lower rate applies to gains realized after May 6, 1997.

TRA-97 also established a 10 percent tax rate on gains realized by

taxpayers in the 15 percent bracket, as well as lower rates after

2000 for gains on assets held for at least five years.

8. Many factors affect the share of income from capital gains. Its

growth in recent years, for example, came in large part from rapid

increases in the prices of common stocks. The large fall in the

share in 1987 came directly as a result of the increase in the tax rate

on capital gains that was enacted as part of TRA-86.
CHAPTER ONE THE DISTRIBUTION OF EFFECTIVE TAX RATES AND INCOME 7

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

20

40

60

80

100

Percent

Next 10 Percent

Fourth Quintile

Middle Quintile

Second Quintile

Lowest Quintile

Next 5 Percent

Next 4 Percent

Top 1 Percent of Income Distribution

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

-40

0

40

80

120

160 Percentage Change

Highest Quintile

Top 1 Percent of

Income Distribution

Middle Quintile

All Quintiles

Lowest Quintilea

Figure 1-5.

Percentage Change from 1979 in Real Pretax

Household Income, by Income Group

SOURCE: Congressional Budget Office.

NOTES: Quintiles, or fifths, of the income distribution contain

equal numbers of people.

Households are people who share a single housing unit,

regardless of the relationships among them. Real pretax

household income (which is measured in 1997 dollars) is

the sum of wages, salaries, self-employment income,

rents, taxable and nontaxable interest, dividends, realized capital gains, cash transfer payments, and retirement benefits. Income also includes the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll

taxes as well as all in-kind benefits (Medicare, Medicaid,

employer-paid health insurance premiums, food stamps,

school lunches and breakfasts, housing assistance, and

energy assistance).

a. Excludes households with negative incomes.

for the top 1 percent of households more than doubled, rising from $420,000 in 1979 to more than $1

million in 1997.

The uneven gains in income generated sharp

changes in the shares of pretax income going to each

fifth of the income distribution (see Figure 1-6). The

share received by the highest quintile climbed from

46 percent in 1979 to 53 percent in 1997, while the

share for the lowest quintile fell from 5 percent to

4 percent. Households in the top 1 percent saw their

share of total income rise by more than two-thirds,

growing from 9 percent to nearly 16 percent.

Because high-income taxpayers face effective

tax rates that are much higher than the rates for other

households, the rapid rise in their income has generated more than a proportional increase in federal tax

revenues. In turn, that increase has driven up the

total effective tax rate faster than the growth in income. The unequal income growth also helps explain

the near-record share of gross domestic product

(GDP) claimed by federal taxes despite virtually no

increase in effective tax rates for any quintile. (Box

1-2 separates out the factors leading to changes in the

share of GDP claimed by taxes.)

Figure 1-6.

Shares of Pretax Household Income, by Income

Group, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Quintiles, or fifths, of the income distribution contain

equal numbers of people.

Households are people who share a single housing unit,

regardless of the relationships among them. Pretax

household income is the sum of wages, salaries, selfemployment income, rents, taxable and nontaxable interest, dividends, realized capital gains, cash transfer

payments, and retirement benefits. Income also includes the corporate income tax and the employer’s

share of Social Security, Medicare, and federal unemployment insurance payroll taxes as well as all in-kind

benefits (Medicare, Medicaid, employer-paid health insurance premiums, food stamps, school lunches and

breakfasts, housing assistance, and energy assistance).
8 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

14

16

18

20

Percentage of GDP

Box 1-2.

Individual Income Tax Receipts as a Percentage of GDP

Statistics on federal taxes often measure revenues not as a

share of household income but rather as a percentage of

gross domestic product, or GDP (see the figure below). Because of significant conceptual differences between GDP

and household income, the effective tax rates discussed in

this study can differ substantially from the percentage of

GDP that goes toward taxes. Deviation of the two measures

can therefore appear to indicate different trends.

Total Revenues as a Share of GDP,

Fiscal Years 1979-1997

SOURCE: Congressional Budget Office.

During the late 1990s, federal revenues grew faster

than GDP, pushing up the share of GDP claimed by taxes

from 18.1 percent in 1995 to 19.9 percent in 1998, a postWorld War II high. Two-thirds of that growth came from

rising individual income tax receipts, which climbed from

7.8 percent of GDP to 9.0 percent.1

Three factors explain the faster growth—relative to

GDP—of individual income tax receipts over that period

(see the table below). First, taxable personal income (TPI)

in the national income and product accounts rose more rapidly than national income, accounting for one-fifth of the

increased growth. Second, adjusted gross income (AGI)

increased by more than TPI did. That rapid growth, mostly

due to skyrocketing capital gains realizations, explains more

than one-third of the excess. Third, the effective tax rate on

AGI rose, in part because real (inflation-adjusted) income

growth pushed taxpayers into higher tax brackets and in part

because a greater share of AGI went to high-income taxpayers, who face the highest tax rates. (Box 1-3 on page 11

shows recent changes in effective tax rates measured as a

percentage of AGI.) Nearly half of the growth in individual

income tax liabilities in excess of growth in GDP resulted

from the higher effective tax rate. Note that the measure of

effective tax rates used to assess that effect—taxes as a percentage of AGI—differs from the broader measure used

throughout this analysis. The two measures moved in similar ways over the period, however.2

1. Some of the increase has taken place since 1997 and is therefore

not reflected in the effective tax rates discussed in this study.

Note that taxes claimed an even larger share of GDP in 1999

and 2000, but data are not yet available for those years to conduct the kind of analysis reported here.

2. Table G-1c in Appendix G shows changes since 1979 in the

shares of pretax income going to households in different quintiles of the income distribution.

Growth of Individual Income Tax Liabilities in Excess of Growth of GDP, by Source, 1995-1998 (In percent)

Source of Growth of Tax Liabilities 1995 1996 1997 1998a

Total,

1995-1998a

Taxable Personal Income (TPI) Grew Faster than GDP 21 12 14 33 20

Adjusted Gross Income (AGI) Grew Faster than TPI

Capital gains taxes grew faster than TPI 21 52 30 15 30

Other AGI grew faster than TPI 14 4 9 2 6

Changes in the Effective Tax Rate on AGIb 44 32 47 50 44

Total 100 100 100 100 100

Memorandum:

Growth of Individual Income Tax Liabilities in

Excess of Growth of GDP (Billions of dollars) 27 39 35 40 141

SOURCE: Congressional Budget Office using data from the Internal Revenue Service’s Statistics of Income for 1995 through 1998.

a. The estimates of 1998 tax liabilities do not include the child and education credits enacted in the Taxpayer Relief Act of 1997.

b. The effective tax rate on AGI differs from the broader measure of effective tax rates used in this study. AGI excludes significant amounts of income

counted under the broader measure.
CHAPTER ONE THE DISTRIBUTION OF EFFECTIVE TAX RATES AND INCOME 9

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

20

40

60

80

100 Percent

 Individual Income Tax Corporate Income Tax 

 Social Insurance Taxes Excise Taxes Other Taxes a

Demographic Changes

In 1979, households with children (at least one member under age 18) and nonelderly childless households (headed by a person under age 65 and with no

member younger than age 18) each represented twofifths of all households; elderly childless households

(headed by a person age 65 or older and with no

member younger than age 18) made up the remaining

fifth. The elderly share changed little over the subsequent two decades, but the fraction composed of

households with children dropped 10 percent to just

over one-third of all households. Nonelderly childless households grew in number to make up the difference. Furthermore, within the declining share of

households with children, the fraction headed by single parents climbed from one-fifth to more than onequarter.

Those demographic shifts have affected federal

tax revenues in two ways. First, because nonelderly

childless households have higher average incomes

than other households, the relative growth of that

group increased total household income more than

would otherwise have been the case, driving revenues

upward. Second, elderly taxpayers and those with

children receive more favorable income tax treatment

than nonelderly households without children. Social

Security benefits, for example, are taxed only for recipients with incomes above $25,000 ($32,000 for

joint filers), and even then, part of the benefits are

exempt. Moreover, because elderly taxpayers are

less likely to have earnings, most of them owe no

payroll taxes. Low-income working families with

children are favored under the EITC: they qualify for

a much more generous credit than do childless taxpayers. In addition, households with children can

generally claim more dependent exemptions than

other households can, and all but those with the highest income may claim tax credits of $500 per child.

Changing Sources 

of Federal Revenues

The distribution of federal taxes among taxpayers

depends in part on the relative importance of the four

major sources of federal revenues: individual and

Figure 1-7.

Shares of Total Federal Revenues,

by Source, 1979-1997

SOURCE: Congressional Budget Office.

a. Payroll taxes financing Social Security, Medicare, and federal

unemployment insurance.

corporate income taxes, social insurance taxes, and

excise taxes. Corporate taxes fall more heavily on

taxpayers at the top of the income distribution, social

insurance taxes claim a larger share of middle-class

income, and excise levies disproportionately affect

low-income households.9

 Over the past 20 years, the

shares of federal revenues coming from those sources

have varied widely (see Figure 1-7).

The share of revenues from individual income

taxes trended downward during the late 1980s, partly

as a result of the cuts in rates and indexation of

brackets and other parameters enacted in the Economic Recovery Tax Act of 1981 and partly because

of rising payroll tax rates. Only with the steep climb

in incomes since 1995 and rate increases in 1990 and

1993 has the fraction of revenues from that source

returned to the levels of the early 1980s. In fiscal

9. The Congressional Budget Office allocates corporate taxes and the

employer’s share of social insurance taxes to individuals using generally accepted assumptions about the incidence of taxes. For further discussion, see Chapter 2.
10 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

-10

0

10

20

30

Percent

Middle Quintile

Lowest Quintile

All Income Groups

Highest Quintile

Top 1 Percent of

Income Distribution

year 2001, individual income taxes will provide fully

half of all federal revenues.

Corporate income taxes fell sharply as a share

of federal revenues in the early 1980s as the economy

dipped into a deep recession. Between 1983 and

1997, the trend reversed: corporate profits rebounded, and the corporate income tax share of revenues nearly doubled. Interrupted only by the short

recession in 1990, the growth of revenues from those

taxes reflects the rise in corporate profits, which

climbed from 7 percent of GDP in 1983 to 10 percent

in 1997. In fiscal year 2001, corporate taxes will

make up about one-tenth of federal revenues.

 Social insurance levies will provide roughly a

third of all federal revenues in fiscal year 2001. The

legislated increases in tax rates during the early

1980s raised the share of revenues from that source

by more than a fifth, to nearly 38 percent in 1992.

That share has drifted downward since then as a result of the extraordinary climb in income taxes.

The share of revenues coming from excise taxes

declined steadily over the 18-year period, dropping

from its high of nearly 7 percent in 1981 to less than

half that level in fiscal year 2001. Much of the drop

results from levies that are set not as a percentage of

the price of a good but rather as a fixed dollar amount

per unit sold.

Effective Tax Rates

The slight rise in the total effective federal tax rate

for all households between 1979 and 1997 hides the

decline in that measure for each quintile of the income distribution. It also hides the substantially different changes in effective rates for the four sources

of revenue. Changes in the total effective tax rate

reflect both the shifting distribution of income among

quintiles and legislation affecting specific taxes. To

understand those changes thus requires an examination of each source of revenue.

Individual Income Taxes

The effective rate of the individual income tax for all

households dipped during the 1980s before returning

to essentially the same level in 1997 as it had reached

in 1979 (see Figure 1-8). That lack of change over

the period reflected a drop of nearly 5 percentage

points (to -5.0 percent) for the lowest fifth of households, a decline of at least 1.5 percentage points for

each of the middle three quintiles, and a slight rise

for households with the highest incomes. Trends in

effective rates during the 1990s that moved downward for low-income households and upward for

those with high incomes stemmed in part from expansion of the EITC, in part from new tax brackets with

higher rates, and in part from the rapid growth of income at the top of the distribution that pushed more

income into the highest tax brackets. Although fully

comparable data do not exist for the years since 1997,

information from tax returns indicates that the diverging trends in rates have continued at least through

1999 (see Box 1-3).

The dramatic shift of pretax income toward the

top quintile—its share increased from 46 percent to

53 percent over the period—joined with reductions in

Figure 1-8.

Effective Individual Income Tax Rates, 

by Income Group, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: The effective tax rate equals individual income tax liabilities as a percentage of total income.

Quintiles, or fifths, of the income distribution contain

equal numbers of people.
CHAPTER ONE THE DISTRIBUTION OF EFFECTIVE TAX RATES AND INCOME 11

1995 1996 1997 1998 1999

0

10

20

30

40

50

Percent

Share of Federal Individual Income 

Taxes Paid by High-Income Taxpayers

Share of AGI

of High-Income Taxpayers

Box 1-3.

Trends in the Individual Income Tax Since 1997

The Congressional Budget Office’s database on effective tax rates currently ends in 1997. Preliminary data

on individual income tax liabilities are available from

tax returns through 1999. The statistics from tax returns differ in three ways from other data reported in

this study. First, they cover only the tax-filing population and thus exclude people with very low taxable

income. Second, the unit of analysis is the tax return,

not the household, which means that the average income per unit is lower than that for the more aggregated household measure. Third, the income measure

used is adjusted gross income (AGI) reported on tax

returns, a less comprehensive yardstick than those

used for the study’s estimates of effective tax rates.

Furthermore, small changes in the definition of AGI

over the three-year period (such as the new deduction

for interest on student loans effective in 1998) reduce

the comparability of the data. Nonetheless, the taxreturn data offer indications about recent trends in

effective tax rates and changes in the distribution of

income and taxes.

Recent tax data show that the effective federal income tax rate on AGI fell from 14.2 percent in

1997 to 14.0 percent in 1998 (see the table below).

Lower individual income tax rates resulting from the

Taxpayer Relief Act of 1997 explain much of the

drop. That law reduced capital gains tax rates and

introduced credits for children and for the costs of

higher education. Because the lower tax rate affected

only some 1997 capital gains, most of the change between 1997 and 1998 came from the new child and

education credits. Households throughout the income

distribution shared in the tax savings as the effective

tax rate fell for all three broad classes of AGI.

Preliminary data for 1999 show an increase in

the overall effective individual income tax rate, to

14.6 percent. The lower two income groups shown in

the table experienced little change in tax rates between

1998 and 1999, but taxpayers with income above

$200,000 saw their tax rate rise from 26.2 percent to

27.0 percent (because more of their income was taxed

at higher rates).

Tax-Return Data on Shares of Adjusted Gross

Income and Taxes for High-Income Taxpayers

(More Than $200,000 of AGI), 1995-1999

Effective Individual Income Tax Rates

Based on Tax-Return Data, 1997-1999 (In percent)

SOURCE: Congressional Budget Office based on data from the

Internal Revenue Service’s Statistics of Income (1995

through 1998) and its master file (1999).

The tax data through 1999 also show continued

growth in the shares of income and taxes reported on

high-income returns (see the figure above). The share

of AGI going to taxpayers with income above

$200,000 rose from 16 percent in 1995 to 24 percent

in 1999. Over the same period, the fraction of individual income taxes paid by that group climbed from

34 percent to 45 percent. Note, however, that the

share of taxpayers with AGI over $200,000 rose

sharply, increasing from 1.3 percent in 1995 to 1.9

percent in 1999. (Appendix J contains additional data

from tax returns for 1995 through 1999.)

Adjusted Gross Income

(1999 dollars) 1997 1998 1999

Under $50,000 6.3 5.7 5.7

$50,000 to $200,000 14.3 13.9 14.0

$200,000 and Over 27.0 26.2 27.0

Overall Rate 14.2 14.0 14.6

SOURCE: Congressional Budget Office based on the Internal

Revenue Service’s Statistics of Income (1997 and

1998) and its master file (1999).

NOTE: Individual income tax totals are net of the refundable

earned income tax credit. Effective rates are calculated by

dividing individual income taxes by AGI.
12 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

20

40

60

80

100

120 Percent

Next 10 Percent

Fourth Quintile

Second Quintile Middle Quintile

Next 5 Percent

Next 4 Percent

Top 1 Percent of Income Distribution

Figure 1-9.

Shares of Individual Income Taxes,

by Income Group, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Quintiles, or fifths, of the income distribution contain

equal numbers of people.

The share of taxes paid by the lowest quintile is less

than zero and is not shown.

rates to shift the burden of individual income taxes

onto the highest-income households. The top quintile

of households paid 78 percent of total individual income taxes in 1997, up from 66 percent 18 years earlier (see Figure 1-9). The top 1 percent of households bore the bulk of that change: their share rose

from 19 percent to 33 percent over the interval.

Social Insurance Taxes

The effective social insurance tax rate climbed

steadily over most of the past two decades, rising

from 6.8 percent in 1979 to 8.6 percent in 1995, as

the Congress pushed up levies to improve the longrun stability of Social Security and Medicare (see

Figure 1-10). The rate settled slightly lower in 1997

only because more income went to the highestincome households, for whom the cap on Social Security taxes limited their exposure.10 Over the entire

period, the effective tax rate rose for every quintile,

with the largest rate of increase affecting households

with the lowest incomes.11

Corporate Income Taxes

Between 1979 and 1997, the effective rate for the

corporate income tax first declined by nearly half and

then rose to a level that was half a percentage point

below its level in 1979. The principal cause of that

trend was the fall and subsequent rise of corporate

profits.12 Households at every income level experienced a drop in their effective corporate income tax

rate, but the magnitude of the decline differed, depending on the share of their income coming from

capital (interest, dividends, rent, and capital gains).

Furthermore, because capital income goes disproportionately to the wealthiest households, the tax is

highly progressive. At the same time, the effective

tax rate dropped proportionately more for households

at the top of the income distribution than for households with lower incomes, making the tax less progressive in 1997 than it was in 1979.

Excise Taxes

Over the past two decades, despite legislated increases in statutory rates, excise taxes have claimed a

nearly constant share of income—at or just under 1

percent.13 That virtual lack of change in effective

rates, however, obscures markedly different effects

within different income categories. The lowest

quintile first saw excise taxes dip from 2.1 percent of

their income in 1979 to 1.6 percent in 1981 and then

climb to 2.8 percent in 1997. In contrast, the quintile

with the highest incomes experienced a drop in the

effective rate from 0.7 percent to 0.5 percent over the

same period. The overall effect was to make a regressive tax even more regressive: excise taxes

10. Taxes for Old-Age, Survivors, and Disability Insurance are levied

on earnings up to a maximum amount, which is set at $80,400 in

2001. Earnings above that limit are subject only to the Medicare

payroll tax.

11. Social insurance taxes finance specific transfer programs. It is

therefore difficult to evaluate those taxes without considering the

distribution of the benefits they pay for. That sort of evaluation,

however, is beyond the scope of this study.

12. Table G-1a shows the effective corporate tax rate by income

quintile for the 1979-1997 period.

13. Table G-1a shows the effective federal excise tax rate by income

quintile for the 1979-1997 period.
CHAPTER ONE THE DISTRIBUTION OF EFFECTIVE TAX RATES AND INCOME 13

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

2

4

6

8

10

12

Percent

Highest Quintile

Top 1 Percent of

Income Distribution

Middle Quintile

All Income Groups

Lowest Quintile

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

20

40

60

80

100

Percent

Next 10 Percent

Fourth Quintile

Middle Quintile

Second Quintile

Lowest Quintile

Next 5 Percent

Next 4 Percent

Top 1 Percent of Income Distribution

Figure 1-10.

Effective Social Insurance Tax Rates,

by Income Group, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Social insurance, or payroll, taxes finance Social Security, Medicare, and federal unemployment insurance.

The effective tax rate equals social insurance tax liabilities as a percentage of total income.

Quintiles, or fifths, of the income distribution contain

equal numbers of people.

claimed five times the share of income from the

lowest-income households that they claimed from the

highest-income households. However, to the extent

that one intent of imposing excise taxes is to reduce

the consumption of particular goods, that regressivity

may be viewed as less onerous.

Composition of Changes 

in Effective Tax Rates

The overall trends in effective federal tax rates derive

from widely differing changes for the various income

quintiles in the effective rates of the four major revenue sources (see Figure 1-11 on page 14). Rapid expansion of the EITC in the 1990s cut individual income tax rates sharply for households in the lowest

quintile, more than offsetting significant increases in

social insurance and excise tax rates. For the middle

quintile, rising social insurance taxes roughly balanced the fall in individual income taxes, and the decline in corporate income taxes accounted for virtually all of the drop in households’ overall effective

tax rate. In contrast, the top quintile saw the combination of individual income and social insurance tax

rates rise by about the same amount as corporate income and excise tax rates decreased, leaving the total

effective federal tax rate for those households almost

the same in 1997 as it had been in 1979.

The Distribution 

of After-Tax Income

The overall progressivity of federal taxes yields a

distribution of after-tax income that is more equal

than that of pretax income (see Figure 1-12). The

decline in effective tax rates for low-income households since 1979 would have narrowed the gap beFigure 1-12.

Shares of After-Tax Household Income,

by Income Group, 1979-1997

SOURCE: Congressional Budget Office.

NOTE: Households are people who share a single housing unit,

regardless of the relationships among them. After-tax

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

dividends, realized capital gains, cash transfer payments,

retirement benefits, and in-kind benefits (Medicare,

Medicaid, employer-paid health insurance premiums, food

stamps, school lunches and breakfasts, housing assistance, and energy assistance) minus individual income

taxes, excise taxes, and the employee’s share of payroll

taxes.
14 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

-10

0

10

20

30

Percent

Excise Taxes

Total Effective

Federal Tax Rate

Lowest Quintile

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

-10

0

10

20

30

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

-10

0

10

20

30

Corporate Income Tax

Individual Income Taxa

Social Insurance Taxesb

Percent Middle Quintile

Social Insurance Taxesb

Individual Income Tax

Total Effective

Federal Tax Rate

Corporate Income Tax

Excise Taxes

Percent Highest Quintile

Excise Taxes

Corporate Income Tax

Social Insurance Taxesb

Individual Income Tax

Total Effective

Federal Tax Rate

Figure 1-11.

Effective Federal Tax Rates, by Income Quintile and Revenue Source, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: The effective tax rate equals tax liabilities as a percentage of total income.

Quintiles, or fifths, of the income distribution contain equal numbers of people.

a. For the lowest quintile, the effective individual income tax rate is negative in most years.

b. Social insurance, or payroll, taxes fund Social Security, Medicare, and federal unemployment insurance.
CHAPTER ONE THE DISTRIBUTION OF EFFECTIVE TAX RATES AND INCOME 15

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

5

10

15

20

25

Percent

 Individual Income Tax 

Corporate Income Tax Excise Taxes 

 Social Insurance Taxes a

tween the incomes of high- and low-income households, had incomes themselves not grown disproportionately rapidly for those at the top of the income

distribution. Income growth, however, dominated

any changes in tax law in determining the rising inequality in the distribution of after-tax income.

In 1979, the share of total after-tax income going to the highest quintile was less than seven times

the share going to the lowest quintile; by 1997, the

multiple exceeded 10. In both years, that multiple

was about one-fourth larger before taxes than after,

indicating little change in the effect of federal taxes

in leveling the income distribution. Nonetheless, that

reduction itself shows the amount of redistribution

brought about by taxes.

Effective Federal Tax Rates

for Different Types of 

Households

Overall effective federal tax rates faced by various

types of households changed differentially between

1979 and 1997. Households with children saw taxes

take a larger bite out of their pretax income at the end

of the period compared with the early years.14 The

reverse held true for households with elderly members. Nonelderly childless households experienced

virtually no change in their federal tax rate over the

two decades. Those overall trends, however, conceal

significant differences in the rates of the four major

taxes, the growth of income for the three types of

households, and the effective tax rates faced by

households in different parts of the income distribution.

Households with Children

As a group, households with children experienced a

rise in their effective federal tax rate between 1979

Figure 1-13.

Effective Tax Rates for Households with

Children, by Revenue Source, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: The effective tax rate equals tax liabilities as a percentage of total income.

A household consists of the people who share a housing

unit, regardless of their relationships. A household with

children has at least one member under age 18.

a. Payroll taxes financing Social Security, Medicare, and federal

unemployment insurance.

and 1997 of 1.4 percentage points, almost entirely the

result of a larger share of their income going for social insurance taxes (see Figure 1-13). Their effective individual income tax rate dropped during the

1980s but rose in the 1990s to a 1997 level identical

with that in 1979. Corporate income and excise tax

rates moved down slightly over the period.

The rise in effective social insurance tax rates

over the two decades occurred for households with

children throughout the income distribution.15 There

were sharp differences, however, in changes in the

individual tax rate for households with children at

different points in the income distribution. Expan14. If the child tax credits and other changes that were part of TRA-97

had been in effect in 1997, they would have reversed some of that

rise in the effective tax rate for households with children. Even

with the 1997 tax reductions, however, the effective tax rate in

1997 would have exceeded the rate in 1979.

15. Table G-2a shows effective rates for each revenue source faced by

each quintile of households with children.
16 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

5

10

15

20

25

Percent

 Individual Income Tax 

Corporate Income Tax Excise Taxes 

 Social Insurance Taxes a

sion of the EITC drove that rate down—from -1 percent in 1979 to -9 percent in 1997—for the quintile

with the lowest income; the negative rates indicate

payments to taxpayers whose credits exceeded their

positive tax liability.16 At the other end of the income distribution, households with children in the

top quintile faced higher individual income tax rates

in 1997 than in 1979, in part because substantial

growth in their income made more of it subject to

higher tax rates and in part because of the legislated

increases in rates in 1990 and 1993. Effective income tax rates dropped for households with children

in the middle three quintiles but by much less than

for the lowest-quintile households. In future years,

the child credit—established by TRA-97 and set at

$500 per child per year—will reduce effective individual income tax rates for households with children

throughout the income distribution.

Elderly Childless Households

Between 1979 and 1997, a large drop in the effective

corporate income tax rate offset a smaller rise in the

individual income tax rate for elderly childless

households as a group, yielding a decline of 1 percentage point in their overall effective federal tax rate

(see Figure 1-14). Elderly households saw virtually

no change in either social insurance or excise tax

rates over the period. Their overall effective tax rate

would have dropped even more, had not substantial

increases in pretax income moved many elderly

childless households up the income distribution and

into higher income tax brackets. For example, the

number of such households in the lowest income

quintile dropped by 15 percent between 1979 and

1997 while the number in the top quintile increased

by nearly 60 percent.

That upward movement of elderly childless

households in the income distribution during the

1980s and 1990s obscured differences in the changes

in effective tax rates across income quintiles.17 For

example, the effective individual income tax rate for

all such households rose by 1.2 percentage points

between 1979 and 1997, even though the rate for no

quintile changed by more than half a percentage point

over the period and the rate for the top quintile fell.

That apparent anomaly resulted from income gains

that shifted substantially more income of elderly

childless households into higher tax brackets, pulling

up the average rate for the entire group. For elderly

childless households in the lowest quintile who pay

no individual income tax, small declines in other

taxes just offset higher excise tax rates, leaving the

lowest-income childless elderly the only quintile

whose effective federal tax rate did not fall over the

two decades.

Figure 1-14.

Effective Tax Rates for Elderly Childless 

Households, by Revenue Source, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: The effective tax rate equals tax liabilities as a percentage of total income.

A household consists of the people who share a housing

unit, regardless of the relationships among them. An

elderly childless household is one headed by a person

age 65 or older and with no member under age 18.

a. Payroll taxes financing Social Security, Medicare, and federal

unemployment insurance.

16. In the federal tax system, only the EITC was refundable during the

two decades under consideration.

17. Table G-3a shows effective rates for each revenue source faced by

each quintile of elderly childless households.
CHAPTER ONE THE DISTRIBUTION OF EFFECTIVE TAX RATES AND INCOME 17

Nonelderly Childless Households

The near constancy of the total effective federal tax

rate between 1979 and 1997 for nonelderly childless

households obscures increases in rates at the bottom

of the income distribution and slight decreases at the

top.18 Higher social insurance and excise tax rates

more than offset falling individual and corporate income tax rates for the bottom two quintiles, yielding

a rise of 1 percentage point in their effective rates.

At the top of the distribution, individual income tax

rates changed little over the two decades. Rising social insurance taxes balanced declining corporate income and excise taxes, leaving the highest-income

households with roughly the same total effective federal tax rate at the end of the period as at the beginning. Changes in tax law from TRA-97 had little effect on federal taxes for nonelderly childless households throughout the income distribution.

Effective Federal Tax Rates 

by Cash Income Category

The foregoing discussion of federal tax rates relies on

a measure of income that includes more than just

cash receipts and that adjusts for differences in

household size. Using that broader measure affects

the analysis in various ways. First, it increases measured income for some households but not for others,

depending on the distribution of noncash income.

Second, that higher income reduces calculated effective tax rates: the same tax liability divided by a

larger income yields a lower tax rate. Third, adjusting income for differences in the size of households

moves larger households down the income distribution and smaller households up it. As described in

greater detail in Chapter 3, the net effect is to shift

households with children into lower quintiles and

elderly and nonelderly childless households into

higher quintiles.

As a result of those effects, this analysis may

not fit well with people’s perceptions of their own tax

situations. A more familiar measure of effective federal tax rates that is easier to understand classifies

households by cash income. Nevertheless, analyzing

tax rates using cash income categories presents several limitations. Most important, even though categories in different years are defined in terms of constant

1997 dollars—that is, categories with unchanging

purchasing power—they represent different fractions

of the population over time. For example, the top

income category used in the following analysis

($200,000 and above) includes three times as many

households in 1997 as in 1979, a period that saw only

a 25 percent increase in total households.

In addition, it is important to keep in mind that

cash measures of income are poor indicators of

household well-being.19 Noncash income omitted

from the measure can make households significantly

better off. A given amount of cash income goes a lot

further for a smaller household than for a larger one.

Despite those limitations, however, analyzing effective tax rates for households in different cash income

categories provides useful information about the nature of the federal tax system.

Between 1979 and 1997, the effective federal

tax rate:

o Fell for households with income below $50,000

(in 1997 dollars); 

o Was virtually unchanged for those with income

between $50,000 and $75,000; 

o Rose slightly for households with income between $75,000 and $100,000; and 

o Declined for households with income above

$100,000 (see Figure 1-15).20 

Patterns of change across the two decades varied

widely, depending on the impact of changes in different taxes. For example, households with the highest

income saw their effective tax rate drop sharply between 1979 and 1985 before rising over the next

18. Table G-4a shows effective rates for each revenue source faced by

each quintile of nonelderly childless households.

19. Chapter 2 discusses alternative measures of income that may give a

more accurate picture of household well-being.

20. Table H-1a provides effective tax rates for all cash income categories for each of the four major sources of federal taxes and the total

of all four taxes over the 1979-1997 period.
18 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

10

20

30

40

Percent

$30,000 to $50,000

Over $100,000

$75,000 to $100,000

Less Than $30,000

$50,000 to $75,000 All Income Categories

Figure 1-15.

Total Effective Federal Tax Rates, 

by Income Category, 1979-1997

SOURCE: Congressional Budget Office.

NOTE: The effective tax rate equals total tax liabilities (individual

income, corporate income, payroll, and excise) as a percentage of total income.

decade and then dropping again between 1995 and

1997. In contrast, households at the bottom of the

income distribution saw their tax rates rise during

most of the 1980s before declining in the 1990s.

At every level of household income, the effective

individual income tax rate declined between 1979

and 1997. The decline was most pronounced for

households with income below $10,000, for whom

the expansion of the EITC pushed down their income

tax rate to -4.3 percent—a payment from the government rather than a tax liability. The lower tax rates

for each income category were not reflected in the

effective tax rate for all households, however. The

growth of real income over the period moved households into higher income categories and consequently

into tax brackets subject to higher rates: the fraction

of households with income above $75,000 (in 1997

dollars) climbed from 14.4 percent in 1979 to 19.8

percent in 1997. That “real bracket creep” caused the

effective individual income tax rate for households as

a group to rise slightly.

The effective social insurance tax rate for all

households rose between 1979 and 1997. Moreover,

every income category experienced a rising tax rate.

Increases were greatest for households with income

between $100,000 and $200,000 (the rate climbed

from 5.9 percent to 9.6 percent), largely because all

earnings became subject to Medicare taxes.
Chapter Two

Methodological Issues

Analyzing the distribution of taxes among categories of income requires many decisions.

What units should be used to measure income? What counts as income? What adjustments to

income are needed to account for different circumstances faced by households and families? Who

bears the incidence of various taxes? What time period is appropriate for the study? The answers to

those questions all affect any distributional analysis.

Knowing the trade-offs involved in choosing among

alternatives is essential to a complete understanding

of the implications of distributional data.

Decisions affecting the analysis discussed in

this study are driven by several considerations. The

study’s principal goal is to understand the distribution of federal taxes, not to examine the distribution

of income either for a single year or over time. To

the extent possible, given the limitations of the available data, the study examines the distribution of federal taxes using measures of income that reflect the

relative economic positions of households. Compromises result from missing information about specific

sources of income as well as the lack of longitudinal

data. Choices made from among competing methods

often depend on the nature of the taxes being considered. Finally, many decisions reflect explicit tradeoffs and a recognition of the pluses and minuses of

each choice. Chapter 3 discusses alternative measures to provide some understanding of the effects of

the choices made. Those alternatives, however, do

not encompass all of the possible choices. Moreover,

the limited period that the study covers means that

any comparison applies only to the two decades

under consideration and may not hold over other

periods.

The Unit of Analysis

Ranking people by income requires choosing the unit

over which to measure income. Because income matters not for its own sake but rather for the consumption and saving that it makes possible, the appropriate

groupings of people are so-called consumer units—

groups that combine their resources to purchase

goods and services. Yet even that simplification encounters problems because groupings may differ for

choices about different goods. For example, students

sharing an apartment compose a single group in their

housing decision but are likely to divide into smaller

subgroups for choices about food and clothing. Furthermore, available data generally include no information about consumer units. More commonly, they

report household and family relationships; analysts

must infer how individuals combine to make decisions about consumption.

Analysts of the distribution of taxes confront

four principal kinds of units: individuals, tax units,

families, and households. The first possibility—

individuals—is readily dismissed with the observation that many people, particularly children and the

elderly, rely on others to provide for their needs. Assessing their economic position solely on the basis of

their own resources would inaccurately consign them

to the bottom of the income distribution, regardless

of their actual consumption. Similarly, because they

often exclude people who share consumption, tax

units—individuals or couples filing tax returns plus

their tax dependents—fail to encompass larger units

that are more meaningful in terms of economic posi-
20 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

tion. For example, grown children residing with their

parents are separate tax units, even though they may

share resources with their parents. Tax units, of

course, are appropriate for analyses that focus more

narrowly on taxes.

Choosing between families and households is

harder. Families—people living together who are

related by blood, marriage, or adoption—frequently

constitute single units for most decisions about consumption. The prototypical case of a married couple

with children fits that description most completely.

Such families combine the incomes of the two parents to provide for the entire unit. At the same time,

extended families combine subfamilies that may

share only housing expenses and make other decisions about consumption as subfamily units.

A household—all of the people living in a single housing unit—is usually also a family; nevertheless, a small but growing fraction of arrangements

involve unrelated people sharing a house or apartment. Such nonfamily households form a single unit

for their consumption of housing, but, like extended

families, they may divide into smaller groups for

other consumption choices. Many nonfamily households consist of unmarried couples, with or without

children, whose consumption decisions differ little

from those of married couples. To separate such

households into smaller consumer units to assess

their income would misrepresent their relative economic positions.

Focusing on families thus incurs two kinds of

mistakes: it combines subfamilies that act independently in their decisions about what to consume, and it

separates nonfamily groups that act together. In contrast, the use of households inaccurately combines

groups that act independently (both subfamilies and

unrelated subgroups) but correctly counts as a single

unit households composed of unrelated groups that

combine resources to finance consumption. Over 90

percent of all households consist of a single family;

because the household and the family are identical,

the choice of unit does not matter. Using either alternative corrects mistakes that the other makes but introduces new errors. Data limitations preclude knowing which approach misclassifies fewer units, so either choice is to some degree arbitrary. Because all

members of every household make a combined decision about the housing they “consume,” households

are the unit used in the principal analysis of this

study.1

The Definition of Income

People typically think of their income as the cash

they receive either as pay for working, as returns on

their investments (in the form of interest, dividends,

rents, and capital gains), or as payments from the

government or retirement accounts. Economists

think of income in broader terms, adding in the value

of in-kind benefits such as health insurance, food

stamps, and housing assistance; income and payroll

tax payments made by others that effectively reduce a

person’s earnings or return on investment; and the

value of services provided by durable goods such as

owner-occupied housing. In its most broadly construed but most difficult to measure form, income

equals the sum of consumption of all kinds, including

leisure, plus the change in wealth over the measurement period.2

Tax-Based Measures of Income

The federal individual income tax defines at least

three different measures of income. Cash income

before adjustments consists roughly of all cash income potentially subject to tax. Subtracting various

exclusions from that value yields adjusted gross income, or AGI. Taxable income equals AGI minus

any applicable personal exemptions and deductions. 

1. In contrast to the approach used by the Congressional Budget Office, the Office of Tax Analysis in the Department of the Treasury

uses families as its unit of analysis, and the Joint Committee on

Taxation focuses on tax units. The Bureau of the Census uses

households as its primary unit but produces tables for both families

and households. As Chapter 3 demonstrates, however, the choice

of unit has little effect on observed trends in effective tax rates or

income.

2. The Treasury’s Office of Tax Analysis and the Joint Committee on

Taxation use measures of income that differ from those used in this

analysis. Differences among the methods used by the three offices

cause little qualitative variation in the measured distribution of

taxes (see Appendix C).
CHAPTER TWO METHODOLOGICAL ISSUES 21

Even cash income, the most expansive of those

measures, excludes cash income from many sources,

including most Social Security benefits, all meanstested cash payments from the government, and taxexempt interest. At the same time, however, the narrowest measure—taxable income—is the basis for

determining how much taxpayers must pay in income

taxes. None of the three measures provide a full assessment of a household’s economic status.

Cash Income Not Subject to Tax

Expanding the tax-based measures to include all cash

income gives a more complete picture of a household’s resources. That expansion includes adding all

cash transfers such as Social Security benefits, Supplemental Security Income payments, and grants

from the Temporary Assistance for Needy Families

program. Information on the receipt of such taxexempt payments does not appear on tax returns and

must therefore come either from administrative data

for individual programs, which often lack demographic detail, or from survey instruments such as the

Current Population Survey, which are almost certainly less accurate than tax returns. As a result,

broadening the income measure risks misstating

household income, in terms of which households receive payments and the size of those payments.

Nonetheless, the various transfer payments can substantially affect household resources, particularly at

the lower end of the income distribution, and their

omission threatens the validity of any distributional

analysis.

Retirement Funds

Contributions to and withdrawals from retirement

funds pose a particularly difficult problem. On the

one hand, if workers voluntarily choose to put part of

their pretax earnings into accounts held for retirement, the contributions represent income when they

are earned. Workers could use the funds to finance

current consumption but instead elect to put them

away for their later years. On the other hand, money

withdrawn from the funds during retirement provides

a significant share of resources for older taxpayers.

Ignoring those withdrawals in assessing income could

vastly understate the resources available to senior

citizens and yield an inaccurate measure of effective

tax rates.3

In the face of conflicting arguments about when

to count retirement funds as income, the Congressional Budget Office (CBO) includes in its income

measure both voluntary contributions to individual

retirement accounts and 401(k) accounts and withdrawals from those and other accounts during retirement.4

 Although that approach clearly double-counts

contributions over a lifetime, omitting either of the

measures would understate the resources available to

workers or retirees.5

If data were available to analyze tax liabilities

and income on a lifetime rather than an annual basis,

the resources would be counted only once and the

question of when to include them as income would

not arise. (Annual versus lifetime accounting is discussed further in a later section.) In the absence of

the data required for lifetime analysis, however, including both contributions to and withdrawals from

retirement accounts recognizes the effect of both factors on a household’s income.

Taxes Paid by Businesses

Another component of household income consists of

taxes paid by businesses, both corporate income taxes

and payroll taxes. A firm’s income tax liability ultimately falls not on the firm but on individuals—on

stockholders in the form of lower dividend payments

or smaller capital gains, on workers in the form of

lower compensation, or on customers in the form of

higher prices. Although economists disagree about

the actual incidence of corporate income taxes, the

general consensus holds that the entire burden falls

3. Ignoring assets also understates available resources. The lack of

appropriate data, however, precludes taking assets into account.

4. Note that only employees’ contributions to retirement plans count

as income for workers; employers’ contributions to both defined

benefit and defined contribution plans are excluded. The Treasury’s Office of Tax Analysis follows a similar approach.

5. Only the contributions are counted twice; any accrued earnings in

the account are treated as income and are taxed only when withdrawn. The earnings are not available to account owners during the

accrual period.
22 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

on the owners of capital as a group.6 Following that

consensus requires assigning corporate taxes—as

both a tax liability and income—to the owners of

capital in proportion to their capital income.

Economists are in greater agreement that workers bear the full incidence of payroll taxes, the taxes

that pay for Social Security, Medicare, and unemployment insurance.7

 Employers pass on their share

of those taxes to workers in the form of wages or

benefits that are lower than those employers would

pay in the absence of the tax. Accurate measures of

income and taxes should consequently include payroll tax payments made by employers, allotted to

workers in proportion to the payroll taxes they pay

themselves.8

Income Received in Kind

Many transfer payments and a significant share of the

compensation paid to workers come not in cash but in

kind. The government gives food stamps, housing

and energy assistance, Medicare and Medicaid benefits, and school breakfasts and lunches in the form of

goods or services.9

 Although economists agree that

recipients would prefer to receive cash equal to the

cost of in-kind benefits, the government provides

benefits in kind to help ensure that beneficiaries consume the intended goods or services. In the workplace, some employers pay health and life insurance

premiums for their workers and provide educational

assistance, cars, housing, meals, and free or subsidized child care. Such in-kind compensation may be

designed to take advantage of the beneficial way that

the tax code treats particular forms of noncash payments, to attract workers who place especially high

value on such benefits, or to enable workers to perform better in their jobs. 

Regardless of the motivation behind them,

transfers and compensation provided in kind constitute income for recipients and enhance their economic position. But valuing those benefits is difficult. Recipients place a higher value on a cash payment equal to the cost of an in-kind benefit than on

the benefit itself simply because the cash allows them

the choice of obtaining the in-kind benefit on their

own or consuming a preferred alternative that costs

no more. The cost of the in-kind payment is thus an

upper bound on the value of the benefit. That value,

however, could be much lower, particularly for lowincome recipients whose consumption is tightly constrained by their lack of resources. In the extreme,

the recipient’s value for an in-kind benefit is zero;

that situation occurs when he or she would not purchase the benefit at any price after getting its cost in

cash. In general, however, recipients value in-kind

benefits somewhere between the two extremes.

The Bureau of the Census has developed measures to estimate the value to recipients of benefits

received in kind.10 Some benefits are assessed at

market value—the costs recipients would incur if

they bought the goods themselves. The value assigned to food stamps, for example, equals their face

value, and school meals are counted at the subsidy

cost borne by the government. 

That approach poses problems in the case of

health benefits provided through the Medicare and

Medicaid programs. For many recipients, the average cost, or insurance value, of benefits is high relative to income. Given a choice between health services and other consumption, those beneficiaries

would probably not spend the full insurance value on

health but instead split their consumption among a

6. See, for example, Jane G. Gravelle and Kent Smetters, Who Bears

the Burden of the Corporate Tax (and Why)?: The Open Economy

Case, Technical Paper 1998-1 (August 1998), available from

CBO’s Tax Analysis Division or at www.cbo.gov/tech.html. The

Office of Tax Analysis at the Department of the Treasury assumes

that the full burden of the corporate income tax falls on owners of

capital. The Joint Committee on Taxation has recently discontinued measuring the distribution of the tax because of uncertainty

about its incidence. See Julie-Anne Cronin, U.S. Treasury Distributional Analysis Methodology, Working Paper 85 (U.S. Treasury,

Office of Tax Analysis, September 1999), pp. 25-26.

7. See, for example, Daniel S. Hamermesh, Labor Demand (Princeton,

N.J.: Princeton University Press, 1993), especially pp. 172-173.

8. Both the Treasury’s Office of Tax Analysis and the Joint Committee on Taxation use the same assumption—that workers bear the

full burden of payroll taxes (see Appendix C).

9. Government spending finances a broad range of activities that benefit households. However, consideration of the full range of that

spending is beyond the scope of this study.

10. A full description of the methods used to value noncash benefits is

provided in Appendix B of Bureau of the Census, Measuring the

Effect of Benefits and Taxes on Income and Poverty: 1992, Current

Population Reports, Series P60, No. 186RD (September 1993), pp.

viii-ix and B-1 to B-5.
CHAPTER TWO METHODOLOGICAL ISSUES 23

range of goods and services. That observation implies that the value of health benefits to recipients is

less than the insurance value—that is, the average

cost to the government of providing the benefits. It is

impossible to determine how much less, however,

without knowing the preferences of individual recipients.

The solution provided by the Bureau of the Census and used in this study is to count the fungible

value of the benefits. That value equals the amount

of resources freed up for other uses by the health care

services provided, up to the insurance value of those

services.11 For example, suppose a household that is

not receiving food stamps spends $400 a month on

food. If the household started getting $500 a month

in food stamps, the $400 previously spent on food

would be available for other uses. The Census Bureau’s fungible value for the food stamps would

equal $400, $100 less than the value of the food

stamps received. If the household instead received

only $300 in food stamps, the fungible value would

be $300, because the household could use food

stamps and cash to buy the same $400 worth of food

and use the freed-up $300 to purchase other goods or

services.

The fungible value of a benefit received in kind

thus depends not only on the market or insurance

value of the benefit but also on the income of the recipient’s household. Low-income households that

would spend nothing on health care in the absence of

subsidized programs, for example, would have a fungible value for health care benefits equal to zero. At

the other end of the scale, the value to high-income

households would equal the full insurance value.

CBO counts the health insurance premiums paid

by employers as income. Firms offer health plans to

their workers in place of cash wages presumably because they feel workers value health benefits more

than the forgone earnings.12 In turn, because they

could work elsewhere, employees of firms with

health plans demonstrate that they do, in fact, consider the health benefits to be worth at least as much

as the additional wages they could get for comparable

jobs at companies not offering health plans. Excluding the value of those benefits would understate

household income and misrepresent significant differences in income between workers with and without employer-sponsored health plans.

Imputed Income from Services

Many households consume services for which they

are not charged directly and which therefore constitute income. Durable goods such as owner-occupied

housing, motor vehicles, and household appliances

provide specific services over their useful lifetime.

Financial institutions offer a wide range of “free”

services such as checking accounts that users pay for

by getting lower returns on their invested assets than

they would get if firms charged for all services.

From an economic standpoint, all such services constitute income, although part or all of that income

could be offset by other costs associated with the services.13 Because information on both the consumption of the services and their value cannot be readily

obtained, CBO omits imputed income from services

in the income measure used in this analysis.

Unrealized Capital Gains

An increase in the value of an asset represents income to the owner of the asset. The federal tax system taxes such capital gains only when the owner

sells the asset and realizes the gain, in part because

valuing unrealized gains is difficult and in part because taxpayers may lack funds to pay taxes on the

higher value of assets they have not sold. The lack of

information about the value of assets precludes making unrealized gains part of measured income, and

the income measure used in this study excludes them.

CBO does, however, include in its measure of household income realized capital gains reported on indi11. A detailed discussion of fungible value may be found in Bureau of

the Census, Measuring the Effect of Benefits and Taxes, p. viii.

12. Firms may have the additional advantage of obtaining health insurance for their workers at the reduced rates available only for group

coverage, an added incentive to offer the benefit.

13. Owner-occupied housing is perhaps the most significant form of

imputed income. The Office of Tax Analysis estimates that it

amounts to approximately 0.5 percent of total household income.

See Cronin, U.S. Treasury Distributional Analysis Methodology,

p. 11.
24 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

vidual income tax returns, but it does not adjust those

gains for inflation because of limitations in the data.14

Adjusting Income for 

Differences Among 

Households

Households with identical incomes may differ in

other ways that bear on their economic status. Ranking households by levels of equivalent resources requires adjusting income to account for differences

such as household size.

Household Size

Two cannot live as cheaply as one. Put less succinctly, larger households need more income to finance consumption and savings than smaller households do. At the same time, economies of scale in at

least some consumption—housing, in particular—

mean that two people do not need twice the income

to live as well as an individual living alone. In other

words, per capita income (total household income

divided by household size) ignores the benefits of

shared consumption. An adjusted income falling

somewhere between household and per capita incomes is likely to offer a better means of ranking

households.

CBO has previously used the equivalence scales

implicit in the poverty thresholds with which the Bureau of the Census determines the poverty status of

families and individuals. Those thresholds exhibit

significant irregularities as the size of families increases, suggesting that a second person adds 28 percent to the needs of a single person and a third person

adds a similar amount, but a fourth person raises

costs by 44 percent of the cost of an individual. Furthermore, the poverty thresholds do not change at all

once a family’s size exceeds nine people. An alternative and more regular adjustment suggested in previous studies increases the needs of a household in proportion to the square root of the household’s size.15

That adjustment implies that each additional person

increases a household’s needs but at a decreasing

rate. Analysis covering the 1980-1995 period shows

that the choice among a range of adjustments for the

size of families affects the measured levels of income

and effective tax rates but has little effect on observed trends.16 The main results reported in this

study use the square root of household size to adjust

for the different needs of households.

The household-size adjustment that CBO used

to construct the tables in this analysis is employed for

ranking purposes only—that is, it is used only to assign households to percentile groupings and not for

other calculations. The incomes reported in the tables represent total household income; they are not

adjusted in any way to reflect a household’s size. As

a result, two households with very different incomes

may be grouped together because the higher-earning

household is larger. All of the income averages calculated for the study derive from unadjusted measures of reported income with equal weights for all

households (or families, where those units are used),

regardless of size.

Other Adjustments

It may also be desirable to adjust the incomes of

households for other differences in their circumstances that affect their economic positions. For example, the prices of goods and services vary among

locations, and households can incur quite different

costs associated with working, depending on how

many members are employed, the costs of commuting, child care expenses, and other costs. However,

14. An alternative approach, used by the Office of Tax Analysis (OTA),

would use retained corporate earnings as the basis for measuring

accrued capital gains in the corporate sector. OTA assumes that

real capital gains derive entirely from retained earnings. Its measure of income thus allocates retained earnings to households (with

adjustments for accelerated tax-cost recovery and inflation) and

subtracts realized capital gains. See Cronin, U.S. Treasury Distributional Analysis Methodology, p. 10. Data limitations led CBO to

reject that approach.

15. See, for example, Patricia Ruggles, Drawing the Line: Alternative

Poverty Measures and Their Implications for Public Policy (Washington, D.C.: Urban Institute Press, 1990), pp. 75-78.

16. Roberton Williams, David Weiner, and Frank Sammartino, Equivalence Scales, the Income Distribution, and Federal Taxes, Technical Paper 1999-2 (October 1998), available from CBO’s Tax Analysis Division or at www.cbo.gov/tech.html.
CHAPTER TWO METHODOLOGICAL ISSUES 25

data that would allow analysts to adjust incomes for

differences in prices and in the costs of working are

unavailable.

Assumptions About the 

Incidence of Federal Taxes

Essential to measuring the distribution of federal

taxes are assumptions about the incidence of those

levies.17 The people or businesses that remit tax payments to the government may not bear the actual burden of the taxes they pay but instead pass that burden

on to others. Although economists do not universally agree on the ultimate incidence of specific

taxes, CBO follows consensus views in allocating

taxes among households. Furthermore, to the extent

that taxes paid by businesses result in lower incomes

for households, imputing those taxes to the households that bear their burden requires adding those tax

liabilities not only to the taxes of households but also

to the incomes those families receive.

Individual Income Taxes 

and Payroll Taxes

Workers bear the full cost of taxes imposed on their

income deriving from wages and salaries. Firms trying to maximize their profits pay workers only as

much as necessary to attract those with required

skills, up to the point where additional workers cost

more than their value to the firm. The fact that workers incur taxes on that pay does not affect the total

compensation firms will offer.18 Thus, employees

bear the full individual income tax on their earnings

as well as their and their employers’ share of payroll

taxes. That assumption, which is accepted by virtually all economists, implies that in the absence of

payroll taxes, compensation to workers would increase by the full amount of the payroll taxes paid by

employers.

Corporate Income Taxes

Less agreement exists on the incidence of corporate

income taxes. Firms pay the tax on their net profits

according to a schedule of four rates that reaches 35

percent for annual taxable income over $10 million.

Ultimately, however, that tax is borne by households,

either as higher prices for the goods they buy or

lower income from work or investments. Economists

disagree on whether people bear the tax as shareholders in corporations, owners of all capital assets, employees, or consumers. Nonetheless, a survey of the

economics literature on the issue indicates a dominant view that the corporate income tax reduces the

return to all capital, and thus the burden of the tax

falls on all owners of capital assets. Accordingly,

CBO allocates corporate income taxes as both income and tax liabilities to households in proportion

to their income from interest, dividends, rents, and

capital gains.

Excise Taxes

The government collects excise taxes on a narrow

range of goods and services, some of which are inputs to the production of final products and some of

which are purchased directly by consumers. CBO

assumes that excise taxes on goods and services sold

directly to consumers are borne by those consumers

in proportion to their purchases of the taxed items.

Excise taxes on intermediate products and services

are allocated among all consumers in proportion to

their total consumption.

The Time Period

Over the course of their lives, people experience

wide variations in the annual income they receive and

consequently in the taxes they pay. Part of the variation in income comes from changes in earnings over

the life cycle: low earnings during early years in the

job market, rising earnings through middle age, and

17. This study focuses on the four major federal taxes: individual income, corporate income, social insurance, and excise. It excludes

estate and gift taxes and customs duties, primarily because of limitations in the data. The omitted taxes make up less than 10 percent

of all federal revenues.

18. Taxes may, however, affect the form of compensation offered.

Workers may prefer noncash benefits that are exempt from tax in

place of taxable cash wages.
26 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

the shift from labor earnings to pensions and investment earnings in retirement. Another part of the variation comes from periods of unemployment that temporarily depress income. And part of it results from

irregular receipt of income, particularly capital gains

or losses from the sale of investment assets.

The individual income tax takes little account of

variations in income over the years and may therefore

impose a tax burden across a person’s life that correlates poorly with a lifetime concept of economic resources. Many economists view lifetime measures of

income and taxes as the best approach to assessing

the distributional effects of the federal tax system.

Furthermore, using a lifetime accounting period eliminates the problem of when to count particular forms

of income. For example, funds in retirement accounts could be counted as compensation during the

year they are contributed by workers or employers;

alternatively, those funds could be included in income when they are withdrawn during retirement.

Data on taxpayers collected through panel surveys (which interview the same respondents repeatedly over a number of years) show the importance of

considering income over periods longer than one

year. The Department of the Treasury has constructed longitudinal files for a random sample of

taxpayers over periods as long as 10 years, which

have been used to examine the year-to-year variation

in income for individuals. Those data indicate that

there is significant movement of taxpayers within the

income distribution but that year-to-year shifts tend

to be small. For example, over the 1979-1988 period,

roughly half of all taxpayers who were ever in the top

1 percent of all families were in that percentile for

only one year. At the same time, virtually none of

those who ever appeared in the top 1 percent were

ever below the top 10 percent of taxpayers ranked by

annual income.

Available 10-year longitudinal files provide

only limited information about taxpayers’ income

and tax liabilities over time. The data required for

complete lifetime assessments of the incidence of

taxes simply do not exist. As more longitudinal data

covering longer periods become available, economists will be better able to analyze lifetime income

and taxes. In the absence of those data, distributional

analyses must focus on shorter periods.

Because federal income taxes use a one-year

accounting period—and because lifetime data do not

exist—CBO’s analyses of effective tax rates focus on

annual income and tax liabilities. That approach has

two significant limitations. First, the year-to-year

variation in income means that a household’s distributional rank may not accurately represent its command of economic resources. A household’s patterns

of consumption derive less from current income than

from the normal, or permanent, income the household

expects to have over time. People rely on savings or

borrowing to tide themselves over periods of unemployment, for example. 

A second, and related, limitation is that some

forms of income come irregularly, particularly capital

gains from the sale of a business, of shares of stock,

or of another asset. A business owner who sells his

firm, for example, will appear wealthy in the year of

the sale because of the large capital gain realized at

that time, even though the increase in the firm’s value

accrued over a much longer period. Placing that person near the top of the income distribution in the year

of the sale and at a much lower rank in other years

misstates his economic status in all years, overstating

it in one and understating it in all others. Yet in the

absence of lifetime income data, it is impossible to

apportion the capital gains realized in a single year

over multiple years. Analysts must choose between

counting the gain as income when realized or allotting only part or none of it to current income. Extensive examination of tax data on the sales of capital

assets indicates that apportioning gains across years

based on a single year’s realizations would lead to

significant error.19 CBO thus counts all capital gains

as income when realized.

19. See Congressional Budget Office, Perspectives on the Ownership

of Capital Assets and the Realization of Capital Gains, CBO Paper

(May 1997).
Chapter Three

The Effects of Applying

Alternative Distributional Methods

The choices that are made among the methodological alternatives discussed in Chapter 2

affect the distribution of households by income. Including more sources of income moves

households with income from those sources up the

distribution. Adjusting income for the size of households puts smaller ones higher in the distribution and

larger ones lower. In that reranking process, households carry with them the dollar values of both their

income and the taxes they pay. As a result, distributional rankings affect the average values of those

variables calculated for each quintile. Understanding

the impact of alternative methodological choices is

therefore essential to assessing the implications of tax

and income measures.

Alternative Income Rankings

The alternative rankings that the Congressional Budget Office examines in this chapter reflect choices

along three of the five dimensions discussed in Chapter 2:

o Households versus families as the unit of analysis;

o Alternative measures of income; and

o Unadjusted income versus income adjusted for

household size.

The analysis does not examine alternatives using different time periods or different assumptions about the

incidence of taxes.1

Choosing households rather than families as the

unit of analysis has a relatively small effect on income rankings because in most cases, households and

families are identical. Only when people not related

by blood, marriage, or adoption live together in a single housing unit do households comprise more than

one family. In 1979, households on average contained 1.06 families, indicating that nearly all households had only one family; no more than 6 percent

were multifamily households (see Table 3-1).2

 Virtually all of those multifamily households contained no

children or elderly members. By 1997, the average

number of families per household had risen to 1.10,

and again, multifamily households were most likely

to be childless and nonelderly. Using households

rather than families as the unit of analysis thus tends

to join nonelderly childless individuals and couples,

combining their incomes and moving them up the

income distribution. By averaging the same total income over fewer units, the combining of families into

1. The data required to examine periods longer than one year do not

exist. Previous work by the Congressional Budget Office used alternative assumptions about the incidence of the corporate income

tax. (See, for example, The Changing Distribution of Federal

Taxes: 1975-1990, published in October 1987.) In more recent

analyses, CBO has assumed that the tax falls entirely on capital.

2. The Bureau of the Census defines people who are not living with

relatives as unrelated individuals, whether they live alone or with

others. The statistics cited in this paragraph count unrelated individuals as one-person families. Therefore, in this analysis, people

living alone are considered both a family and a household.
28 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table 3-1.

Household Characteristics by Household Type, 1979-1997

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

All Households

Millions of People 222.3 226.8 229.9 236.1 241.0 245.6 250.0 255.9 257.5 264.3

Millions of Families 86.1 89.3 91.8 95.7 98.7 102.1 104.7 107.2 109.1 112.9

Millions of Households 81.4 84.2 86.2 89.5 92.0 94.6 96.7 98.2 99.7 102.9

Average Family Size 2.6 2.5 2.5 2.5 2.4 2.4 2.4 2.4 2.4 2.3

Average Household Size 2.7 2.7 2.7 2.6 2.6 2.6 2.6 2.6 2.6 2.6

Ratio of Families to Households 1.06 1.06 1.06 1.07 1.07 1.08 1.08 1.09 1.09 1.10

Households with Children

Millions of People 136.2 135.6 134.6 137.5 138.9 140.4 142.7 149.3 149.0 151.9

Millions of Families 32.7 33.0 33.2 34.1 34.5 34.8 35.5 37.1 37.0 37.9

Millions of Households 32.4 32.6 32.7 33.6 34.0 34.2 34.8 36.3 36.2 36.9

Average Family Size 4.2 4.1 4.1 4.0 4.0 4.0 4.0 4.0 4.0 4.0

Average Household Size 4.2 4.2 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.1

Ratio of Families to Households 1.01 1.01 1.02 1.01 1.01 1.02 1.02 1.02 1.02 1.03

Elderly Childless Households

Millions of People 27.2 28.4 29.6 30.8 32.2 33.1 34.2 34.1 34.7 35.2

Millions of Families 16.7 17.5 18.2 18.9 19.8 20.5 21.2 21.0 21.8 21.9

Millions of Households 16.3 17.0 17.6 18.4 19.2 19.8 20.5 20.2 20.9 21.0

Average Family Size 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6

Average Household Size 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7

Ratio of Families to Households 1.02 1.03 1.03 1.03 1.03 1.04 1.03 1.04 1.04 1.04

Nonelderly Childless Households

Millions of People 58.9 62.7 65.7 67.8 69.9 72.1 73.1 72.5 73.8 77.2

Millions of Families 36.7 38.8 40.5 42.7 44.5 46.8 48.0 49.1 50.3 53.1

Millions of Households 32.7 34.7 35.9 37.5 38.9 40.6 41.3 41.6 42.7 45.0

Average Family Size 1.6 1.6 1.6 1.6 1.6 1.5 1.5 1.5 1.5 1.5

Average Household Size 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.7 1.7 1.7

Ratio of Families to Households 1.12 1.12 1.13 1.14 1.14 1.15 1.16 1.18 1.18 1.18

SOURCE: Congressional Budget Office.

NOTE: Families are people related by blood, marriage, or adoption who live together. A household consists of the people who share a housing

unit, regardless of the relationships among them. A household with children has at least one member under age 18. An elderly

childless household is one headed by a person age 65 or older and with no member under age 18. A nonelderly childless household

is one headed by a person under age 65 and with no member under age 18.
CHAPTER THREE THE EFFECTS OF APPLYING ALTERNATIVE DISTRIBUTIONAL METHODS 29

households yields measures of average household

income that are slightly greater than measures of average family income.

The measure of income used for ranking families or households has a bigger effect on their positions in the distribution. (Box 3-1 describes the eight

measures of income CBO used in this analysis.)

Broader income measures reorder the income distribution on the basis of which households receive income from the sources that have been included. Relative to cash income (the narrowest measure), adding

taxes paid by businesses—corporate income taxes

and the employer’s share of payroll taxes—

raises total income by between 6.1 percent and 9.7

percent over the 1979-1997 period (see Table 3-2).

Including nonhealth benefits received in kind has a

smaller effect since those benefits make up less than

1 percent of cash income in any single year. Most

nonhealth in-kind benefits are means-tested, going

only to households at the bottom of the income distribution. Including them as income is likely to have

the greatest effect on low-income households.

In comparison, health benefits—principally

Medicare, Medicaid, and employer-paid health insurance premiums—represent a larger fraction of cash

income, rising from 4.7 percent in 1979 to 6.6 perBox 3-1.

Measures of Income

This analysis compares the effects of using eight different

measures of income to rank households. The measures

range from unadjusted family cash income to the broader

measure of household income adjusted for household size.

In addition, to allow comparison with previous work by the

Congressional Budget Office, the list includes the adjusted

measure of family income that CBO has employed over the

past 13 years. The eight alternatives follow.

1. Family cash income includes only cash receipts—

wages and salaries, self-employment income, rental

income, interest and dividends, realized capital gains,

cash transfer payments, and retirement benefits. The

family is the primary unit of analysis, and no adjustment is made for a family’s size.

2. Household cash income is the same as family cash income except that the unit of analysis is the household

(people who share a single housing unit, regardless of

the relationships among them), not the family (people

related by blood, marriage, or adoption who live together).

3. Household cash income plus taxes paid by businesses

and employee contributions to 401(k) retirement plans

expands household cash income by adding each household’s imputed share of corporate income taxes and the

employer’s share of payroll taxes as well as imputed

contributions to 401(k) retirement plans.

4. Household cash income plus nonhealth in-kind benefits further expands cash income plus taxes paid by

businesses to include the value of food stamps, school

lunches and breakfasts, housing assistance, and energy

assistance.

 5. Comprehensive household income adds health-related

in-kind benefits (the value of employer-paid health insurance premiums and Medicare and Medicaid health

insurance) to the previous measure of income.

6. Comprehensive household income adjusted on the

basis of federal poverty thresholds divides comprehensive household income by the federal poverty threshold

appropriate for a household’s size.

7. Comprehensive household income adjusted on the

basis of household size adjusts the comprehensive

measure to account for differences in a household’s

size, dividing by the square root of the number of

household members. This measure provides the foundation for the analysis presented in Chapter 1 and, in

CBO’s view, is the best measure of income available,

given the limitations of current data.

8. CBO’s historical income measure equals family cash

income plus business taxes divided by the federal poverty threshold appropriate for a family’s size. Imputed

contributions to 401(k) retirement plans are not included.
30 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table 3-2.

Income Totals, 1979-1997

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

Cash Incomea

(Billions of 1997 dollars) 3,498 3,540 3,669 4,066 4,298 4,597 4,529 4,613 4,843 5,521

Taxes Paid by Businessesb

In billions of 1997 dollars 268 233 222 280 333 365 353 406 467 511

As a percentage of cash

income 7.7 6.6 6.1 6.9 7.7 7.9 7.8 8.8 9.7 9.3

Nonhealth In-Kind Benefitsc

In billions of 1997 dollars 21 22 23 24 26 25 31 34 32 28

As a percentage of cash

income 0.6 0.6 0.6 0.6 0.6 0.5 0.7 0.7 0.7 0.5

Health-Related In-Kind Benefitsd

In billions of 1997 dollars 163 159 179 196 232 258 270 329 368 362

As a percentage of cash

income 4.7 4.5 4.9 4.8 5.4 5.6 6.0 7.1 7.6 6.6

Comprehensive Household Incomea

In billions of 1997 dollars 3,951 3,953 4,094 4,566 4,889 5,245 5,183 5,381 5,711 6,423

As a percentage of cash

income 112.9 111.7 111.6 112.3 113.7 114.1 114.4 116.7 117.9 116.3

SOURCE: Congressional Budget Office.

a. Box 3-1 describes income measures used in CBO’s analysis.

b. Taxes paid by businesses include corporate income taxes and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes.

c. Nonhealth in-kind benefits include food stamps, school lunches and breakfasts, housing assistance, and energy assistance.

d. Health-related in-kind benefits include Medicare, Medicaid, and employer-paid health insurance premiums.

cent in 1997. Households throughout the income distribution receive health benefits, and the impact of

including them in income is difficult to predict. Regardless of which particular households receive income from the additional sources, including it increases average household or family income above

the comparable measure that uses cash income only.

Adjusting income to account for differences in

the size of households shifts larger households down

the income distribution and smaller households up it.

As noted in Chapter 2, adjusted household income is

used only to assign households to income percentiles;

the values reported for average household income are

not adjusted. Because households thus carry their

unadjusted incomes with them when they are assigned to quintiles, larger households will have larger

incomes than smaller households in the same

quintile. Measures of income for each quintile thus

depend on the numbers of households of different

sizes. Furthermore, demographic changes over time

that affect the distribution of household sizes will

influence the levels of income in each quintile.

The Effects of Using Different

Income Measures

The choice of an income measure affects the ordering

of households or families in the income distribution

and consequently affects estimates of effective tax

rates and pretax and after-tax income for different
CHAPTER THREE THE EFFECTS OF APPLYING ALTERNATIVE DISTRIBUTIONAL METHODS 31

percentiles of that distribution. In addition, broader

measures of income yield larger estimates of income,

simply because they incorporate income from more

sources. Broader measures also lead to lower estimates of effective tax rates because those rates equal

tax liabilities that are unchanged but that are divided

by higher incomes. Understanding the effects of using a particular measure of income requires examining both the degree of movement of families among

income percentiles and differences in estimated effective tax rates and income under alternative measures.

The Movement of Families 

Among Income Quintiles

Changing from one measure of income to another

moves families up or down the income distribution.

Examining the movement of families among income

quintiles shows how big an effect changing measures

has on the composition of each quintile. In general,

using households rather than families as the unit of

analysis and adjusting income for differences in the

size of the unit shifts more families into different

quintiles than does broadening measures of income to

include more sources.

Changing from the family to the household as

the unit of analysis combines family incomes in multifamily households, which moves families in those

units up the distribution and consequently moves

other families down. That change shifted about onequarter of families into different income quintiles in

1997, with slightly more moving down than moving

up (see Table 3-3). The effect is greatest for nonelderly childless families—nearly 30 percent shifted

quintiles in 1997—because those families are more

likely to live in multifamily households. Slightly

more than half of nonelderly childless families shifting quintiles moved upward. Conversely, more than

two-thirds of the roughly 20 percent of elderly childless families moving across quintile lines were

pushed downward as other families moved ahead of

them. About one-fourth of families with children

would have been located in different quintiles under

household rather than family ranking, with roughly

60 percent moving downward.

Expanding the definition of income to include

taxes paid by businesses, contributions to 401(k) retirement plans, and the value of benefits received in

kind moved less than 10 percent of families into different quintiles in 1997 (see Table 3-3). The impact

of counting more income was greatest for elderly

childless families, for whom health benefits—principally from Medicare—raised income enough to move

nearly one-tenth of such families into higher quintiles.

Adjusting household income to account for differences in the size of households moved nearly 40

percent of families into different income quintiles in

1997, with nearly three-fourths of those shifting up

the distribution (see Table 3-3).3

 As expected, the

adjustment tended to move families with children

into lower quintiles: nearly 90 percent of those that

shifted quintiles moved down. Families with children are generally larger than childless families, so

adjusting for family size drops their incomes more

than the incomes of smaller families. In contrast,

virtually all of the nearly half of families without

children who shifted quintiles ended up in higher

quintiles as defined by adjusted income.

Examining the effects of CBO’s change from its

historical measure of adjusted family income to the

measure of adjusted household income used in the

current study provides a basis for comparing effective

tax rates and income presented in CBO’s earlier publications with the new statistical series discussed in

Chapter 1. Changing the measure of income shifted

about one-quarter of families into different quintiles

in 1997, with slightly fewer families moving up the

distribution than the number moving down (see

Tables 3-3 and 3-4). Elderly childless families were

least affected by the change in methods: 14 percent

moved into new quintiles, with two-thirds of them

moving into higher quintiles. Nonelderly childless

families were most likely to move, and about three

families went into lower quintiles for every two that

rose to higher groups. Nearly all movement took

place between adjacent categories: just 4 percent of

3. The cited movements occur when the adjustment involves dividing

household income by the square root of the number of household

members. Using the federal poverty thresholds as the basis for adjustment would have shifted nearly half of all households into different quintiles. Upward movements would again predominate over

downward shifts.
32 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table 3-3. 

Percentages of Families Moving Among Quintiles, by Income Measure, 1997

Comparisona

No Quintile

Change

Moving Up

at Least One

Quintile

Moving Down

at Least One

Quintile

All Families

Family Cash Income Versus Household Cash Income 75 12 14

Household Cash Income Versus

Cash plus taxes paid by businesses 97 2 2

Cash plus taxes paid by businesses and nonhealth in-kind benefits 95 2 3

Cash plus taxes paid by businesses and all in-kind benefits 91 4 5

Comprehensive Household Income Versus

Comprehensive household income adjusted using federal

poverty thresholds 53 35 13

Comprehensive household income adjusted for household size 61 29 10

CBO's historical income measure 77 10 13

Families with Children

Family Cash Income Versus Household Cash Income 76 9 15

Household Cash Income Versus

Cash plus taxes paid by businesses 97 1 1

Cash plus taxes paid by businesses and nonhealth in-kind benefits 95 3 2

Cash plus taxes paid by businesses and all in-kind benefits 91 4 5

Comprehensive Household Income Versus

Comprehensive household income adjusted using federal

poverty thresholds 64 8 29

Comprehensive household income adjusted for household size 73 3 24

CBO's historical income measure 78 9 13

Elderly Childless Families

Family Cash Income Versus Household Cash Income 79 6 15

Household Cash Income Versus

Cash plus taxes paid by businesses 95 2 3

Cash plus taxes paid by businesses and nonhealth in-kind benefits 94 2 4

Cash plus taxes paid by businesses and all in-kind benefits 89 10 1

Comprehensive Household Income Versus

Comprehensive household income adjusted using federal

poverty thresholds 45 53 2

Comprehensive household income adjusted for household size 53 45 1

CBO's historical income measure 86 9 5

(Continued)
CHAPTER THREE THE EFFECTS OF APPLYING ALTERNATIVE DISTRIBUTIONAL METHODS 33

Table 3-3. 

Continued

Comparisona

No Quintile

Change

Moving Up

at Least One

Quintile

Moving Down

at Least One

Quintile

Nonelderly Childless Families

Family Cash Income Versus Household Cash Income 72 16 13

Household Cash Income Versus

Cash plus taxes paid by businesses 97 2 1

Cash plus taxes paid by businesses and nonhealth in-kind benefits 95 2 3

Cash plus taxes paid by businesses and all in-kind benefits 92 2 6

Comprehensive Household Income Versus

Comprehensive household income adjusted using federal

poverty thresholds 48 47 6

Comprehensive household income adjusted for household size 56 40 4

CBO's historical income measure 73 11 16

SOURCE: Congressional Budget Office.

NOTES: Quintiles, or fifths, of the income distribution contain equal numbers of people.

Families are people related by blood, marriage, or adoption who live together. A household consists of the people who share a

housing unit, regardless of the relationships among them. A family with children has at least one member under age 18. An elderly

childless family is one headed by a person age 65 or older and with no member under age 18. A nonelderly childless family is one

headed by a person under age 65 and with no member under age 18.

In cases in which two or more families are combined into one household, each family’s original quintile is compared with the combined

household quintile. For example, if a second-quintile family joined with a fourth-quintile family to create a middle-quintile household,

the first family would be counted as moving up one quintile and the second family as moving down one quintile.

a. Box 3-1 on page 29 describes income measures used in CBO’s analysis.

all families shifted up two or more quintiles, and

none fell more than one quintile.

The Distribution of People, 

Families, and Households

As noted earlier, quintiles of the income distribution

contain equal numbers of people, ranked by a specific

measure of income. For the basic tabulations presented in Chapter 1, that measure is adjusted comprehensive household income. Equal numbers of people

per quintile does not mean equal numbers of families

or households, however, nor does it mean an even

distribution of people among quintiles for different

types of households. Two offsetting factors affect

the distribution of people, families, and households

into quintiles. On the one hand, combining individual incomes into household incomes tends to move

people in larger households up the distribution, all

else being the same. On the other hand, adjusting

incomes to account for differences in the size of

households shifts larger ones—and the people in

them—into lower quintiles. Only the actual distributions can reveal which effect predominates.

When ranked by comprehensive adjusted household income, people in households with children are

overrepresented in the lower quintiles, in large part

because of the adjustment for household size (see

Table 3-5). In contrast, more households headed by

an elderly person end up in lower quintiles even

though the adjustment tends to move them up the distribution; on average, elderly childless households

simply have lower unadjusted incomes than other

households. People in nonelderly childless households are more likely to appear at the top end of the
34 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table 3-4.

Distribution of Families Under CBO's Historical Income Measure and the Adjusted Comprehensive 

Household Income Measure, by Income Quintile, 1997 (In percent)

Quintile Based on 

CBO's Historical 

Income Measurea

Quintile Based on Adjusted Comprehensive Household Incomea

Lowest

Quintile

Second

Quintile

Middle

Quintile

Fourth

Quintile

Highest

Quintile All Quintiles

All Families

Lowest Quintile 18 2 1 * * 22

Second Quintile 3 14 2 1 * 20

Middle Quintile * 4 13 2 1 19

Fourth Quintile * * 4 14 1 19

Highest Quintile 0 * * 2 18 20

All Quintiles 21 19 19 20 21 100

Families with Children

Lowest Quintile 20 2 1 * * 23

Second Quintile 4 16 2 1 * 22

Middle Quintile 0 4 15 2 * 21

Fourth Quintile * * 3 15 1 19

Highest Quintile 0 0 0 2 13 14

All Quintiles 24 22 21 19 15 100

Elderly Childless Families

Lowest Quintile 20 2 * * * 22

Second Quintile 1 19 3 * * 24

Middle Quintile 0 1 16 2 * 19

Fourth Quintile 0 * 1 14 1 16

Highest Quintile 0 0 * 1 17 18

All Quintiles 21 22 21 18 19 100

Nonelderly Childless Families

Lowest Quintile 16 2 1 1 1 20

Second Quintile 3 10 1 1 1 16

Middle Quintile * 5 11 2 1 18

Fourth Quintile * * 4 14 2 20

Highest Quintile 0 * * 4 22 25

All Quintiles 19 17 18 21 26 100

SOURCE: Congressional Budget Office.

NOTES: * = less than 0.5 percent.

Families are people related by blood, marriage, or adoption who live together. A household consists of the people who share a

housing unit, regardless of the relationships among them. A family with children has at least one member under age 18. An elderly

childless family is one headed by a person age 65 or older and with no member under age 18. A nonelderly childless family is one

headed by a person under age 65 and with no member under age 18.

Quintiles, or fifths, of the income distribution contain equal numbers of people.

Bold numbers indicate percentages of families who are in the same quintile under both CBO’s historical measure and the comprehensive measure.

a. Box 3-1 on page 29 describes income measures used in CBO’s analysis.
CHAPTER THREE THE EFFECTS OF APPLYING ALTERNATIVE DISTRIBUTIONAL METHODS 35

Table 3-5. 

Distribution of People, Families, and Households Under the Adjusted Comprehensive Household

Income Measure, by Income Quintile and Household Type, 1997 (In percent)

Income Quintilea All Households

Households

with Children

Elderly Childless

Households

Nonelderly Childless

Households

People

Lowest 20 23 17 16

Second 20 22 21 15

Middle 20 21 22 17

Fourth 20 19 20 23

Highest 20 15 21 29

Total 100 100 100 100

Families

Lowest 21 24 21 19

Second 19 22 22 17

Middle 19 21 21 18

Fourth 20 19 18 21

Highest 21 15 19 26

Total 100 100 100 100

Households

Lowest 22 24 21 21

Second 20 22 22 17

Middle 19 21 21 17

Fourth 19 19 18 20

Highest 20 15 18 24

Total 100 100 100 100

SOURCE: Congressional Budget Office.

NOTES: Families are people related by blood, marriage, or adoption who live together. A household consists of the people who share a

housing unit, regardless of the relationships among them. A household with children has at least one member under age 18. An

elderly childless household is one headed by a person age 65 or older and with no member under age 18. A nonelderly childless

household is one headed by a person under age 65 and with no member under age 18.

Box 3-1 on page 29 describes the income measures used in CBO’s analysis.

a. Quintiles, or fifths, of the income distribution contain equal numbers of people.

distribution, in part because they have higher incomes than other households and in part because

their households are generally smaller than households with children.

The distributions among quintiles of people,

families, and households living with children differ

little, in part because families and households with

children are almost always the same and in part because the average size of families with children varies little among quintiles. In contrast, people in elderly childless households and elderly childless families are distributed nearly equally among quintiles,

but elderly childless households are more heavily

represented in the lower quintiles. That difference

arises primarily because combining families into

households moves nonelderly childless units up the

distribution, displacing elderly households downward. Among units that have no children and that are

not headed by an elderly person, families in the upper
36 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

quintiles are larger than those in lower quintiles,

yielding a more uneven distribution of people among

quintiles than of either families or households.

Effective Tax Rates and 

Income Under Alternative 

Income Measures

The measure of income used to rank households affects estimates of both effective tax rates and income.

Nevertheless, general trends in those estimates differ

little under the alternative measures CBO examined.

Effective Tax Rates

The choice of income measure affects estimates of

effective tax rates in two ways. First, measures that

include income from relatively more sources raise

incomes and thus reduce effective tax rates—that is,

taxes as a percentage of pretax income. Second, alternative measures of income distribute households

differently among quintiles, leading to different estimates for a given quintile of both effective tax rates

and income. Over the 1979-1997 period, choosing

from among the eight alternative measures of income

yields different estimates of tax rates and income but

has little effect on observed trends in those variables.

The choice of income measure has little effect

on the observed trend in the total effective federal tax

rate between 1979 and 1997 (see Figure 3-1 on page

38).4

 Under each measure that the figure shows, the

rate falls in the early 1980s following the Economic

Recovery Tax Act of 1981, rises irregularly until

1995, and dips slightly in 1997. The effective rate

was slightly higher in 1997 than it was in 1979, regardless of the measure of income used to rank

households.

The similarity of trends in effective tax rates

extends across income quintiles for all measures of

income except the ones that adjust for differences in

a household’s size (see Figure 3-2). That adjustment

moves households with children down the distribution and therefore concentrates taxpayers claiming

the earned income tax credit in the lowest quintile.

The effect of that concentration is to make the downward trend since 1985 in the effective tax rate for

households in that quintile sharper than the trends

observed for other measures of income. That difference in trends does not occur for households in other

quintiles.

The measure of income used to rank households

has differential effects on estimated effective tax

rates among quintiles. For households in the middle

quintile, for example, the effective rate is substantially lower if households are ranked by adjusted

comprehensive income rather than by unadjusted income. In contrast, for households in the highest

quintile, adjusting income for the size of households

has virtually no effect on effective tax rates during

the past two decades.

Each of the four federal taxes that CBO examined shows the same trend in its overall effective rate

between 1979 and 1997, regardless of the measure of

income used (see Figure 3-3).5

 That similarity of

trends does not hold, however, for individual income

quintiles, particularly the lowest one. 

For households in the lowest income quintile,

the effective individual income tax rate drops much

more sharply after 1985 under the adjusted household

income measure than under the unadjusted alternatives (see Figure 3-4). That difference is the result of

the adjustment to income for differences in the size

of households, which moves households with children into lower quintiles and, as noted above, concentrates the benefits of the EITC in the lowest

quintile. In contrast, effective individual income tax

rates using alternative income measures move in parallel for the middle and highest quintiles. In fact, for

the top quintile, using households rather than families

as the unit of observation has essentially no effect on

the change in measured tax rates, nor does adjusting

incomes for differences in households’ sizes. That

4. Table K-1 in Appendix K shows effective federal tax rates by income quintile for all eight measures of income.

5. Tables I-1a, I-2a, I-3a, I-4a, I-5a, I-6a, and I-7a show effective individual income, social insurance, corporate income, and excise tax

rates by income quintile for seven of the eight measures of income.

Appendix G provides comparable estimates for comprehensive

household income adjusted on the basis of household size.
CHAPTER THREE THE EFFECTS OF APPLYING ALTERNATIVE DISTRIBUTIONAL METHODS 37

stability results because high-income households generally contain only one family and tend not to change

quintiles under the adjustment for household size.

Effective rates for social insurance, corporate

income, and excise taxes follow roughly parallel

trends over the 1979-1997 period under all of the

measures of income CBO examined (see Figures 3-5,

3-6, and 3-7, respectively). Rates of change differ

among the measures for specific years, most obviously in the case of corporate income taxes for the

lowest quintile (see Figure 3-6). Under that tax, the

effective rate is constant after 1983 under the adjusted household income measure, even though the

rate moves up and down when other measures of income are used. Apparent variation in trends for other

sources of revenues, particularly excise taxes, shows

up only because rounding effective rates magnifies

small changes.

Levels of Income

Using measures of income that combine families into

households or that include income from more sources

leads tautologically to higher estimates of pretax income (see Figure 3-8).6

 Obviously, counting more

income can only increase the estimates. Over the

past two decades, more families per household and

higher noncash incomes have resulted in slightly

larger differences among estimates of pretax income

under alternative income measures.

The same pattern of parallel trends in income

under alternative measures holds for each income

quintile (see Figure 3-9). As the adjustment for

household size moves larger households into lower

quintiles, those households carry with them unadjusted incomes that are higher than the incomes of

the households they displace. If every household

moving into a lower quintile pushed exactly one

household into a higher quintile, that movement

would increase average income for the lower quintiles. However, larger households moving down displace more than one smaller household, and average

income for even the lowest quintile falls when incomes are adjusted for household size. Note that the

multiple smaller households pushed into higher quintiles by larger households moving down doubly affect

average income: first, by carrying with them their

lower incomes and second, by more than one of them

replacing the single larger household that moved

down.

6. Tables I-1c, I-2c, I-3c, I-4c, I-5c, I-6c, and I-7c show average pretax

and after-tax income under alternative measures of income for each

income quintile.
38 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

5

10

15

20

25

30

Percent

Household Cash Income

Household Cash Income Plus

Taxes Paid by Businessesa

Comprehensive Household Income

Figure 3-1.

Total Effective Federal Tax Rates, by Income Measure, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing total tax liabilities (individual income, corporate income, payroll, and excise) by the

applicable income measure.

Box 3-1 on page 29 describes income measures used in CBO’s analysis.

a. Taxes paid by businesses include corporate income taxes and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Adding nonhealth in-kind benefits (food stamps, school lunches and breakfasts, housing assistance, and

energy assistance) to this income measure has only a small effect on effective tax rates.
CHAPTER THREE THE EFFECTS OF APPLYING ALTERNATIVE DISTRIBUTIONAL METHODS 39

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

5

10

15

Percent Lowest Quintile

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

10

15

20

25

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

20

25

30

35

Percent Middle Quintile

Percent Highest Quintile

Household Cash Income Family Cash Income Comprehensive Household Income

Adjusted Comprehensive Household Income

Figure 3-2.

Total Effective Federal Tax Rates, by Income Measure and Quintile, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing total tax liabilities (individual income, corporate income, payroll, and excise) by the

applicable income measure.

Quintiles, or fifths, of the income distribution contain equal numbers of people.

Box 3-1 on page 29 describes income measures used in CBO’s analysis.
40 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

9

10

11

12

13

14

15

Percent Effective Individual Income Tax Rates

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

6

7

8

9

10

11

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

1

2

3

4

5

6

Percent Effective Social Insurance Tax Rates

Percent Effective Corporate Income Tax Rates

Household Cash Income Comprehensive Household Income Household Cash Income Plus

Taxes Paid by Businessesa

Figure 3-3.

Effective Federal Tax Rates, by Income Measure and Revenue Source, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by the applicable income measure.

Box 3-1 on page 29 describes income measures used in CBO’s analysis.

a. Taxes paid by businesses include corporate income taxes and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Adding nonhealth in-kind benefits (food stamps, school lunches and breakfasts, housing assistance, and

energy assistance) to this income measure has only a small effect on effective tax rates.
CHAPTER THREE THE EFFECTS OF APPLYING ALTERNATIVE DISTRIBUTIONAL METHODS 41

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

-10

-5

0

5

Percent Lowest Quintile

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

5

10

15

Percent Middle Quintile

Percent Highest Quintile

Household Cash Income Family Cash Income Comprehensive Household Income

Comprehensive Household Income

Adjusted for Household Size

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

5

10

15

20

Figure 3-4.

Effective Federal Individual Income Tax Rates, by Income Measure and Quintile, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing individual income tax liabilities by the applicable income measure.

Quintiles, or fifths, of the income distribution contain equal numbers of people.

Box 3-1 on page 29 describes income measures used in CBO’s analysis.
42 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

2

4

6

8

10

12

Percent Lowest Quintile

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

2

4

6

8

10

12

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

2

4

6

8

10

12

Percent Middle Quintile

Percent Highest Quintile

Household Cash Income Family Cash Income Comprehensive Household Income

Comprehensive Household Income

Adjusted for Household Size

Figure 3-5.

Effective Federal Social Insurance Tax Rates, by Income Measure and Quintile, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing social insurance tax liabilities by the applicable income measure.

Quintiles, or fifths, of the income distribution contain equal numbers of people.

Box 3-1 on page 29 describes income measures used in CBO’s analysis.
CHAPTER THREE THE EFFECTS OF APPLYING ALTERNATIVE DISTRIBUTIONAL METHODS 43

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

2

4

6

Percent Lowest Quintile

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

2

4

6

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

2

3

4

5

6

7

Percent Middle Quintile

Percent Highest Quintile

Household Cash Income Family Cash Income Comprehensive Household Income

Comprehensive Household Income

Adjusted for Household Size

Figure 3-6.

Effective Federal Corporate Income Tax Rates, by Income Measure and Quintile, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing corporate tax liabilities by the applicable income measure.

Quintiles, or fifths, of the income distribution contain equal numbers of people.

Box 3-1 on page 29 describes income measures used in CBO’s analysis.
44 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

2

4

Percent Lowest Quintile

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

2

4

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

2

4

Percent Middle Quintile

Percent Highest Quintile

Household Cash Income Family Cash Income Comprehensive Household Income

Comprehensive Household Income

Adjusted for Household Size

Figure 3-7.

Effective Federal Excise Tax Rates, by Income Measure and Quintile, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing excise tax liabilities by the applicable income measure.

Quintiles, or fifths, of the income distribution contain equal numbers of people.

Box 3-1 on page 29 describes income measures used in CBO’s analysis.
CHAPTER THREE THE EFFECTS OF APPLYING ALTERNATIVE DISTRIBUTIONAL METHODS 45

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

10

20

30

40

50

60

70

Thousands of 1997 Dollars

Household Cash Income

Household Cash Income Plus

Taxes Paid by Businessesa

Comprehensive Household Income

Family Cash Income

Figure 3-8.

Average Real Pretax Income by Income Measure, 1979-1997

SOURCE: Congressional Budget Office.

NOTE: Box 3-1 on page 29 describes income measures used in CBO’s analysis.

a. Taxes paid by businesses include corporate income taxes and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Adding nonhealth in-kind benefits (food stamps, school lunches and breakfasts, housing assistance, and

energy assistance) to this income measure has only a small effect on average real pretax income.
46 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

10

20

30

40

50

60

70

80

90

100

Thousands of 1997 Dollars Lowest Quintile

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

0

10

20

30

40

50

60

70

80

90

100

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

100

110

120

130

140

150

160

170

180

190

200

Thousands of 1997 Dollars Middle Quintile

Thousands of 1997 Dollars Highest Quintile

Household Cash Income Family Cash Income Comprehensive Household Income

Comprehensive Household Income

Adjusted for Household Size

Figure 3-9.

Average Real Pretax Income by Income Measure and Quintile, 1979-1997

SOURCE: Congressional Budget Office.

NOTES: Quintiles, or fifths, of the income distribution contain equal numbers of people.

Box 3-1 on page 29 describes income measures used in CBO’s analysis.
Appendixes
 
Appendix A

A Chronology of CBO’s Work on

the Distribution of Federal Taxes

The Congressional Budget Office’s (CBO’s)

analyses of the distribution of federal taxes

stretch back more than a decade. Over the period, the methodology has evolved to take advantage

of improvements in modeling capabilities and the

availability of more and better data. This study continues that evolution.

Table A-1.

Previous Congressional Budget Office Work on the Distribution of Federal Taxes

Date Report/Event

1985-1986 Rick Kasten and Frank Sammartino develop CBO’s microsimulation model for estimating federal individual income tax liabilities

1987 The Changing Distribution of Federal Taxes: 1975-1990 (CBO Study)

1988 The Changing Distribution of Federal Taxes: A Closer Look at 1980 (CBO Paper)

1989 CBO’s data on effective federal tax rates first appear in the House Committee 

on Ways and Means’s Green Book

1992 Richard Kasten, Frank Sammartino, and Eric Toder, Trends in Federal Tax Progressivity, 1980-1993

(paper prepared for the Conference on Tax Progressivity, Office of Tax Policy Research, School of

Business Administration, University of Michigan, Ann Arbor, September 11-12, 1992)

1992 CBO hosts a half-day conference to discuss its methods of distributional analysis. Topics include basic

data issues (sources and the differences between them, adjustments, and weights); CBO’s method for

simulating the distribution of combined federal taxes using census, tax-return, and expenditure

microdata; and the effects of moving from the income measure of the Bureau of the Census to that of

CBO

1993 Comparing CBO and Census Income Statistics (CBO Paper)

1994 The Green Book stops publishing CBO’s data on effective tax rates

1993-1999 CBO prepares annual tabulations of data on effective tax rates at the request of the Committee on Ways

and Means

1997 Perspectives on the Ownership of Capital Assets and the Realization of Capital Gains (CBO Paper)

1998 Estimates of Federal Tax Liabilities for Individuals and Families by Income Category and Family Type for

1995 and 1999 (CBO Memorandum)

1999 CBO transmits Preliminary Estimates of Effective Tax Rates to the Committee on Ways and Means on

September 7; the report provides preliminary estimates for the 1977-1995 period and projections for

1999

Appendix B

CBO’s Conference on

Distributional Measurement

On March 31, 2000, the Tax Analysis Division

of the Congressional Budget Office (CBO)

brought together 15 experts on distributional

issues in a one-day conference on conducting distributional analyses. The wide-ranging discussion

reached substantial agreement on how best to classify

people within the income distribution and assess their

effective tax rates. Rather than concentrate on the

ideal way to carry out distributional analysis, many of

the participants focused instead on how to do so in

the face of limitations on the available data that preclude that ideal. All attendees agreed that compromise was required to produce meaningful results.

Those compromises demand that findings be qualified but do not render them invalid.

Three major messages came out of the conference. First, the distributional statistics that CBO produces are both important and useful, and CBO should

continue to produce them regularly. Second, CBO

should investigate changes in and extensions of its

current measures to determine the impact of altering

its basic methodology. Third, rather than replace the

measures it currently uses with a single alternative,

CBO should produce statistics using a variety of measures so that users can choose the measures they feel

are most appropriate.

The conference posed four specific questions:

o What is the appropriate unit of analysis for distributional studies—the family, the household,

the tax unit, or some other group?

o What should count as income? Should it be

cash only or a broader measure?

o What is the appropriate period over which to

measure tax burdens? Should it be one year or

a longer period?

o Who bears the burden of various federal taxes?

Decisions made in carrying out the analysis reported

in this study reflect the discussion of those four questions at the conference. Much of CBO’s analysis

compares the effects of different answers to the questions to evaluate the importance of particular decisions.

Unit of Analysis

Participants agreed that which unit was chosen for

analysis was probably less important than making the

unit consistent throughout a study. Participants expressed a preference for using households—groups of

people, not necessarily related to each other, living

together in a single housing unit—on the grounds that

households probably better represent consumption

units than do tax filers (generally a single taxpayer or

a couple plus dependents) or families (related people

living together).

Definition of Income

There was general agreement that CBO should investigate the effects of using a broader measure of income than one comprising only cash earnings in
52 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

order to rank people in the income distribution. Participants nearly unanimously approved including

noncash items such as food stamps, school meals,

and housing and energy assistance, all measured at

their market value. No consensus was reached about

counting the value of health insurance and health programs such as Medicare and Medicaid. The major

objection was that the market value of such benefits

almost certainly overstates their worth to low-income

households. One proposed solution called for a dichotomous classification of households based on

whether they had any health coverage, either through

employment, through a government program, or

through privately purchased insurance. The obvious

difficulty with that approach is that it creates two

distributions that cannot be readily combined. Conference attendees expressed no interest in including

imputed income from durable property, such as

owner-occupied housing.

There was little discussion of how to adjust incomes to account for differences among households.

Participants seemed to agree that CBO’s adjustment

for differences in family size improved distributional

rankings. No strong feelings surfaced about the different work-related prices or costs that households

face.

Two complaints were raised about CBO’s distributional rankings. First, some participants noted that

Members of Congress and other users of the analyses

have difficulty thinking about quintile rankings and

incomes adjusted for differences in family size.

Those kinds of users apparently prefer stories about

individual families rather than statistical averages for

amorphous groups of people. A second and related

issue was that people seeing CBO’s tables cannot

easily find their place in the income distribution.

Their desire to do so argues for CBO’s providing

tables not only for adjusted income rankings but also

for distributions based on dollar income. At the same

time, participants cautioned, any analysis including

such tables should clearly explain the important differences between rankings based on cash income and

rankings based on adjusted income.

Measurement Period

Attendees generally favored measuring the incidence,

or burden, of taxes over a person’s lifetime rather

than annually because year-to-year variations in

income—both taxable and tax-exempt—can result in

misleading statistics about effective tax rates across

the income distribution. Participants agreed, however, that limitations in the available data preclude a

lifetime analysis and that analyzing shorter periods is

the only current option. Furthermore, because people

think of their tax liabilities in annual terms, CBO’s

focusing on yearly data makes it simpler both to compute incidence and to explain it to readers.

Tax Incidence

The assumptions about incidence underlying CBO’s

previous tax analyses evoked no serious complaints

from participants. Their major suggestion was that

CBO include more sources of revenue—particularly

estate and gift taxes and customs duties—in its analyses. Attendees acknowledged, however, that limitations in the data make including more sources difficult.

Conference Participants

Individuals from a variety of organizations and government agencies attended CBO’s distributional conference, including:

Tom Barthold, Joint Committee on Taxation

Julie-Anne Cronin, Office of Tax Analysis, 

Department of the Treasury

Al Davis, House Committee on Ways and Means

Jim Horney, Senate Committee on the Budget

(at the time of the conference, Center for

Budget and Policy Priorities)
APPENDIX B CBO’S CONFERENCE ON DISTRIBUTIONAL MEASUREMENT 53

Rick Kasten, CBO analyst, now retired

Arthur Kenneckell, Federal Reserve Board

Tom Koerner, Joint Committee on Taxation

Marvin Kosters, American Enterprise Institute

Jim Nunns, Office of Tax Analysis, Department 

of the Treasury

Lindy Paull, Joint Committee on Taxation

Wendell Primus, Center for Budget and Policy 

Priorities

Ralph Rector, Heritage Foundation

Frank Sammartino, Joint Economic Committee

(at the time of the conference, Urban Institute)

Bernie Schmitt, Joint Committee on Taxation

Joyce Zickler, Federal Reserve Board

Participants from the Congressional Budget

Office included:

Dan Crippen, Director

Barry Anderson, Deputy Director

Steve Lieberman, Executive Associate Director

Tom Woodward, Assistant Director, 

Tax Analysis Division

Roberton Williams, Deputy Assistant Director, 

Tax Analysis Division

Mark Booth, Senior Analyst—Revenue Estimation,

Tax Analysis Division

David Weiner, Senior Analyst—Modeling, 

Tax Analysis Division

Appendix C

Comparing the Distributional

Methodologies of CBO,

the Treasury Department, and

the Joint Committee on Taxation

Like the Congressional Budget Office (CBO),

the Department of the Treasury’s Office of

Tax Analysis (OTA) and the Joint Committee

on Taxation (JCT) produce tables showing the distribution of federal taxes.1

 The three groups agree on

many of the methodological points that have the

greatest influence on distributional results (see Table

C-1). For example, in their definitions of income,

they all count labor income—which accounts for over

70 percent of income—the same way. Similarly, all

three use the same assumptions about the incidence,

or burden, of individual income taxes and payroll

taxes, which together account for over 80 percent of

federal taxes. The groups’ methodologies differ,

however, along many important dimensions including

the unit of analysis, the way income is defined (what

“income” comprises, or the income measure), the

taxes included in the analysis, and assumptions about

incidence that are used to allocate federal tax liabilities.

Despite methodological differences, the three

agencies’ distributional analyses are qualitatively

similar. Patterns of effective tax rates among income

groups are comparable as are the estimates themselves (see Figures C-1 and C-2). That qualitative

similarity occurs in part because CBO’s, OTA’s, and

JCT’s methodologies are basically alike and in part

because some of their methodological differences

offset each other. For example, OTA’s broader definition of income, which yields lower estimated tax

rates, is offset by inclusion of estate and gift taxes

and customs duties, both of which are omitted from

CBO’s analysis.

1. The Treasury’s methodology is described in detail in Julie-Anne

Cronin, U.S. Treasury Distributional Analysis Methodology, OTA

Paper 85 (Department of the Treasury, Office of Tax Analysis, September 1999). The JCT’s methodology is outlined in Joint Committee on Taxation, Distribution of Certain Federal Tax Liabilities

by Income Class for Calendar Year 2001, JCX-2-01 (February 27,

2001).
56 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table C-1.

Summary of Distributional Methodologies

Methodology

Congressional

Budget Office

Department of

the Treasury

Joint Committee

on Taxation

Unit of Analysisa Household Family Tax unit

Income Definition Wages and salaries

Self-employment income

Rental income

Interest and dividends

Realized capital gains

Cash transfer payments

Retirement benefits

In-kind benefitsb

Taxes paid by businesses

(employer’s share of social

insurance taxes and

corporate income taxes)c

Employee contributions to

401(k) retirement plans

Wages and salaries

Self-employment income

Employer-provided fringe

benefits

Employer’s share of social

insurance taxesc

Net interest income

Pretax corporate profits

Real accruals of nonstock

capital gains

Pension and benefits from

individual retirement

accounts

Real earnings on retirement

and life insurance assets

Imputed rent from owneroccupied housing

Cash transfer payments

Adjusted gross income

Tax-exempt interest

Employer’s contributions to 

health and life insurance

Employer’s share of social

insurance taxesc

Workers’ compensation

Nontaxable Social Security

benefits

Medicare (Insurance value)

Alternative minimum tax

preference items

Excluded income of U.S. citizens 

living abroad

Taxes Included 

and Assumptions

About Their

Incidence

Individual income tax, borne 

by payers

Corporate income tax, borne 

by capital income

Social insurance taxes, borne

by employeesc

Excise taxes, borne by

consumers

Individual income tax, borne 

by payers

Corporate income tax, borne 

by capital income

Social insurance taxes, borne 

by employeesc

Excise taxes, borne by

consumers and by labor

and capital income

Customs duties, borne by

labor and capital income

Estate and gift taxes, borne 

by decedents

Individual income tax, borne 

by payers

Social insurance taxes, borne 

by employeesc

Excise taxes, borne by

consumers

Adjustments

to Income

Incomes adjusted by household 

size for ranking purposesd

No adjustments No adjustments

Presentation

of Results

By income quintile and dollar 

income category

By income quintile and dollar 

income category

By dollar income category

SOURCE: Congressional Budget Office.

a. Households are people who share a single housing unit, regardless of the relationships among them. Families are people related by blood,

marriage, or adoption who live together. Taxpayers filing dependent returns are considered part of the primary taxpaying unit and are not

counted separately.

b. Includes Medicare, Medicaid, employer-paid health insurance premiums, food stamps, school lunches and breakfasts, housing assistance,

and energy assistance.

c. Social insurance taxes finance Social Security, Medicare, and federal unemployment insurance.

d. Adjusted by dividing by the square root of the household’s size.
APPENDIX C COMPARING THE DISTRIBUTIONAL METHODOLOGIES OF CBO, THE TREASURY, AND JCT 57

Lowest Second Middle Fourth Highest All Quintiles

0

5

10

15

20

25

30

35

Treasury CBO 

Percent

Figure C-1.

Comparing Total Effective Federal Tax Rates as Calculated by the Department of the Treasury

and CBO, by Income Quintile, 1997

SOURCE: Congressional Budget Office.

NOTES: CBO’s calculations used the methodology described in Table C-1—with the exception that CBO did not adjust income for household

size—and applied calendar year 2000 tax law to the 1997 data. The Treasury’s calculations used the methodology described in Table

C-1 and also applied calendar year 2000 tax law to the data.

Quintiles, or fifths, of the income distribution contain equal numbers of people.
58 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

0 to 10 10 to 20 20 to 30 30 to 40 40 to 50 50 to 75 75 to 100 100 to 200 Over 200 All Categories

0

5

10

15

20

25

30

35

JCT CBO 

Percent

Thousands of Dollars

Figure C-2.

Comparing Total Effective Federal Tax Rates as Calculated by the Joint Committee on Taxation

and CBO, by Dollar Income Category, 1997

SOURCES: Congressional Budget Office; Joint Committee on Taxation.

NOTE: CBO’s calculations used the methodology described in Table C-1—with the exception that CBO did not adjust income for household

size—and applied calendar year 2000 tax law to the 1997 data. JCT’s calculations used the methodology described in Table C-1 and

also applied calendar year 2000 tax law to the data.
Appendix D

CBO’s Distributional Methodology

The Congressional Budget Office (CBO) uses a

multistep methodology to produce its estimates

of the distribution of incomes and taxes. The

Current Population Survey (CPS) is the primary

source of data for CBO’s distributional analyses, providing initial estimates of population and incomes.

CBO adjusts the incomes reported in the survey to

bring them in line with the totals reported by the Internal Revenue Service in its Statistics of Income file.

Next, CBO estimates federal taxes for each family in

the CPS on the basis of family income, demographic

characteristics, and existing laws in the relevant year.

CBO then groups the families in the CPS into quintiles, or fifths, on the basis of their incomes and tabulates the incomes and taxes for each quintile.

The Current Population

Survey

Conducted by the Bureau of the Census, the CPS is a

monthly survey of approximately 47,000 households,

containing roughly 122,000 individuals. The sample

used for the survey is statistically designed to represent the entire U.S. population and many demographic subpopulations. Every March, the CPS adds

questions about family income during the previous

calendar year, which form the basis for CBO’s income estimates for that year. (For example, CBO’s

1997 estimates are based on the CPS conducted in

March 1998.)1

The CPS data have three problems that must be

corrected before they can be used to estimate the distribution of taxes and incomes. First, the CPS does

not collect enough information about individual income taxes to allow CBO to estimate tax liabilities

accurately; in particular, the CPS lacks data on itemized deductions and capital gains. Second, high incomes in the CPS are top-coded (that is, capped at

given levels) to maintain confidentiality for the families included in the sample. Third, incomes in the

survey differ substantially from the amounts reported

on tax returns. Tax-return data are generally believed

to be more accurate than the incomes reported on

surveys.

CBO’s adjustments to the CPS income data are

based on data in the Statistics of Income (SOI) file

created annually by the Internal Revenue Service

(IRS). The file is based on a nationally representative sample of more than 100,000 individual income

tax returns; it contains detailed information on incomes and taxes. High-income tax returns are oversampled in the SOI file (that is, the proportion of

high-income people surveyed is greater than their

share of the population), enhancing the richness of

the data at the top of the income distribution. CBO

adjusts incomes for each year using the relevant SOI

file; for example, the adjustments for 1997 come

from the SOI file for the 1997 tax year.2

CBO imputes information missing from the CPS

data, such as deductions and capital gains, by using

the SOI. For example, to impute deductions, CBO

first splits families from the CPS into tax-filing units

1. For more information about the March supplement to the CPS, see

the section on 1999 methodology and documentation, available at

www.bls.census.gov/cps/ads/1999/smethdoc.htm.

2. For more information about the SOI, see Internal Revenue Service,

Statistics of Income, Individual Income Tax Returns 1997, IRS

Pub. 1304 (December 1999).
60 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

comparable with those in the SOI. Data from the SOI

file are then used to determine the probability that a

tax unit with particular income and demographic

characteristics claims deductions and the ratio of

those deductions to income. The tax units developed

from the CPS data are then assigned deductions on

the basis of those probabilities. A similar procedure

is used to impute other missing information.

To adjust for top-coding, CBO uses the SOI to

construct a distribution of each type of income

among high-income families. It then replaces topcoded incomes from the CPS with a randomly

selected amount from the appropriate SOI highincome distribution.

A more complex procedure is necessary to adjust incomes that have been incorrectly reported on

the CPS to match incomes in the SOI. Because lowincome families are not required to file tax returns,

the CPS includes many more tax units than the SOI

does. Therefore, CBO compares only incomes from

CPS units that are estimated to owe taxes with incomes from the SOI. In addition, for each source of

income, it compares data from the CPS with data

from the SOI and adjusts the CPS data until the level

and distribution of income on the two files are approximately the same. For example, interest and dividends are generally increased for families reporting

such income, and new recipients are created; rental

income and income from sole proprietorships are

generally adjusted downward. As a final step, CBO

revises the weights and incomes of taxpaying families in the top 1 percent of the income distribution so

that the number of such families and their average

income are identical in the two files.

Estimating Federal Taxes

Once incomes in the CPS have been adjusted to

match the SOI’s totals, CBO estimates individual

income taxes for each CPS tax-filing unit, using the

income tax law for the relevant year. However, for

high-income taxpayers, CBO uses data from the SOI

to impute taxes to those filing units in the CPS.

CBO estimates payroll taxes—covering Social

Security, Medicare, and federal unemployment insurance—for each unit on the basis of two sets of

factors: earnings and self-employment income in the

income-adjusted CPS, and the relevant tax rates and

maximum amounts of income subject to tax for each

year. It assumes that both the employee’s and employer’s shares of payroll taxes are borne by the employee.

Corporate taxes are apportioned to each family

in proportion to their adjusted capital income (interest, dividend, capital gains, and rental income), under

the assumption that the burden of corporate taxes

falls on capital income. For example, a family with

0.001 percent of total capital income is assigned

0.001 percent of overall corporate tax liability.

CBO estimates excise taxes on the basis of a

family’s spending on the goods subject to those

taxes, using data from the Consumer Expenditure

Survey (CEX). The CEX, which is a quarterly survey of family income and expenditures conducted by

the Bureau of Labor Statistics, divides families into

categories on the basis of their income and demographic characteristics.3

 For four consecutive quarters, the survey asks families detailed questions about

their expenditures on particular items over the previous three months. Those data are then used to compute average spending by each category of family on

the goods subject to excise taxes. CBO assumes that

each family in the CPS has the same average spending as do similar families with comparable levels of

income in the CEX.

CBO further assumes that excise taxes have two

distinct effects on consumers: they raise the prices of

the commodities subject to tax, and they cause prices

in general to increase. Consequently, for each good

on which an excise tax is levied, CBO apportions to

families (in proportion to their spending on the taxed

commodity) the part of excise tax revenues collected

in each year that reflects a rise in the price of that

good. The remaining revenue—the part that shows

up in higher prices overall—is distributed among

families in proportion to their total spending.

3. For more information about the Consumer Expenditure Survey, see

Bureau of Labor Statistics, Consumer Expenditure Survey, Interview Survey, 1997 (October 1999).
APPENDIX D CBO’S DISTRIBUTIONAL METHODOLOGY 61

Summarizing the Results

In a series of steps, CBO combines the incomes and

taxes of families for each year to create tables showing distributions of incomes and taxes among income

groups and types of households. First, it combines

families that share a residence into one household

record. Second, it groups households by one of several measures of income. For example, cash income

is defined on a cash-receipts basis and comprises

wages and salaries, net income from a business or

farm, taxable and nontaxable interest, dividends,

rental income, realized capital gains, cash transfers

from the government, and retirement benefits. Some

definitions of income also include the imputed values

of taxes paid by businesses—the employer’s contribution to payroll taxes and federal corporate income

taxes—as well as contributions to 401(k) plans. For

some analyses, CBO adds the estimated cash value of

in-kind benefits, as reported in the CPS, to the income definition. (Those in-kind benefits are food

stamps, school lunches and breakfasts, Medicare and

Medicaid health insurance, housing assistance, energy assistance, and employer-provided health insurance.) Some definitions of income exclude healthrelated in-kind benefits (Medicare, Medicaid, and

employer-provided health insurance).

To take account of the differing needs of larger

and smaller households, CBO adjusts some of the

income measures it uses to group households. Many

of the tables CBO constructs to display its distributional analyses use a measure of household income

that is adjusted for household size; the principal measure divides household income by the square root of

family size. Another measure adjusts income according to the equivalence scale implied by the federal

poverty thresholds (adjusted income equals household income divided by the relevant threshold). 

In the third step, CBO ranks households by the

(adjusted) incomes and groups them in quintiles

(fifths of the distribution) containing equal numbers

of people. CBO then tabulates overall income and

taxes for each quintile as well as for smaller groupings at the top of the distribution.

Specific Changes from 

Earlier Estimates

Changes in methodology and databases mean that the

estimates presented in this study cannot be directly

compared with estimates from CBO’s previous analyses of tax rates and incomes. Five differences are

most important:

o Income measures now include in-kind income

from government transfer programs, such as

Food Stamps, rent subsidies, Medicare, and

Medicaid, as well as health insurance premiums

paid by employers.

o Both cash income and the payroll tax base include imputed pretax contributions made by

families to 401(k)-type retirement funds.

o Households, rather than families, are the primary unit of analysis.

o The methodology for estimating excise taxes

has changed.

o Dollar amounts are adjusted for inflation using

the Research Series Consumer Price Index, a

consistent-methodology index developed by the

Bureau of Labor Statistics.

Appendix E

Comparing Measures of Personal Income:

CBO and the Bureau of Economic Analysis

The total amount of income implicit in the Congressional Budget Office’s (CBO’s) distributional tables differs from the measure of personal income reported by the Bureau of Economic

Analysis as part of the national income and product

accounts both on a conceptual basis and in the specific components it includes. Nevertheless, for components that are similar in the two measures, the total

dollar amounts are roughly comparable.

The basic difference between the two measures

is that personal income in the national income and

product accounts, or NIPAs, covers income earned in

current production, whereas CBO’s income measure

is based on cash receipts. Certain components of income are common to both measures (for example,

wages and salaries), but others are included only in

the NIPA measure (for example, investment income

from pension plans), and others show up only in

CBO’s measure (for example, capital gains). In general, the NIPA measure is more comprehensive, containing many types of income that CBO’s does not

include.

The Bureau of Economic Analysis (BEA) performs a detailed reconciliation of the NIPA measure

of personal income and the Internal Revenue Service’s adjusted gross income (AGI) measure.1

 The

reconciliation is similar to the kind of procedure that

would be necessary to reconcile the NIPA measure

and CBO’s, although CBO’s measure includes several items that are not part of AGI. For 1997, BEA

estimates an “AGI gap”—the difference between

AGI reported to the Internal Revenue Service and

BEA’s estimates of the equivalent income sources—

of $630 billion. Almost half of that amount comprises explicit adjustments for misreporting that BEA

makes to its estimates of personal income. CBO’s

reconciliation is less detailed than BEA’s; it adjusts

only for the larger and most easily measured differences.

Personal income in the NIPAs and CBO’s income measure most closely overlap in the case of

taxable personal income (TPI). TPI in the NIPAs

consists of wage and salary income, personal interest

income, personal dividend income, proprietors’ income, and rental income; over the past 20 years,

those components have accounted for 80 percent to

85 percent of personal income. The components of

personal income that are excluded from TPI in the

NIPAs are “other labor income” (mostly employers’

contributions for pensions and life and health insurance) and “transfer income” (primarily government

benefits such as Social Security and Medicare).2

 

In 1997, taxable personal income as estimated

by BEA in the NIPAs was $5.8 trillion, almost $1.4

trillion more than CBO’s estimate (see Table E-1).

However, $1.2 trillion of that difference can be rec1. See Thae S. Park, “Comparison of BEA Estimates of Personal Income and IRS Estimates of Adjusted Gross Income,” Survey of

Current Business (Bureau of Economic Analysis, February 2000),

available at www.bea.doc.gov/bea/pub/0200cont.htm.

2. For a comparison of all income measures in the Current Population

Survey, or CPS, with the totals in the NIPAs, including transfer

payments (which CBO takes directly from the CPS), see Mark

Roemer, Assessing the Quality of March CPS and SIPP [Survey of

Income and Program Participation] Income Estimates, 1990-1996

(Bureau of the Census, June 2000).
64 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

onciled with relative ease: $895 billion comes from

income components in the NIPAs that CBO’s measure excludes, and $312 billion derives from BEA’s

adjustments for misreporting. The remaining “unexplained difference” is only $157 billion, or about 3.5

percent of the CBO total.

Over the past two decades, taxable personal income in the NIPAs has consistently exceeded CBO’s

equivalent measure (see Figure E-1). After the basic

adjustments noted above, however, the measures

track each other closely.

Table E-1.

Differences Between Taxable Personal Income in the NIPAs and CBO’s Equivalent Measure, 1997

(In billions of dollars)

Wages

and

Salaries

SelfEmployment

Income

Interest

and

Dividends

Rental

Income Total

Taxable Personal Income in the NIPAs 3,889 581 1,199 128 5,797

Minus Misreporting Adjustments 90 232 -11 1 312

Minus Items Not Included on a Cash Basis 11 7 807 70 895

Adjusted Taxable Personal Income in the NIPAs 3,788 342 403 57 4,591

CBO’s Equivalent Measure of Taxable Personal Income 3,694 356 359 24 4,434

Unexplained Difference 94 -14 44 33 157

SOURCE: Congressional Budget Office.

NOTE: NIPAs = national income and product accounts.
APPENDIX E COMPARING MEASURES OF PERSONAL INCOME: CBO AND BEA 65

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

1

2

3

4

5

6

7

Trillions of Dollars

NIPA Taxable

Personal Income

Adjusted NIPA Taxable

Personal Income

CBO's Equivalent Measure

Figure E-1.

Total Income in the NIPAs and in CBO’s Equivalent Measure, 1979-1997

SOURCE: Congressional Budget Office.

NOTE: NIPAs = national income and product accounts.

Appendix F

Comparing Income Statistics from

CBO and the Bureau of the Census

The Bureau of the Census and the Congressional

Budget Office (CBO) both produce statistics

on the distribution of income. The Census Bureau’s statistics are a product of its annual March

Current Population Survey (CPS); CBO’s are a byproduct of its analyses of the distribution of tax liabilities. Although both offices base their distributional studies on the CPS, they differ in the sources

of income they consider, how they adjust data on incomes for underreporting and concerns about confidentiality, and the measure of income they use to

rank households. The alternative methodologies result in different estimates of the distribution of income among quintiles (fifths of the distribution), but

the trends in the distribution over time are similar

under both approaches.1

Defining Income

CBO and the Census Bureau use different definitions,

or measures, of income. The Census Bureau reports

income distributions using what it terms “money

income”—its official measure; it also reports them

using 14 alternative definitions.2

 None of the eight

measures of income used by CBO in this study match

the Census Bureau’s definitions. Both agencies include some in-kind benefits (such as Medicare and

energy assistance) in some of their definitions and

not in others. Most of CBO’s definitions include

taxes paid by businesses (for example, the employer’s share of Social Security), whereas none of

the Census Bureau’s measures do. As a further point

of difference, the Census Bureau takes into account

both federal and state income taxes in measuring

after-tax income, whereas CBO considers only federal taxes.

The choice of what “income” comprises obviously affects the income distribution that is observed.

Including income from sources that disproportionately go to upper-income households—for example,

capital gains and employer-paid health insurance

premiums—makes the share of income going to

higher-income quintiles appear larger. Including

components that disproportionately go to lowerincome households—such as food stamps and Medicaid—increases the share of income going to lowerincome quintiles.

Adjusting Income

The Census Bureau’s distributional estimates derive

from income reported on the annual March CPS;

CBO, however, adjusts those estimates to bring them

into line with the income reported to the Internal

Revenue Service on tax returns. CBO’s adjustments

have the biggest impact on high-income households,

substantially increasing the income of that group

above the levels reported by the Census Bureau.

1. For a more complete discussion of the differences between the two

agencies’ measures, see Congressional Budget Office, Comparing

CBO and Census Income Statistics, CBO Paper (June 1993).

2. See Bureau of the Census, Money Income in the United States:

1999 (September 2000), Appendix A, for a discussion of the Census Bureau’s definitions.
68 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Those adjustments result in part from respondents to

the CPS underreporting their income relative to

amounts appearing on tax returns and in part from

“top-coding” (the Census Bureau’s practice of capping incomes in CPS public-use files at specific

levels).

In terms of component incomes, CBO’s unadjusted measure of household cash income minus capital gains most closely matches the Census Bureau’s

money income measure (see the first and second panels of Table F-1). CBO’s measure, however, adds

substantial amounts of income from sources that the

Census Bureau’s measure does not include, particularly at the top of the distribution. The effect is to

increase the share of income going to the top quintile

and reduce shares for the other four. Under both

methods, the share of income going to the top

quintile has steadily increased over the 1979-1997

period, while the share going to all other quintiles has

declined.

Defining Income Quintiles

CBO defines income quintiles as having equal numbers of people, but it allows the number of households to vary. In contrast, the Census Bureau defines

quintiles as containing equal numbers of households

and differing numbers of people. Person-based quintiles give equal weight to all people; household-based

quintiles give less weight to people in large households than to people in smaller households. 

As discussed in Chapter 3, smaller households

have lower average income, so CBO tabulations that

do not adjust for household size show more households in the lower-income than in the higher-income

quintiles. Basing quintiles on people results in more

households in the lower quintiles; the share of income in the lower quintiles is thus greater, relative to

household-based quintiles, at the expense of the upper quintiles. Moving from household-based to

person-based quintiles increases the income shares of

the lower and second quintiles and lowers the shares

of the upper three quintiles (compare the second and

third panels of Table F-1). However, the distribution

of income shares does not differ significantly for the

two definitions of income quintiles.

Adjusting for Household Size

Some of CBO’s income measures—including the

measure used for the principal analysis of this study

—rank households on the basis of income that has

been adjusted for differences in household size.

Those adjustments divide family or household income by a factor that increases with the number of

people in the unit. As a result, larger families move

down the income distribution, displacing smaller

families and, hence, moving them up. Under adjusted income measures, the distribution of households among quintiles is more even than it is under

unadjusted measures.

Moving from an unadjusted measure to an adjusted measure decreases the shares of income going

to the lower quintiles, because they contain fewer

households than they do under the unadjusted measures (compare the third and fourth panels of Table

F-1). Once again, the choice of adjustment does not

affect the observed distribution of income shares.
APPENDIX F COMPARING INCOME STATISTICS FROM CBO AND THE BUREAU OF THE CENSUS 69

Table F-1.

Shares of Income for All Households, by Income Quintile, Using Alternative Income Definitions, 

1979-1997 (In percent)

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

Using the Census Bureau’s Definition of Money Income and Equal Households per Quintileb

Lowest Quintile 4.2 4.1 4.0 3.9 3.8 3.9 3.8 3.5 3.7 3.6

Second Quintile 10.2 10.3 10.0 9.9 9.8 9.4 9.5 9.1 9.1 8.9

Middle Quintile 17.2 16.5 16.6 16.1 15.7 16.1 16.0 15.1 15.2 15.1

Fourth Quintile 24.3 24.9 24.4 24.5 24.6 23.7 24.2 23.7 23.4 23.0

Highest Quintile 44.1 44.3 45.1 45.6 46.1 46.8 46.5 48.6 48.6 49.3

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

Using Household Cash Income (Excluding Capital Gains) and Equal Households per Quintile

Lowest Quintile 3.7 3.5 3.3 3.4 3.2 3.3 3.2 3.0 3.0 2.8

Second Quintile 9.6 9.4 9.0 9.1 8.8 8.6 8.6 8.3 8.2 7.8

Middle Quintile 16.1 15.8 15.4 15.2 14.8 14.5 14.5 14.2 14.1 13.6

Fourth Quintile 24.0 24.0 23.8 23.6 23.0 22.6 22.6 22.5 22.4 21.7

Highest Quintile 47.0 47.9 49.0 49.4 50.7 51.7 51.4 52.5 52.6 54.4

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

Using Household Cash Income (Excluding Capital Gains) and Equal People per Quintile

Lowest Quintile 6.8 6.3 5.5 5.8 5.6 5.7 5.5 5.2 5.4 5.1

Second Quintile 13.8 13.3 12.5 12.6 12.4 12.1 12.1 12.0 11.9 11.4

Middle Quintile 17.9 17.8 17.4 17.4 17.0 16.7 16.7 16.5 16.2 15.7

Fourth Quintile 22.8 22.7 23.3 22.7 22.6 21.8 22.0 22.2 21.5 20.8

Highest Quintile 38.9 40.5 41.7 42.2 43.1 44.4 44.0 44.7 45.4 47.3

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

Using Household Cash Income (Excluding Capital Gains) Adjusted

for Household Size and Equal People per Quintilec

Lowest Quintile 5.0 4.7 4.0 4.3 4.2 4.2 4.1 3.9 4.0 3.8

Second Quintile 11.3 10.7 10.1 10.2 10.1 9.9 9.7 9.6 9.5 9.1

Middle Quintile 16.3 16.0 15.8 15.7 15.4 15.2 15.3 15.0 14.9 14.3

Fourth Quintile 22.9 23.0 22.9 22.8 22.4 21.9 22.0 22.3 21.7 21.0

Highest Quintile 44.7 46.2 47.5 47.5 48.5 49.6 49.2 49.8 50.3 52.1

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

SOURCES: Congressional Budget Office; Bureau of the Census.

NOTES: A household consists of all people who share a housing unit, regardless of the relationships among them.

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

cash transfer payments, and retirement benefits.

Households with negative income are excluded from the lowest income category but are included in totals.

a. A quintile is a fifth of the income distribution.

b. See Bureau of the Census, Money Income in the United States: 1999 (September 2000), Appendix A, for a discussion of the Census

Bureau’s definition of money income.

c. For purposes of ranking by adjusted household income, the income for each household is divided by the square root of the household’s

size.

Appendix G

Distributional Estimates Using Adjusted

Comprehensive Household Income,

by Quintile, 1979-1997
72 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-1a.

Effective Federal Tax Rates for All Households, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate 

 

Lowest Quintile 8.1 8.3 8.1 9.7 8.9 8.5 7.9 7.6 6.0 5.6 5.3

Second Quintile 14.0 14.2 13.0 14.5 14.3 14.3 14.2 13.5 13.6 13.9 12.8

Middle Quintile 18.2 18.7 17.1 17.7 17.3 17.6 17.3 17.3 17.6 17.5 16.7

Fourth Quintile 21.2 21.9 19.9 20.2 20.0 20.3 20.2 20.4 20.8 20.5 20.0

Highest Quintile 27.8 27.1 23.7 23.7 25.4 25.1 25.2 26.8 28.3 27.7 27.4

All Quintiles 22.3 22.4 20.2 20.6 21.3 21.3 21.1 22.0 22.9 22.8 22.3

Top 10 Percent 30.0 28.4 24.7 24.4 26.8 26.2 26.3 28.5 30.4 29.4 29.1

Top 5 Percent 32.2 29.6 25.3 24.9 27.9 27.0 27.3 30.1 32.3 30.9 30.5

Top 1 Percent 37.3 31.8 26.8 26.0 29.9 28.2 28.9 33.3 36.4 33.3 32.7

Effective Individual Income Tax Rate 

 

Lowest Quintile -0.4 0.3 -0.1 0.3 -0.7 -1.1 -1.9 -2.3 -4.5 -5.0 -5.3

Second Quintile 3.9 4.5 3.5 3.9 3.4 3.5 3.1 2.4 2.2 2.4 1.3

Middle Quintile 7.3 8.0 6.6 6.5 5.8 6.1 5.9 5.5 5.5 5.6 4.8

Fourth Quintile 10.1 11.0 9.1 8.9 8.2 8.4 8.2 8.0 8.0 8.1 7.5

Highest Quintile 15.9 16.7 14.1 13.8 14.6 14.4 14.1 14.7 15.5 16.1 15.8

All Quintiles 11.1 12.0 10.2 10.1 10.2 10.2 9.8 10.0 10.4 11.0 10.5

Top 10 Percent 17.7 18.3 15.5 15.2 16.4 16.0 15.7 16.7 17.6 18.1 17.8

Top 5 Percent 19.4 19.7 16.8 16.4 18.1 17.4 17.1 18.6 19.6 20.0 19.5

Top 1 Percent 22.4 22.0 19.1 18.5 20.7 19.5 19.7 22.5 23.4 23.0 22.3

Effective Social Insurance Tax Rate 

 

Lowest Quintile 5.3 5.8 5.8 6.5 6.6 7.2 7.0 6.8 7.2 7.4 7.4

Second Quintile 7.3 7.8 7.6 8.4 8.6 8.7 9.0 8.8 8.8 9.2 9.2

Middle Quintile 8.3 8.9 8.7 9.2 9.1 9.4 9.3 9.5 9.6 9.7 9.7

Fourth Quintile 8.4 9.0 8.9 9.4 9.5 9.7 9.9 10.2 10.3 10.2 10.2

Highest Quintile 5.6 6.2 6.3 6.5 6.6 6.7 7.4 7.5 7.5 6.7 6.7

All Quintiles 6.8 7.5 7.4 7.8 7.9 8.0 8.4 8.5 8.6 8.1 8.1

Top 10 Percent 4.5 5.1 5.2 5.2 5.4 5.4 6.3 6.2 6.4 5.4 5.4

Top 5 Percent 3.2 3.8 3.8 3.8 4.1 3.9 5.0 4.8 5.1 4.2 4.2

Top 1 Percent 1.4 1.6 1.6 1.5 1.7 1.5 2.2 2.0 2.7 2.1 2.1

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by adjusted comprehensive household income.

A household consists of the people who share a housing unit, regardless of the relationships among them.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 73

Table G-1a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Effective Corporate Income Tax Rate 

 

Lowest Quintile 1.0 0.6 0.5 0.5 0.5 0.5 0.5 0.6 0.5 0.5 0.5

Second Quintile 1.4 0.8 0.6 0.6 0.9 0.8 0.6 0.8 0.8 0.7 0.7

Middle Quintile 1.6 1.0 0.9 0.9 1.2 1.1 1.0 1.1 1.2 1.1 1.1

Fourth Quintile 1.8 1.2 1.1 1.1 1.4 1.3 1.2 1.3 1.4 1.4 1.4

Highest Quintile 5.6 3.6 2.7 2.8 3.6 3.5 3.1 3.9 4.7 4.4 4.4

All Quintiles 3.4 2.2 1.8 1.8 2.4 2.3 2.0 2.5 2.9 2.9 2.9

Top 10 Percent 7.1 4.6 3.4 3.5 4.4 4.3 3.8 4.9 5.9 5.4 5.4

Top 5 Percent 9.0 5.6 4.2 4.3 5.4 5.3 4.7 6.0 7.2 6.3 6.3

Top 1 Percent 13.0 7.9 5.7 5.6 7.2 6.9 6.6 8.2 10.0 8.0 8.0

Effective Federal Excise Tax Rate 

 

Lowest Quintile 2.1 1.6 1.9 2.5 2.5 1.9 2.3 2.5 2.7 2.8 2.8

Second Quintile 1.3 1.1 1.2 1.5 1.5 1.3 1.5 1.6 1.8 1.6 1.6

Middle Quintile 1.1 0.8 0.9 1.1 1.1 1.0 1.1 1.2 1.3 1.1 1.1

Fourth Quintile 0.9 0.7 0.8 0.9 0.9 0.8 0.9 0.9 1.1 0.9 0.9

Highest Quintile 0.7 0.6 0.6 0.6 0.6 0.5 0.6 0.6 0.7 0.5 0.5

All Quintiles 1.0 0.8 0.8 0.9 0.9 0.8 0.9 1.0 1.0 0.9 0.9

Top 10 Percent 0.7 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.4 0.4

Top 5 Percent 0.6 0.5 0.5 0.5 0.4 0.4 0.5 0.5 0.5 0.4 0.4

Top 1 Percent 0.5 0.4 0.4 0.3 0.3 0.3 0.3 0.5 0.3 0.2 0.2

NOTES: (Continued)

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
74 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-1b.

Shares of Federal Tax Liabilities for All Households, by Income Quintile, Using 

Comprehensive Household Income Adjusted for Household Size, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities 

 

Lowest Quintile 1.9 1.8 1.7 2.1 1.9 1.8 1.7 1.5 1.1 1.0 0.9

Second Quintile 6.9 6.8 6.5 7.0 6.8 6.6 6.7 6.0 5.7 5.5 5.2

Middle Quintile 12.9 13.0 13.0 13.0 12.2 12.3 12.5 11.8 11.4 10.7 10.4

Fourth Quintile 21.0 21.8 21.8 21.3 20.6 20.2 20.8 20.2 19.2 18.1 18.1

Highest Quintile 57.1 56.4 56.9 56.4 58.5 59.0 58.3 60.5 62.5 64.7 65.4

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

Top 10 Percent 41.1 39.6 40.2 39.9 42.3 43.0 42.0 44.5 47.1 49.9 50.4

Top 5 Percent 30.0 28.0 28.4 28.5 30.9 31.8 30.4 33.3 35.8 39.1 39.4

Top 1 Percent 15.5 13.1 13.9 14.2 15.9 16.5 15.2 17.9 19.9 23.0 23.1

Share of Individual Income Tax Liabilities 

Lowest Quintile -0.2 0.1 0 0.1 -0.3 -0.5 -0.8 -1.0 -1.9 -1.8 -2.0

Second Quintile 3.9 4.0 3.4 3.8 3.3 3.4 3.1 2.3 2.1 2.0 1.1

Middle Quintile 10.4 10.4 10.0 9.8 8.7 8.9 9.2 8.2 7.9 7.1 6.4

Fourth Quintile 20.1 20.4 19.7 19.1 17.7 17.5 18.3 17.3 16.4 14.8 14.5

Highest Quintile 65.8 65.1 67.0 67.1 70.6 70.7 70.2 73.2 75.6 77.9 80.0

All Quintiles 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 48.9 47.6 50.1 50.6 54.4 54.8 53.9 57.4 60.3 63.8 65.6

Top 5 Percent 36.4 34.8 37.3 38.2 41.9 42.8 41.2 45.4 47.9 52.4 53.8

Top 1 Percent 18.7 16.9 19.6 20.7 23.1 23.8 22.3 26.7 28.3 32.9 33.6

Share of Social Insurance Tax Liabilities 

 

Lowest Quintile 4.1 3.9 3.4 3.7 3.7 4.0 3.7 3.4 3.7 3.6 3.6

Second Quintile 11.9 11.2 10.4 10.9 11.0 10.8 10.6 10.0 10.0 10.3 10.3

Middle Quintile 19.2 18.6 18.0 17.9 17.5 17.6 16.9 16.7 16.5 16.6 16.6

Fourth Quintile 27.1 27.0 26.7 26.3 26.5 25.9 25.6 26.1 25.3 25.5 25.5

Highest Quintile 37.7 39.1 41.2 41.0 41.2 41.8 43.2 43.7 44.5 44.0 44.0

All Quintiles 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 20.0 21.3 23.0 22.8 23.2 23.6 25.3 25.2 26.5 26.1 26.1

Top 5 Percent 9.8 10.8 11.6 11.6 12.2 12.2 14.0 13.9 15.0 15.1 15.1

Top 1 Percent 1.9 2.0 2.2 2.2 2.4 2.4 3.0 2.8 4.0 4.2 4.2

SOURCE: Congressional Budget Office.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 75

Table G-1b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Corporate Income Tax Liabilities 

Lowest Quintile 1.6 1.3 1.2 1.1 1.0 1.0 1.1 1.1 0.8 0.7 0.7

Second Quintile 4.5 3.9 3.4 3.4 3.7 3.5 3.2 3.0 2.7 2.3 2.3

Middle Quintile 7.2 7.0 7.4 7.6 7.8 7.1 7.7 6.7 6.2 5.5 5.5

Fourth Quintile 11.8 12.3 13.1 12.9 13.0 12.4 12.8 11.5 10.2 9.8 9.8

Highest Quintile 74.7 75.4 74.6 74.9 74.3 76.6 75.2 77.7 80.0 82.1 82.1

All Quintiles 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 63.9 64.0 62.9 64.0 62.6 66.3 64.4 67.6 71.0 72.7 72.7

Top 5 Percent 54.5 53.7 53.5 54.3 52.9 58.2 55.2 58.6 62.1 63.6 63.6

Top 1 Percent 35.2 32.8 33.6 34.4 34.1 37.6 36.6 38.8 42.4 43.7 43.7

Share of Federal Excise Tax Liabilities 

Lowest Quintile 11.6 10.8 9.7 12.0 12.4 9.8 11.3 10.7 11.2 12.5 12.5

Second Quintile 15.3 15.3 15.0 16.7 16.4 15.4 15.8 15.8 16.2 16.7 16.7

Middle Quintile 17.4 17.5 17.6 17.9 17.8 18.1 18.6 18.1 18.7 17.7 17.7

Fourth Quintile 21.1 21.1 21.3 20.6 21.0 21.6 21.5 20.9 21.4 20.4 20.4

Highest Quintile 34.0 34.4 35.5 31.1 31.1 33.1 31.9 33.2 31.4 31.9 31.9

All Quintiles 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 20.5 21.0 21.2 19.0 18.6 19.9 19.3 20.9 18.9 19.6 19.6

Top 5 Percent 12.7 13.0 13.2 11.7 11.0 12.4 11.9 13.7 11.4 12.0 12.0

Top 1 Percent 4.7 4.6 4.9 4.2 3.6 4.4 4.3 6.0 3.9 4.0 4.0

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them.

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
76 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-1c.

Number of Households, Average Pretax and After-Tax Income, Shares of Pretax and After-Tax Income,

and Income Category Minimums for All Households, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Number of Households (Millions)

 

Lowest Quintile 17.8 17.8 17.3 18.4 19.3 19.7 20.3 20.8 21.7 22.4 22.4

Second Quintile 16.1 16.6 17.3 17.9 18.6 19.1 19.1 19.5 19.6 20.3 20.3

Middle Quintile 15.1 15.8 16.6 17.2 17.7 18.3 18.9 19.2 19.4 19.8 19.8

Fourth Quintile 15.4 16.1 16.5 17.2 17.7 18.0 18.6 19.0 19.0 19.7 19.7

Highest Quintile 16.6 17.3 17.8 18.1 18.4 19.1 19.2 19.3 19.8 20.4 20.4

All Quintiles 81.4 84.2 86.2 89.5 92.0 94.6 96.7 98.2 99.7 102.9 102.9

Top 10 Percent 8.4 8.9 9.2 9.2 9.4 9.7 9.7 9.7 10.1 10.3 10.3

Top 5 Percent 4.2 4.6 4.6 4.6 4.7 4.9 4.9 4.9 5.0 5.2 5.2

Top 1 Percent 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 1.0 1.0

Average Income (1997 dollars)

Pretax Income

 

Lowest Quintile 11,800 11,100 10,200 11,100 11,300 11,700 11,300 11,000 11,400 11,400 11,400

Second Quintile 27,100 25,500 23,900 25,600 26,600 27,300 26,900 26,800 28,200 28,600 28,600

Middle Quintile 41,400 39,300 37,900 40,100 41,700 42,700 41,700 42,000 43,500 45,100 45,100

Fourth Quintile 56,800 54,900 55,000 57,800 60,300 61,900 60,400 61,700 63,500 65,600 65,600

Highest Quintile 109,500 107,000 111,400 123,800 130,000 138,000 131,700 138,800 145,700 167,500 167,500

All Quintiles 48,500 47,000 47,500 51,000 53,100 55,400 53,600 54,800 57,300 62,400 62,400

Top 10 Percent 144,500 139,100 146,800 167,800 175,700 190,400 179,200 191,100 201,100 240,700 240,700

Top 5 Percent 195,700 183,700 200,200 232,800 244,200 267,100 249,300 266,100 288,200 355,800 355,800

Top 1 Percent 420,200 389,600 463,800 581,600 598,000 694,000 616,700 672,900 761,200 1,016,900 1,016,900

 

After-Tax Income

 

Lowest Quintile 10,900 10,200 9,400 10,000 10,300 10,800 10,400 10,200 10,700 10,800 10,800

Second Quintile 23,300 21,800 20,800 21,900 22,800 23,400 23,100 23,200 24,300 24,700 25,000

Middle Quintile 33,800 32,000 31,500 33,000 34,500 35,200 34,500 34,700 35,800 37,200 37,500

Fourth Quintile 44,700 42,900 44,100 46,100 48,300 49,300 48,200 49,100 50,300 52,200 52,500

Highest Quintile 79,100 78,000 85,000 94,500 96,900 103,300 98,500 101,700 104,400 121,000 121,600

All Quintiles 37,700 36,400 37,900 40,500 41,800 43,600 42,300 42,700 44,200 48,200 48,500

Top 10 Percent 101,200 99,500 110,600 126,800 128,600 140,600 132,000 136,700 140,100 169,900 170,800

Top 5 Percent 132,600 129,400 149,500 174,700 176,000 195,000 181,400 186,100 195,100 245,900 247,400

Top 1 Percent 263,700 265,700 339,400 430,100 419,300 498,300 438,800 449,200 483,800 677,900 684,500

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them.

Comprehensive household income equals 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 employee 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 totals.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 77

Table G-1c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Income (Percent)

Pretax Income

 

Lowest Quintile 5.3 5.0 4.3 4.5 4.5 4.4 4.4 4.2 4.3 4.0 4.0

Second Quintile 11.1 10.7 10.1 10.0 10.1 9.9 9.9 9.7 9.6 9.0 9.0

Middle Quintile 15.8 15.7 15.4 15.1 15.1 14.9 15.3 15.0 14.8 13.9 13.9

Fourth Quintile 22.1 22.3 22.1 21.8 21.9 21.3 21.7 21.8 21.1 20.2 20.2

Highest Quintile 45.9 46.7 48.4 49.1 49.0 50.1 48.9 49.7 50.5 53.2 53.2

All Quintiles 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 30.6 31.3 32.9 33.7 33.6 35.1 33.7 34.4 35.5 38.7 38.7

Top 5 Percent 20.8 21.2 22.6 23.6 23.6 25.1 23.6 24.4 25.3 28.9 28.9

Top 1 Percent 9.3 9.3 10.4 11.3 11.3 12.5 11.1 11.8 12.5 15.8 15.8

After-Tax Income

 

Lowest Quintile 6.3 5.9 5.0 5.1 5.2 5.1 5.2 5.0 5.3 4.9 4.8

Second Quintile 12.2 11.8 11.0 10.8 11.0 10.8 10.8 10.8 10.8 10.1 10.1

Middle Quintile 16.6 16.4 16.0 15.7 15.8 15.6 16.0 15.9 15.8 14.8 14.9

Fourth Quintile 22.4 22.5 22.2 21.9 22.2 21.6 22.0 22.2 21.7 20.8 20.8

Highest Quintile 42.7 43.9 46.3 47.2 46.4 47.7 46.4 46.7 46.9 49.8 49.7

All Quintiles 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 27.5 28.8 31.0 32.1 31.3 32.9 31.5 31.5 32.1 35.4 35.3

Top 5 Percent 18.1 19.2 21.1 22.3 21.6 23.3 21.7 21.9 22.3 25.8 25.8

Top 1 Percent 7.5 8.1 9.6 10.5 10.1 11.4 10.0 10.1 10.3 13.6 13.7

Minimum Adjusted Income (1997 dollars)

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 13,000 12,200 11,300 12,300 12,700 13,200 12,900 12,800 13,400 13,700 13,700

Middle Quintile 21,100 20,100 19,400 20,700 21,700 22,300 22,000 22,000 23,000 23,600 23,600

Fourth Quintile 29,200 28,300 28,300 30,000 31,300 32,200 31,800 31,900 33,100 34,400 34,400

Highest Quintile 41,200 40,600 41,300 43,800 46,200 47,200 46,300 47,800 48,600 50,800 50,800

Top 10 Percent 53,000 52,800 53,700 58,200 60,700 62,400 61,800 63,500 65,500 69,900 69,900

Top 5 Percent 67,200 67,200 69,200 76,100 78,500 81,600 80,500 81,900 86,800 93,300 93,300

Top 1 Percent 130,800 126,500 133,800 154,900 162,600 181,000 173,700 182,000 199,000 245,700 245,700

NOTES: (Continued)

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
78 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-2a.

Effective Federal Tax Rates for Households with Children, by Income Quintile, Using Comprehensive

Household Income Adjusted for Household Size, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate

Lowest Quintile 7.9 8.7 8.1 9.9 7.9 7.8 6.4 6.0 2.5 2.1 1.6

Second Quintile 15.4 16.4 15.2 16.4 16.0 16.0 15.4 14.6 14.5 14.9 12.9

Middle Quintile 19.0 20.2 18.8 19.4 18.7 19.2 19.2 19.0 19.2 19.1 17.6

Fourth Quintile 21.3 22.7 20.9 21.1 20.8 21.0 21.2 21.5 21.5 21.3 20.3

Highest Quintile 26.6 26.2 23.8 23.5 25.5 24.8 25.3 27.2 29.3 28.4 28.0

All Quintiles 21.1 21.7 20.2 20.6 21.0 20.9 20.8 21.9 22.8 22.5 21.6

Top 10 Percent 28.9 27.4 24.8 24.2 27.0 25.8 26.6 29.1 31.7 30.4 29.9

Top 5 Percent 31.0 28.4 25.5 24.9 28.4 26.6 27.6 30.9 33.8 31.9 31.4

Top 1 Percent 35.2 30.5 27.7 26.7 31.2 27.5 29.0 34.3 37.4 34.5 33.7

Effective Individual Income Tax Rate 

 

Lowest Quintile -1.1 -0.2 -0.7 -0.2 -1.9 -2.7 -3.8 -4.3 -8.3 -9.0 -9.5

Second Quintile 4.6 5.4 4.1 4.4 3.6 3.7 3.0 2.1 1.8 2.0 0.1

Middle Quintile 8.0 8.8 7.4 7.2 6.3 6.6 6.4 5.9 5.9 5.9 4.5

Fourth Quintile 10.5 11.6 9.6 9.3 8.5 8.7 8.4 8.2 8.1 8.2 7.1

Highest Quintile 16.2 16.6 14.8 14.2 15.8 15.0 14.7 15.8 16.8 17.5 17.0

All Quintiles 10.5 11.2 9.8 9.7 9.8 9.5 9.0 9.6 10.0 10.5 9.5

Top 10 Percent 18.4 18.5 16.7 16.0 18.3 17.1 16.9 18.5 19.5 20.0 19.6

Top 5 Percent 20.2 20.1 18.3 17.6 20.7 18.8 19.0 21.0 21.7 22.2 21.7

Top 1 Percent 22.6 22.4 21.5 20.6 24.5 21.0 21.9 25.5 24.9 25.2 24.4

Effective Social Insurance Tax Rate 

 

Lowest Quintile 7.0 7.4 7.0 8.0 7.8 8.7 8.2 8.0 8.4 8.8 8.8

Second Quintile 9.1 9.7 9.8 10.5 10.8 10.8 10.9 10.8 10.9 11.3 11.3

Middle Quintile 9.4 10.1 10.3 10.9 11.1 11.3 11.5 11.7 11.8 11.7 11.7

Fourth Quintile 8.9 9.9 10.1 10.6 11.0 11.0 11.5 11.9 11.8 11.8 11.8

Highest Quintile 5.5 6.6 6.7 6.7 7.0 6.8 8.1 7.8 7.6 7.0 7.0

All Quintiles 7.7 8.7 8.7 9.1 9.3 9.4 9.9 9.9 9.7 9.4 9.4

Top 10 Percent 4.0 5.0 5.0 5.1 5.3 5.0 6.6 6.1 6.0 5.5 5.5

Top 5 Percent 2.8 3.6 3.6 3.5 3.8 3.4 5.0 4.4 4.7 4.2 4.2

Top 1 Percent 1.2 1.6 1.5 1.4 1.7 1.5 2.4 1.8 2.7 2.4 2.4

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by adjusted comprehensive household income.

A household consists of the people who share a housing unit, regardless of the relationships among them. A household with

children has at least one member under age 18.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 79

Table G-2a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Effective Corporate Income Tax Rate 

 

Lowest Quintile 0.5 0.3 0.3 0.2 0.3 0.3 0.2 0.4 0.3 0.2 0.2

Second Quintile 0.6 0.4 0.3 0.3 0.4 0.3 0.3 0.3 0.4 0.4 0.4

Middle Quintile 0.7 0.4 0.3 0.3 0.5 0.4 0.4 0.4 0.5 0.5 0.5

Fourth Quintile 1.0 0.6 0.5 0.5 0.6 0.6 0.5 0.6 0.7 0.7 0.7

Highest Quintile 4.3 2.4 1.8 2.0 2.3 2.5 2.0 3.0 4.3 3.5 3.5

All Quintiles 2.0 1.1 0.9 1.0 1.2 1.2 1.0 1.5 2.2 1.8 1.8

Top 10 Percent 6.0 3.5 2.6 2.7 2.9 3.3 2.6 4.0 5.8 4.4 4.4

Top 5 Percent 7.5 4.3 3.2 3.3 3.6 4.1 3.2 4.9 7.0 5.2 5.2

Top 1 Percent 11.0 6.2 4.4 4.4 4.8 4.7 4.4 6.4 9.6 6.7 6.7

Effective Federal Excise Tax Rate 

 

Lowest Quintile 1.5 1.2 1.6 1.9 1.7 1.6 1.8 1.9 2.1 2.0 2.0

Second Quintile 1.2 0.9 1.0 1.2 1.1 1.1 1.2 1.3 1.4 1.2 1.2

Middle Quintile 1.0 0.7 0.8 0.9 0.9 0.9 0.9 1.0 1.1 0.9 0.9

Fourth Quintile 0.8 0.6 0.7 0.8 0.7 0.7 0.8 0.8 0.9 0.7 0.7

Highest Quintile 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.5 0.4 0.4

All Quintiles 0.9 0.7 0.8 0.9 0.8 0.8 0.8 0.9 0.9 0.8 0.8

Top 10 Percent 0.5 0.4 0.4 0.5 0.4 0.4 0.5 0.6 0.4 0.4 0.4

Top 5 Percent 0.5 0.4 0.4 0.4 0.3 0.3 0.4 0.6 0.4 0.3 0.3

Top 1 Percent 0.4 0.3 0.3 0.3 0.2 0.2 0.4 0.6 0.3 0.2 0.2

 

NOTES: (Continued)

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly, or indirectly through their employers. Federal excise taxes are distributed to households according to their

consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of capital

income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
80 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-2b.

Shares of Federal Tax Liabilities for Households with Children, by Income Quintile, Using 

Comprehensive Household Income Adjusted for Household Size, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities 

Lowest Quintile 2.3 2.5 2.4 2.9 2.3 2.3 1.9 1.6 0.6 0.5 0.4

Second Quintile 9.9 10.4 9.7 10.2 9.6 9.7 9.7 8.1 7.6 7.5 6.8

Middle Quintile 18.5 19.2 18.1 17.4 16.6 17.2 16.9 15.0 14.2 14.1 13.5

Fourth Quintile 25.5 26.9 26.1 25.3 23.9 24.6 24.6 22.9 21.0 20.6 20.4

Highest Quintile 43.6 40.8 43.5 44.0 47.4 46.2 46.8 52.4 56.7 57.4 59.0

All Quintiles 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 29.6 25.0 28.0 29.3 32.5 31.7 31.9 37.6 42.8 44.2 45.5

Top 5 Percent 21.7 16.9 20.1 20.6 24.0 23.5 22.7 27.9 34.3 35.5 36.4

Top 1 Percent 10.7 7.8 10.4 11.3 13.5 13.8 11.4 16.4 22.0 22.1 22.5

Share of Individual Income Tax Liabilities 

 

Lowest Quintile -0.6 -0.1 -0.4 -0.1 -1.2 -1.8 -2.7 -2.6 -4.5 -4.5 -5.2

Second Quintile 5.9 6.6 5.4 5.8 4.7 5.0 4.3 2.7 2.1 2.2 0.1

Middle Quintile 15.6 16.3 14.7 13.8 12.0 13.0 13.0 10.6 9.9 9.4 7.8

Fourth Quintile 25.4 26.7 24.8 23.7 21.1 22.2 22.5 19.8 18.1 17.0 16.3

Highest Quintile 53.6 50.5 55.6 56.8 63.3 61.5 62.9 69.5 74.4 75.8 81.1

All Quintiles 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 38.0 32.9 39.0 41.1 47.5 46.3 47.0 54.3 60.3 62.7 67.4

Top 5 Percent 28.4 23.2 29.7 31.1 37.6 36.4 36.0 43.2 50.4 53.0 56.9

Top 1 Percent 13.9 11.1 16.7 18.6 22.9 23.2 19.9 27.7 33.5 34.7 36.9

Share of Social Insurance Tax Liabilities 

 

Lowest Quintile 5.6 5.4 4.9 5.3 5.1 5.8 5.2 4.6 4.7 4.9 4.9

Second Quintile 15.9 15.4 14.5 14.8 14.8 14.6 14.4 13.3 13.4 13.6 13.6

Middle Quintile 24.8 24.1 22.9 22.1 22.2 22.5 21.2 20.6 20.3 20.5 20.5

Fourth Quintile 29.1 29.2 29.2 28.8 28.5 28.8 28.0 28.1 27.0 27.1 27.1

Highest Quintile 24.5 25.7 28.3 28.7 29.3 28.2 31.3 33.4 34.6 34.0 34.0

All Quintiles 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 11.1 11.3 13.2 13.9 14.5 13.7 16.5 17.5 19.0 19.2 19.2

Top 5 Percent 5.3 5.3 6.6 6.7 7.3 6.7 8.6 8.9 11.1 11.3 11.3

Top 1 Percent 1.0 1.0 1.3 1.3 1.6 1.7 2.0 1.9 3.7 3.6 3.6

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. A household with

children has at least one member under age 18.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 81

Table G-2b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Corporate Income Tax Liabilities 

Lowest Quintile 1.6 1.8 1.8 1.4 1.4 1.3 1.4 1.4 0.7 0.6 0.6

Second Quintile 3.9 4.5 4.1 3.7 4.5 3.6 4.0 2.6 2.0 2.2 2.2

Middle Quintile 7.3 7.7 7.3 6.2 7.4 6.5 6.9 4.8 3.7 4.8 4.8

Fourth Quintile 12.8 13.5 12.8 11.7 12.2 12.2 12.3 9.1 7.2 7.7 7.7

Highest Quintile 74.2 72.2 73.6 76.7 73.8 79.6 75.6 82.3 86.4 86.1 86.1

All Quintiles 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 60.5 62.9 67.7 62.7 69.2 64.7 74.2 80.3 78.6 78.6

Top 5 Percent 55.8 49.2 55.7 57.1 53.2 61.8 54.8 64.0 73.9 70.5 70.5

Top 1 Percent 35.5 30.3 35.9 38.6 36.8 40.3 35.8 43.9 58.2 52.7 52.7

 

Share of Federal Excise Tax Liabilities 

Lowest Quintile 10.8 11.2 12.5 13.5 13.2 12.5 13.2 12.5 12.4 13.9 13.9

Second Quintile 18.0 18.1 17.6 17.9 17.8 17.4 18.2 17.3 18.4 18.4 18.4

Middle Quintile 22.2 22.0 21.2 19.8 20.4 20.1 20.6 18.6 20.0 20.1 20.1

Fourth Quintile 24.2 23.8 23.2 22.5 22.0 22.6 22.0 21.1 22.1 20.7 20.7

Highest Quintile 24.2 23.8 24.4 24.4 25.0 23.9 25.1 29.0 25.9 26.0 26.0

All Quintiles 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 13.3 12.2 13.1 13.8 13.7 12.9 14.7 18.3 14.6 15.4 15.4

Top 5 Percent 8.2 7.1 8.1 8.1 7.7 7.8 9.0 12.2 9.1 9.4 9.4

Top 1 Percent 2.9 2.6 2.9 3.5 2.7 3.2 3.7 6.8 3.6 3.1 3.1

NOTES: (Continued)

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly, or indirectly through their employers. Federal excise taxes are distributed to households according to their

consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of capital

income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
82 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-2c.

Number of Households, Average Pretax and After-Tax Income, Shares of Pretax and After-Tax 

Income, and Income Category Minimums for Households with Children, by Income Quintile, 

Using Comprehensive Household Income Adjusted for Household Size, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Number of Households (Millions)

 

Lowest Quintile 6.9 7.2 7.5 7.8 8.1 8.3 8.5 8.8 8.4 8.7 8.7

Second Quintile 7.0 7.1 7.1 7.3 7.4 7.4 7.7 7.9 7.9 8.0 8.0

Middle Quintile 7.2 7.2 6.9 6.9 7.1 7.1 7.1 7.2 7.3 7.6 7.6

Fourth Quintile 6.5 6.4 6.3 6.5 6.4 6.6 6.5 6.7 6.8 6.9 6.9

Highest Quintile 4.5 4.4 4.5 4.8 4.9 4.7 4.9 5.5 5.6 5.5 5.5

All Quintiles 32.4 32.6 32.7 33.6 34.0 34.2 34.8 36.3 36.2 36.9 36.9

Top 10 Percent 2.0 1.9 2.0 2.2 2.2 2.1 2.3 2.6 2.6 2.7 2.7

Top 5 Percent 1.0 0.9 1.0 1.0 1.1 1.0 1.1 1.3 1.4 1.4 1.4

Top 1 Percent 0.2 0.2 0.2 0.2 0.2 0.3 0.2 0.3 0.3 0.3 0.3

Average Income (1997 dollars)

Pretax Income

 

Lowest Quintile 16,200 15,000 13,700 14,800 15,100 15,800 15,300 14,800 15,800 15,900 15,900

Second Quintile 34,800 32,700 30,800 33,100 34,500 35,800 35,000 34,800 36,800 37,500 37,500

Middle Quintile 51,100 48,700 47,700 50,800 53,000 54,600 53,600 54,300 56,400 58,200 58,200

Fourth Quintile 69,600 68,000 68,300 72,100 76,000 77,900 76,800 78,500 80,400 83,100 83,100

Highest Quintile 137,900 129,000 138,500 153,300 161,700 174,100 161,800 173,900 194,800 217,900 217,900

All Quintiles 55,600 51,900 52,000 56,600 59,300 61,100 59,300 62,500 68,100 71,900 71,900

Top 10 Percent 192,100 178,900 197,100 219,300 229,900 254,300 228,300 247,200 289,100 320,900 320,900

Top 5 Percent 265,000 245,800 269,500 318,100 327,000 368,700 323,800 355,600 418,200 464,400 464,400

Top 1 Percent 601,100 540,100 585,900 762,000 745,900 836,900 716,300 785,300 1,036,600 1,183,900 1,183,900

 

After-Tax Income

 

Lowest Quintile 14,900 13,700 12,600 13,400 13,900 14,500 14,300 13,900 15,400 15,600 15,600

Second Quintile 29,400 27,400 26,100 27,600 29,000 30,100 29,600 29,700 31,500 31,900 32,700

Middle Quintile 41,400 38,900 38,700 41,000 43,100 44,100 43,300 44,000 45,500 47,100 47,900

Fourth Quintile 54,800 52,600 54,100 56,800 60,200 61,500 60,500 61,600 63,100 65,400 66,300

Highest Quintile 101,300 95,300 105,500 117,300 120,500 131,000 120,900 126,600 137,700 156,000 157,000

All Quintiles 43,900 40,600 41,500 44,900 46,800 48,300 47,000 48,900 52,500 55,700 56,400

Top 10 Percent 136,600 129,900 148,300 166,100 167,900 188,600 167,600 175,200 197,500 223,500 224,900

Top 5 Percent 182,800 176,100 200,800 239,000 234,000 270,400 234,300 245,600 277,000 316,200 318,600

Top 1 Percent 389,600 375,400 423,400 558,700 513,200 606,700 508,800 516,200 648,800 776,000 785,100

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. A household with

children has at least one member under age 18.

Comprehensive household income equals 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 employee 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 totals.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 83

Table G-2c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

Current

Law

Under

2000

Law 

Share of Income (Percent)

Pretax Income

Lowest Quintile 6.2 6.4 6.1 6.1 6.1 6.3 6.3 5.7 5.4 5.2 5.2

Second Quintile 13.6 13.7 12.8 12.8 12.7 12.7 13.1 12.1 11.9 11.4 11.4

Middle Quintile 20.5 20.7 19.4 18.4 18.7 18.6 18.3 17.3 16.8 16.6 16.6

Fourth Quintile 25.3 25.8 25.2 24.6 24.1 24.4 24.1 23.2 22.2 21.7 21.7

Highest Quintile 34.6 33.9 36.9 38.6 39.1 38.9 38.5 42.2 44.1 45.5 45.5

All Quintiles 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 21.6 19.8 22.8 24.9 25.4 25.6 25.0 28.2 30.8 32.8 32.8

Top 5 Percent 14.7 12.9 15.9 17.1 17.7 18.4 17.0 19.7 23.2 25.0 25.0

Top 1 Percent 6.4 5.5 7.6 8.7 9.1 10.5 8.2 10.4 13.4 14.4 14.4

After-Tax Income

Lowest Quintile 7.2 7.4 7.0 6.9 7.1 7.3 7.4 6.8 6.8 6.6 6.5

Second Quintile 14.6 14.7 13.6 13.4 13.5 13.5 13.9 13.2 13.1 12.5 12.6

Middle Quintile 21.0 21.1 19.8 18.7 19.2 19.0 18.7 17.9 17.6 17.3 17.4

Fourth Quintile 25.2 25.4 25.0 24.4 24.2 24.3 24.0 23.4 22.6 22.0 22.1

Highest Quintile 32.2 32.0 35.2 37.2 36.9 37.0 36.3 39.4 40.4 42.0 41.8

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

Top 10 Percent 19.4 18.4 21.5 23.7 23.4 24.0 23.2 25.6 27.2 29.4 29.3

Top 5 Percent 12.8 11.8 14.9 16.1 16.1 17.1 15.6 17.4 19.9 22.0 21.9

Top 1 Percent 5.3 4.9 6.9 8.1 7.9 9.6 7.3 8.8 10.9 12.2 12.2

Minimum Adjusted Income (1997 dollars)

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 13,000 12,200 11,300 12,300 12,700 13,200 12,900 12,800 13,400 13,700 13,700

Middle Quintile 21,100 20,100 19,400 20,700 21,700 22,300 22,000 22,000 23,000 23,600 23,600

Fourth Quintile 29,200 28,300 28,300 30,000 31,300 32,200 31,800 31,900 33,100 34,400 34,400

Highest Quintile 41,200 40,600 41,300 43,800 46,200 47,200 46,300 47,800 48,600 50,800 50,800

Top 10 Percent 53,000 52,800 53,700 58,200 60,700 62,400 61,800 63,500 65,500 69,900 69,900

Top 5 Percent 67,200 67,200 69,200 76,100 78,500 81,600 80,500 81,900 86,800 93,300 93,300

Top 1 Percent 130,800 126,500 133,800 154,900 162,600 181,000 173,700 182,000 199,000 245,700 245,700

NOTES: (Continued)

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly, or indirectly through their employers. Federal excise taxes are distributed to households according to their

consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of capital

income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
84 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-3a.

Effective Federal Tax Rates for Elderly Childless Households, by Income Quintile, Using

Comprehensive Household Income Adjusted for Household Size, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate 

 

Lowest Quintile 5.1 3.5 3.1 4.4 4.6 3.1 4.7 5.0 4.1 5.1 5.1

Second Quintile 7.0 4.8 4.1 5.3 5.7 5.3 5.4 5.6 6.0 5.8 5.8

Middle Quintile 12.0 9.1 7.9 8.9 9.1 9.0 8.6 8.7 9.5 9.1 9.1

Fourth Quintile 17.0 14.5 12.4 12.8 13.5 13.5 12.9 13.5 14.5 14.3 14.4

Highest Quintile 29.8 26.4 22.2 22.7 24.8 24.4 22.9 24.6 26.9 25.8 25.5

All Quintiles 19.6 17.6 15.0 15.8 17.1 17.0 15.7 16.5 18.3 18.7 18.5

Top 10 Percent 32.7 28.8 24.3 24.6 27.0 26.3 24.8 27.1 29.2 27.5 27.1

Top 5 Percent 35.5 30.8 25.9 25.9 28.3 27.5 26.3 29.0 31.0 29.0 28.6

Top 1 Percent 42.3 34.5 28.4 27.6 30.7 29.1 28.4 32.2 34.4 30.4 29.9

Effective Individual Income Tax Rate 

 

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

Second Quintile 0.3 0.5 0.4 0.4 0.4 0.5 0.5 0.4 0.4 0.4 0.4

Middle Quintile 2.2 2.4 2.1 2.3 1.9 2.3 2.3 1.8 2.0 2.1 2.1

Fourth Quintile 5.0 5.8 4.9 5.1 4.8 5.3 5.3 4.9 5.3 5.5 5.6

Highest Quintile 13.5 15.2 12.8 13.2 13.1 13.1 12.2 11.7 12.8 13.2 12.9

All Quintiles 7.3 8.9 7.6 7.8 7.8 8.1 7.3 6.8 7.6 8.5 8.4

Top 10 Percent 15.5 17.2 14.6 14.9 14.8 14.5 13.5 13.3 14.1 14.3 13.9

Top 5 Percent 17.5 18.9 16.0 16.1 16.0 15.4 14.3 14.5 15.1 15.2 14.8

Top 1 Percent 22.4 21.9 18.5 17.7 18.4 16.6 15.5 16.3 16.7 16.3 15.8

Effective Social Insurance Tax Rate 

Lowest Quintile 0.5 0.4 0.5 0.4 0.5 0.4 0.5 0.5 0.4 0.4 0.4

Second Quintile 1.3 1.2 1.0 1.0 1.1 1.1 1.2 1.1 1.2 1.1 1.1

Middle Quintile 2.3 2.2 2.0 2.0 1.9 1.8 1.8 1.8 1.6 1.8 1.8

Fourth Quintile 3.0 3.0 2.6 2.7 2.5 2.8 2.5 2.8 2.9 2.7 2.7

Highest Quintile 2.3 2.1 2.1 2.4 2.2 2.5 2.7 2.9 3.0 2.3 2.3

All Quintiles 2.1 2.0 2.0 2.1 2.0 2.2 2.2 2.4 2.4 2.1 2.1

Top 10 Percent 1.9 1.8 1.8 2.0 1.9 2.2 2.5 2.6 2.7 2.1 2.1

Top 5 Percent 1.5 1.5 1.5 1.6 1.6 1.7 2.1 2.4 2.4 1.7 1.7

Top 1 Percent 0.8 0.8 0.9 0.9 0.9 1.0 1.0 1.4 1.5 1.0 1.0

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by adjusted comprehensive household income.

A household consists of the people who share a housing unit, regardless of the relationships among them. An elderly childless

household is one headed by a person age 65 or older and with no member under age 18.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 85

Table G-3a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Effective Corporate Income Tax Rate 

 

Lowest Quintile 1.7 0.9 0.8 0.8 1.0 1.0 0.9 1.2 1.1 1.0 1.0

Second Quintile 3.9 1.9 1.3 1.6 2.2 2.0 1.7 2.0 2.1 1.9 1.9

Middle Quintile 6.4 3.5 2.7 3.1 3.9 3.6 3.0 3.4 3.9 3.5 3.5

Fourth Quintile 7.9 4.9 3.8 3.9 5.1 4.4 3.9 4.5 4.9 4.8 4.8

Highest Quintile 13.2 8.5 6.7 6.5 8.8 8.2 7.3 9.1 10.1 9.5 9.5

All Quintiles 9.0 5.8 4.6 4.6 6.2 5.8 5.0 6.0 6.8 6.8 6.8

Top 10 Percent 14.6 9.3 7.3 7.0 9.6 9.0 8.2 10.4 11.5 10.5 10.5

Top 5 Percent 15.9 10.0 7.8 7.6 10.2 9.8 9.3 11.4 12.9 11.5 11.5

Top 1 Percent 18.6 11.4 8.7 8.5 11.0 11.1 11.5 14.0 15.5 12.7 12.7

Effective Federal Excise Tax Rate

 

Lowest Quintile 2.9 2.2 1.8 3.1 3.1 1.7 3.3 3.4 2.6 3.8 3.8

Second Quintile 1.5 1.3 1.4 2.3 2.1 1.6 2.1 2.2 2.3 2.4 2.4

Middle Quintile 1.2 0.9 1.2 1.5 1.5 1.3 1.5 1.6 1.9 1.6 1.6

Fourth Quintile 1.1 0.8 1.0 1.2 1.1 1.1 1.2 1.3 1.5 1.3 1.3

Highest Quintile 0.7 0.6 0.6 0.7 0.7 0.6 0.7 0.8 0.9 0.7 0.7

All Quintiles 1.2 0.9 0.9 1.2 1.1 1.0 1.2 1.3 1.4 1.2 1.2

Top 10 Percent 0.7 0.5 0.5 0.6 0.6 0.6 0.6 0.7 0.8 0.7 0.7

Top 5 Percent 0.6 0.5 0.5 0.6 0.5 0.5 0.5 0.7 0.8 0.6 0.6

Top 1 Percent 0.5 0.4 0.4 0.5 0.4 0.4 0.4 0.5 0.6 0.4 0.4

NOTES: (Continued)

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly, or indirectly through their employers. Federal excise taxes are distributed to households according to their

consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of capital

income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
86 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-3b.

Shares of Federal Tax Liabilities for Elderly Childless Households, by Income Quintile, Using 

Comprehensive Household Income Adjusted for Household Size, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities 

 

Lowest Quintile 2.3 1.3 0.9 1.4 1.2 0.8 1.4 1.3 1.0 1.0 1.0

Second Quintile 5.3 3.6 3.5 3.9 3.8 3.4 3.7 3.9 3.6 2.9 3.0

Middle Quintile 8.7 7.2 8.0 8.9 8.5 8.1 9.5 9.0 8.7 7.0 7.0

Fourth Quintile 13.9 14.0 15.0 15.3 14.5 14.4 16.4 16.9 15.3 13.8 14.0

Highest Quintile 69.6 73.7 72.5 70.5 72.0 73.2 69.0 68.9 71.4 75.3 75.0

All Quintiles 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 57.0 61.7 59.0 57.2 58.6 61.2 55.0 53.6 57.4 61.7 61.3

Top 5 Percent 46.7 51.6 48.4 45.7 48.6 51.9 42.3 44.2 45.3 50.1 49.8

Top 1 Percent 28.8 30.5 27.7 23.2 28.7 30.1 23.7 25.1 25.7 32.1 31.8

Share of Individual Income Tax Liabilities 

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 0.7 0.8 0.7 0.6 0.5 0.7 0.7 0.6 0.6 0.5 0.5

Middle Quintile 4.2 3.8 4.2 4.7 4.0 4.4 5.6 4.6 4.5 3.5 3.5

Fourth Quintile 10.9 11.2 12.0 12.2 11.3 11.8 14.7 14.9 13.3 11.7 12.1

Highest Quintile 84.2 84.2 83.1 82.5 84.2 83.0 79.0 79.9 81.6 84.4 83.9

All Quintiles 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 72.3 73.1 70.5 69.6 71.2 71.2 64.5 64.0 66.7 70.2 69.6

Top 5 Percent 61.4 62.6 59.5 57.3 60.7 61.3 49.8 53.8 52.9 57.4 56.8

Top 1 Percent 40.7 38.4 35.8 30.0 38.0 36.2 27.8 30.9 30.1 37.8 37.2

Share of Social Insurance Tax Liabilities 

Lowest Quintile 2.2 1.3 1.2 0.9 1.0 0.8 1.0 0.9 0.8 0.7 0.7

Second Quintile 9.0 7.6 6.6 5.4 6.3 5.8 5.6 5.1 5.2 4.9 4.9

Middle Quintile 15.4 15.1 15.1 14.6 14.9 12.4 14.2 13.4 11.3 12.3 12.3

Fourth Quintile 22.9 24.7 24.4 24.0 23.2 23.3 22.5 24.6 22.8 22.7 22.7

Highest Quintile 50.4 51.2 52.7 55.2 54.7 57.7 56.7 56.0 59.8 59.5 59.5

All Quintiles 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 31.7 34.0 34.5 35.6 35.2 39.5 38.5 36.4 40.1 40.3 40.3

Top 5 Percent 19.0 21.5 22.0 20.8 23.5 25.5 23.3 25.8 25.8 26.3 26.3

Top 1 Percent 5.2 6.4 7.0 5.6 7.2 7.9 6.1 7.4 8.7 9.3 9.3

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. An elderly childless

household is one headed by a person age 65 or older and with no member under age 18.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 87

Table G-3b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Corporate Income Tax Liabilities 

Lowest Quintile 1.7 1.0 0.8 0.9 0.7 0.7 0.8 0.9 0.7 0.5 0.5

Second Quintile 6.4 4.3 3.6 4.2 4.0 3.9 3.6 3.7 3.4 2.6 2.6

Middle Quintile 10.1 8.5 8.9 10.6 9.8 9.4 10.4 9.7 9.8 7.5 7.5

Fourth Quintile 14.2 14.2 15.3 15.8 15.1 13.8 15.5 15.5 13.9 12.7 12.7

Highest Quintile 67.5 71.9 71.4 68.5 70.4 72.0 69.6 70.1 72.3 76.6 76.6

All Quintiles 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 55.5 60.0 58.2 56.0 57.6 61.8 57.5 56.5 61.0 64.9 64.9

Top 5 Percent 45.5 50.7 48.1 45.9 48.1 54.3 47.4 47.6 50.5 54.9 54.9

Top 1 Percent 27.6 30.4 27.7 24.6 28.3 33.8 30.2 30.0 31.2 37.1 37.1

 

Share of Federal Excise Tax Liabilities 

Lowest Quintile 22.1 17.2 8.9 12.8 12.0 7.5 12.5 11.0 8.0 11.4 11.4

Second Quintile 19.6 19.4 19.8 22.1 20.5 18.0 18.5 18.9 18.1 18.1 18.1

Middle Quintile 14.7 14.8 19.0 19.4 20.1 20.9 21.0 20.9 22.1 18.8 18.8

Fourth Quintile 14.7 16.1 19.5 17.8 18.1 20.0 19.7 19.8 19.7 18.9 18.9

Highest Quintile 28.9 32.4 32.7 27.7 29.3 33.6 28.2 29.2 32.0 32.7 32.7

All Quintiles 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 19.2 22.4 21.0 19.1 19.3 23.4 17.9 18.4 21.0 22.1 22.1

Top 5 Percent 13.0 16.0 14.3 13.6 13.6 17.4 11.2 12.9 14.1 14.9 14.9

Top 1 Percent 5.7 6.8 5.6 5.1 5.5 7.2 4.4 5.2 5.5 5.7 5.7

NOTES: (Continued)

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly, or indirectly through their employers. Federal excise taxes are distributed to households according to their

consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of capital

income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
88 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-3c.

Number of Households, Average Pretax and After-Tax Income, Shares of Pretax and After-Tax Income,

and Income Category Minimums for Elderly Childless Households, by Income Quintile, Using 

Comprehensive Household Income Adjusted for Household Size, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Number of Households (Millions)

 

Lowest Quintile 5.3 4.7 3.8 4.2 4.0 4.2 4.5 4.3 4.5 4.5 4.5

Second Quintile 4.1 4.3 4.6 4.5 4.7 4.8 4.5 4.7 4.8 4.6 4.6

Middle Quintile 2.5 2.8 3.3 3.7 4.0 4.1 4.5 4.4 4.6 4.4 4.4

Fourth Quintile 2.0 2.4 2.8 2.9 3.2 3.3 3.6 3.5 3.5 3.7 3.7

Highest Quintile 2.4 2.8 3.1 3.1 3.3 3.3 3.4 3.2 3.4 3.8 3.8

All Quintiles 16.3 17.0 17.6 18.4 19.2 19.8 20.5 20.2 20.9 21.0 21.0

Top 10 Percent 1.4 1.7 1.7 1.8 1.8 1.8 1.8 1.6 1.9 2.0 2.0

Top 5 Percent 0.8 1.0 1.0 1.0 1.1 1.1 0.9 0.9 1.0 1.0 1.0

Top 1 Percent 0.2 0.3 0.3 0.2 0.3 0.2 0.2 0.2 0.2 0.2 0.2

Average Income (1997 dollars)

Pretax Income

Lowest Quintile 9,700 9,300 8,400 9,100 9,600 9,700 9,300 9,100 9,400 9,500 9,500

Second Quintile 21,000 19,900 18,900 20,100 21,200 21,800 21,400 21,500 22,300 22,900 22,900

Middle Quintile 32,900 31,600 31,000 32,800 34,100 34,900 34,900 34,900 35,700 37,200 37,200

Fourth Quintile 46,800 45,600 45,700 49,100 50,600 51,800 51,100 52,300 53,300 55,300 55,300

Highest Quintile 107,600 110,800 108,700 120,000 130,700 145,200 126,600 128,800 137,300 162,400 162,400

All Quintiles 35,200 37,700 39,000 41,700 45,100 47,800 44,200 44,300 46,700 54,000 54,000

Top 10 Percent 138,200 143,700 143,500 160,300 178,900 202,700 172,600 182,300 186,800 233,300 233,300

Top 5 Percent 180,600 180,200 188,400 210,700 240,900 265,700 243,400 245,400 263,600 354,400 354,400

Top 1 Percent 357,800 326,900 388,500 521,700 544,900 667,200 620,200 633,200 632,000 949,400 949,400

After-Tax Income

Lowest Quintile 9,200 9,000 8,200 8,700 9,100 9,400 8,800 8,600 9,000 9,000 9,000

Second Quintile 19,500 18,900 18,100 19,100 20,000 20,700 20,300 20,300 21,000 21,500 21,500

Middle Quintile 29,000 28,800 28,500 29,900 31,000 31,800 31,900 31,900 32,300 33,800 33,800

Fourth Quintile 38,900 39,000 40,100 42,800 43,800 44,800 44,600 45,300 45,600 47,400 47,300

Highest Quintile 75,500 81,500 84,600 92,800 98,300 109,700 97,600 97,200 100,400 120,500 121,000

All Quintiles 28,300 31,000 33,100 35,200 37,400 39,600 37,300 36,900 38,200 43,900 44,000

Top 10 Percent 93,000 102,300 108,600 120,900 130,700 149,400 129,800 132,900 132,300 169,200 170,000

Top 5 Percent 116,500 124,600 139,700 156,200 172,800 192,700 179,400 174,300 181,800 251,700 253,000

Top 1 Percent 206,500 214,200 278,200 377,600 377,700 473,000 444,100 429,600 414,900 661,200 665,800

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. An elderly childless

household is one headed by a person age 65 or older and with no member under age 18.

Comprehensive household income equals 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 employee 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 totals.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 89

Table G-3c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Income (Percent)

Pretax Income

 

Lowest Quintile 9.0 6.8 4.6 5.0 4.5 4.3 4.6 4.4 4.3 3.7 3.7

Second Quintile 14.9 13.3 12.8 11.7 11.4 11.1 10.8 11.3 11.1 9.3 9.3

Middle Quintile 14.2 14.0 15.1 15.7 15.9 15.3 17.4 17.2 16.9 14.4 14.4

Fourth Quintile 16.1 17.0 18.3 18.8 18.4 18.2 20.1 20.7 19.3 18.0 18.0

Highest Quintile 45.8 49.0 49.2 48.9 49.8 51.0 47.2 46.4 48.5 54.5 54.5

All Quintiles 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 34.2 37.7 36.5 36.6 37.2 39.7 34.8 32.7 36.0 41.9 41.9

Top 5 Percent 25.8 29.4 28.1 27.8 29.4 32.1 25.3 25.2 26.7 32.2 32.2

Top 1 Percent 13.4 15.5 14.7 13.2 16.0 17.6 13.1 12.9 13.7 19.8 19.8

After-Tax Income

Lowest Quintile 10.6 7.9 5.3 5.6 5.1 5.0 5.2 5.0 5.1 4.4 4.4

Second Quintile 17.3 15.3 14.4 13.1 13.0 12.7 12.1 12.8 12.7 10.8 10.8

Middle Quintile 15.6 15.4 16.4 16.9 17.4 16.8 18.9 18.9 18.7 16.1 16.0

Fourth Quintile 16.6 17.7 18.9 19.5 19.3 19.0 20.7 21.5 20.1 19.0 18.9

Highest Quintile 40.0 43.8 45.0 44.9 45.2 46.5 43.2 41.9 43.4 49.8 49.9

All Quintiles 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 28.6 32.5 32.5 32.8 32.8 35.2 31.0 28.5 31.2 37.3 37.5

Top 5 Percent 20.7 24.7 24.6 24.5 25.5 28.1 22.1 21.5 22.5 28.2 28.3

Top 1 Percent 9.6 12.4 12.4 11.4 13.4 15.1 11.1 10.5 11.0 16.9 17.0

Minimum Adjusted Income (1997 dollars)

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 13,000 12,200 11,300 12,300 12,700 13,200 12,900 12,800 13,400 13,700 13,700

Middle Quintile 21,100 20,100 19,400 20,700 21,700 22,300 22,000 22,000 23,000 23,600 23,600

Fourth Quintile 29,200 28,300 28,300 30,000 31,300 32,200 31,800 31,900 33,100 34,400 34,400

Highest Quintile 41,200 40,600 41,300 43,800 46,200 47,200 46,300 47,800 48,600 50,800 50,800

Top 10 Percent 53,000 52,800 53,700 58,200 60,700 62,400 61,800 63,500 65,500 69,900 69,900

Top 5 Percent 67,200 67,200 69,200 76,100 78,500 81,600 80,500 81,900 86,800 93,300 93,300

Top 1 Percent 130,800 126,500 133,800 154,900 162,600 181,000 173,700 182,000 199,000 245,700 245,700

NOTES: (Continued)

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
90 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-4a.

Effective Federal Tax Rates for Nonelderly Childless Households, by Income Quintile, 

Using Comprehensive Household Income Adjusted for Household Size, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate 

Lowest Quintile 11.8 11.9 11.7 13.3 13.9 13.5 13.5 12.8 13.5 12.4 12.3

Second Quintile 16.3 16.8 15.6 17.2 17.1 17.6 17.7 17.0 17.3 17.2 16.9

Middle Quintile 19.6 20.5 18.9 19.8 19.9 20.1 20.1 19.8 20.2 20.0 19.8

Fourth Quintile 22.3 23.3 21.3 21.8 21.6 22.1 22.1 22.0 22.3 22.1 21.9

Highest Quintile 28.0 27.9 24.2 24.1 25.6 25.6 25.8 27.2 28.1 28.0 27.7

All Quintiles 24.7 25.1 22.3 22.6 23.4 23.6 23.6 24.3 24.9 24.9 24.6

Top 10 Percent 29.8 28.8 24.7 24.5 26.6 26.3 26.7 28.4 29.7 29.5 29.2

Top 5 Percent 31.8 29.7 25.0 24.6 27.4 27.0 27.4 29.8 31.5 30.9 30.5

Top 1 Percent 36.4 31.0 25.4 25.0 28.4 28.2 29.0 32.8 36.3 33.9 33.3

Effective Individual Income Tax Rate 

Lowest Quintile 1.0 1.6 1.3 1.6 1.4 1.4 1.2 0.4 0 -0.5 -0.6

Second Quintile 5.2 5.8 4.8 5.3 4.9 5.2 5.1 4.2 4.3 4.3 4.0

Middle Quintile 8.2 9.1 7.6 7.7 7.5 7.5 7.4 7.0 7.1 7.2 6.9

Fourth Quintile 10.9 11.8 9.9 9.8 9.2 9.4 9.3 8.9 9.0 9.0 8.7

Highest Quintile 16.3 17.2 14.1 13.7 14.4 14.5 14.4 14.9 15.4 16.3 16.0

All Quintiles 13.2 14.1 11.6 11.5 11.6 11.8 11.6 11.7 12.0 12.6 12.4

Top 10 Percent 18.0 18.6 15.2 14.8 15.9 15.9 15.7 16.5 17.3 18.3 18.0

Top 5 Percent 19.6 19.9 16.3 15.8 17.3 17.5 17.1 18.4 19.5 20.3 20.0

Top 1 Percent 22.2 21.8 17.9 17.5 19.2 19.9 20.2 22.6 25.1 24.6 24.0

Effective Social Insurance Tax Rate 

Lowest Quintile 6.6 7.3 7.1 7.7 8.0 8.6 8.7 8.5 9.0 8.7 8.7

Second Quintile 8.2 8.8 8.6 9.7 9.7 10.2 10.5 10.2 10.2 10.4 10.4

Middle Quintile 8.9 9.6 9.6 10.3 10.3 10.8 10.8 10.7 11.0 11.0 11.0

Fourth Quintile 9.2 9.9 9.8 10.4 10.6 10.9 11.1 11.2 11.4 11.3 11.3

Highest Quintile 6.6 7.4 7.5 7.7 8.0 8.1 8.6 8.7 9.1 8.0 8.0

All Quintiles 7.5 8.3 8.3 8.7 9.0 9.2 9.5 9.6 9.9 9.2 9.2

Top 10 Percent 5.6 6.3 6.5 6.5 6.9 6.9 7.5 7.5 8.1 6.7 6.7

Top 5 Percent 4.1 4.9 4.9 4.9 5.4 5.2 6.0 6.0 6.5 5.3 5.3

Top 1 Percent 1.8 2.0 1.9 1.9 2.1 1.8 2.7 2.4 3.4 2.6 2.6

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by adjusted comprehensive household income.

A household consists of the people who share a housing unit, regardless of the relationships among them. A nonelderly childless

household is one headed by a person under age 65 and with no member under age 18.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 91

Table G-4a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Effective Corporate Income Tax Rate 

 

Lowest Quintile 1.5 0.9 0.8 0.7 0.8 0.9 0.7 0.8 0.7 0.7 0.7

Second Quintile 1.3 0.9 0.7 0.6 0.8 0.7 0.6 0.8 0.8 0.7 0.7

Middle Quintile 1.1 0.8 0.8 0.7 0.9 0.7 0.7 0.9 0.7 0.7 0.7

Fourth Quintile 1.2 0.9 0.8 0.8 1.0 1.0 0.8 0.9 0.9 0.9 0.9

Highest Quintile 4.2 2.7 2.0 2.2 2.6 2.5 2.3 3.0 3.0 3.2 3.2

All Quintiles 3.0 1.9 1.5 1.6 1.9 1.8 1.7 2.1 2.1 2.2 2.2

Top 10 Percent 5.5 3.4 2.5 2.7 3.3 3.1 3.0 3.8 3.8 4.0 4.0

Top 5 Percent 7.4 4.4 3.3 3.5 4.3 3.9 3.8 4.9 5.0 5.0 5.0

Top 1 Percent 11.8 6.8 5.2 5.3 6.8 6.1 5.8 7.4 7.5 6.5 6.5

Effective Federal Excise Tax Rate 

 

Lowest Quintile 2.7 2.1 2.6 3.2 3.7 2.5 2.9 3.0 3.8 3.5 3.5

Second Quintile 1.6 1.3 1.4 1.6 1.6 1.5 1.6 1.7 2.0 1.8 1.8

Middle Quintile 1.3 1.0 1.0 1.1 1.1 1.1 1.1 1.2 1.4 1.1 1.1

Fourth Quintile 1.0 0.8 0.8 0.9 0.9 0.9 0.9 0.9 1.1 0.9 0.9

Highest Quintile 0.8 0.6 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.5 0.5

All Quintiles 1.0 0.8 0.8 0.9 0.9 0.8 0.9 0.9 1.0 0.8 0.8

Top 10 Percent 0.7 0.5 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4

Top 5 Percent 0.7 0.5 0.5 0.4 0.4 0.4 0.4 0.5 0.5 0.3 0.3

Top 1 Percent 0.6 0.4 0.5 0.3 0.3 0.3 0.3 0.4 0.3 0.2 0.2

NOTES: (Continued)

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
92 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-4b.

Shares of Federal Tax Liabilities for Nonelderly Childless Households, by Income Quintile, Using 

Comprehensive Household Income Adjusted for Household Size, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities 

Lowest Quintile 1.4 1.3 1.3 1.6 1.7 1.6 1.5 1.4 1.7 1.4 1.4

Second Quintile 4.5 4.4 4.4 5.0 5.1 5.1 5.0 4.6 4.6 4.5 4.5

Middle Quintile 8.7 9.1 9.7 10.2 9.5 9.6 9.8 9.5 9.4 8.8 8.7

Fourth Quintile 18.7 19.3 19.7 19.4 19.5 18.4 18.9 18.7 18.6 17.3 17.3

Highest Quintile 66.7 65.7 64.8 63.7 64.2 65.3 64.8 65.7 65.6 67.9 68.0

All Quintiles 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 47.6 46.6 46.0 44.8 46.0 46.8 46.7 48.3 48.2 51.3 51.3

Top 5 Percent 33.3 31.4 30.3 30.8 31.5 32.6 33.6 35.3 34.2 38.8 38.7

Top 1 Percent 16.2 13.2 13.2 14.3 13.9 14.7 15.9 17.3 16.0 21.0 20.8

Share of Individual Income Tax Liabilities 

Lowest Quintile 0.2 0.3 0.3 0.4 0.4 0.3 0.3 0.1 0 -0.1 -0.1

Second Quintile 2.7 2.7 2.6 3.0 3.0 3.0 2.9 2.4 2.4 2.2 2.1

Middle Quintile 6.9 7.2 7.5 7.9 7.2 7.2 7.3 7.0 6.9 6.2 6.1

Fourth Quintile 17.1 17.5 17.4 17.1 16.7 15.6 16.2 15.8 15.6 13.9 13.8

Highest Quintile 73.1 72.3 72.2 71.5 72.8 74.0 73.3 74.7 75.0 77.8 78.1

All Quintiles 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 54.0 53.4 54.1 53.4 55.4 56.6 56.1 58.5 58.6 62.8 63.0

Top 5 Percent 38.6 37.4 37.9 39.0 40.1 42.2 42.8 45.4 44.3 50.4 50.4

Top 1 Percent 18.6 16.5 17.8 19.8 18.9 20.7 22.6 24.8 23.1 30.1 29.9

Share of Social Insurance Tax Liabilities

Lowest Quintile 2.6 2.5 2.1 2.3 2.5 2.6 2.5 2.4 2.9 2.7 2.7

Second Quintile 7.4 7.0 6.5 7.4 7.5 7.6 7.3 7.0 6.8 7.4 7.4

Middle Quintile 13.0 13.0 13.2 13.7 12.8 13.3 13.1 13.0 12.9 13.0 13.0

Fourth Quintile 25.1 24.8 24.4 23.9 24.8 23.3 23.6 24.2 23.9 24.1 24.1

Highest Quintile 51.8 52.6 53.7 52.5 52.3 53.2 53.5 53.3 53.4 52.8 52.8

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

Top 10 Percent 29.1 31.0 32.2 30.8 31.1 31.5 32.6 32.3 32.9 31.7 31.7

Top 5 Percent 14.2 15.7 15.9 16.0 16.2 16.2 18.4 18.0 17.9 17.9 17.9

Top 1 Percent 2.6 2.6 2.6 2.9 2.7 2.5 3.6 3.3 3.8 4.3 4.3

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. A nonelderly childless

household is one headed by a person under age 65 and with no member under age 18.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 93

Table G-4b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Corporate Income Tax Liabilities 

Lowest Quintile 1.5 1.3 1.2 1.2 1.1 1.3 1.1 1.0 1.0 0.8 0.8

Second Quintile 2.9 3.0 2.9 2.4 2.9 2.8 2.3 2.4 2.5 2.0 2.0

Middle Quintile 4.1 4.7 5.7 4.9 5.3 4.4 4.9 4.7 4.1 3.6 3.6

Fourth Quintile 8.5 9.3 10.7 10.1 10.6 10.4 9.9 8.6 8.6 7.6 7.6

Highest Quintile 82.7 81.6 79.1 81.3 80.2 80.9 81.6 83.0 83.7 85.8 85.8

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

Top 10 Percent 72.4 70.9 68.6 71.1 69.5 70.5 72.7 75.5 74.5 78.0 78.0

Top 5 Percent 63.3 60.1 58.8 62.5 59.3 61.2 65.0 67.2 65.0 69.2 69.2

Top 1 Percent 43.2 37.3 39.5 43.2 40.5 41.2 44.8 45.3 39.9 45.0 45.0

Share of Federal Excise Tax Liabilities

Lowest Quintile 8.0 7.6 7.6 9.9 12.0 8.5 9.0 8.8 11.9 12.1 12.1

Second Quintile 10.7 10.8 10.6 12.4 12.9 12.3 12.1 12.6 13.0 14.2 14.2

Middle Quintile 13.7 14.4 13.8 15.3 14.1 14.8 15.4 15.9 15.4 14.7 14.7

Fourth Quintile 20.8 20.8 20.3 20.4 21.7 21.5 22.1 21.3 21.7 21.0 21.0

Highest Quintile 46.0 45.1 46.6 39.6 37.6 41.4 40.2 39.9 36.4 36.8 36.8

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

Top 10 Percent 28.3 28.5 28.4 24.1 22.7 24.6 24.5 24.9 21.8 21.9 21.9

Top 5 Percent 17.1 17.1 17.3 14.3 12.5 14.1 15.0 15.7 12.2 12.6 12.6

Top 1 Percent 6.2 5.6 6.3 4.4 3.3 4.0 4.7 5.6 3.2 3.7 3.7

NOTES: (Continued)

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.
94 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table G-4c.

Number of Households, Average Pretax and After-Tax Income, Shares of Pretax and After-Tax Income,

and Income Category Minimums for Nonelderly Childless Households, by Income Quintile, Using 

Comprehensive Household Income Adjusted for Household Size, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Number of Households (Millions)

 

Lowest Quintile 5.6 6.0 6.0 6.4 7.2 7.2 7.3 7.7 8.8 9.2 9.2

Second Quintile 5.0 5.3 5.6 6.1 6.5 6.9 6.8 6.9 6.8 7.6 7.6

Middle Quintile 5.4 5.8 6.3 6.7 6.5 7.1 7.3 7.5 7.4 7.8 7.8

Fourth Quintile 6.9 7.3 7.4 7.8 8.2 8.1 8.6 8.7 8.7 9.1 9.1

Highest Quintile 9.6 10.0 10.2 10.2 10.3 11.1 10.9 10.5 10.8 11.0 11.0

All Quintiles 32.7 34.7 35.9 37.5 38.9 40.6 41.3 41.6 42.7 45.0 45.0

Top 10 Percent 4.9 5.3 5.5 5.3 5.3 5.7 5.7 5.5 5.6 5.6 5.6

Top 5 Percent 2.4 2.6 2.6 2.6 2.6 2.7 2.9 2.8 2.7 2.7 2.7

Top 1 Percent 0.5 0.5 0.4 0.5 0.4 0.4 0.5 0.5 0.4 0.4 0.4

Average Income (1997 dollars)

Pretax Income

 

Lowest Quintile 8,300 7,800 6,900 7,800 7,900 8,300 8,000 7,800 8,200 8,100 8,100

Second Quintile 21,200 20,200 19,200 20,500 21,400 21,900 21,500 21,200 22,300 22,800 22,800

Middle Quintile 32,200 31,400 30,900 33,100 34,200 35,200 34,500 34,200 35,700 36,800 36,800

Fourth Quintile 47,500 46,400 47,200 49,200 51,800 53,200 51,900 52,600 54,300 56,500 56,500

Highest Quintile 96,600 96,200 100,200 111,100 114,700 120,500 119,700 123,600 123,000 144,000 144,000

All Quintiles 48,200 46,900 47,600 50,600 51,700 54,400 53,400 53,200 53,300 58,600 58,600

Top 10 Percent 126,700 123,600 129,700 149,200 152,100 162,800 161,600 167,100 164,700 204,500 204,500

Top 5 Percent 171,700 164,200 178,000 207,800 210,400 229,200 223,000 232,100 231,000 299,700 299,700

Top 1 Percent 373,900 374,400 447,100 522,900 544,200 623,500 568,700 615,200 613,600 929,900 929,900

After-Tax Income

 

Lowest Quintile 7,400 6,800 6,100 6,800 6,800 7,200 6,900 6,800 7,100 7,100 7,100

Second Quintile 17,700 16,800 16,200 17,000 17,700 18,000 17,700 17,600 18,400 18,800 18,900

Middle Quintile 25,900 24,900 25,100 26,500 27,400 28,100 27,600 27,500 28,500 29,400 29,500

Fourth Quintile 36,900 35,600 37,100 38,500 40,600 41,400 40,400 41,000 42,200 44,000 44,100

Highest Quintile 69,500 69,400 76,000 84,300 85,300 89,600 88,800 90,000 88,500 103,700 104,000

All Quintiles 36,300 35,100 37,000 39,200 39,700 41,600 40,800 40,200 40,000 44,000 44,100

Top 10 Percent 89,000 88,000 97,700 112,700 111,600 120,000 118,500 119,600 115,800 144,200 144,800

Top 5 Percent 117,000 115,500 133,500 156,700 152,800 167,200 161,900 162,900 158,300 207,100 208,200

Top 1 Percent 237,800 258,500 333,400 392,300 389,800 447,800 404,000 413,100 391,000 614,200 620,100

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. A nonelderly childless

household is one headed by a person under age 65 and with no member under age 18.

Comprehensive household income equals 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 employee 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 totals.
APPENDIX G DISTRIBUTIONAL ESTIMATES USING ADJUSTED COMPREHENSIVE HOUSEHOLD INCOME 95

Table G-4c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Income (Percent)

Pretax Income

Lowest Quintile 3.0 2.9 2.5 2.6 2.8 2.7 2.7 2.7 3.2 2.8 2.8

Second Quintile 6.8 6.6 6.3 6.6 6.9 6.8 6.6 6.6 6.6 6.5 6.5

Middle Quintile 11.0 11.2 11.5 11.6 11.1 11.3 11.5 11.7 11.6 10.9 10.9

Fourth Quintile 20.7 20.8 20.6 20.1 21.1 19.6 20.2 20.7 20.8 19.5 19.5

Highest Quintile 58.9 59.2 59.6 59.7 58.5 60.3 59.3 58.8 58.2 60.4 60.4

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

Top 10 Percent 39.5 40.6 41.4 41.4 40.4 42.1 41.4 41.4 40.5 43.3 43.3

Top 5 Percent 25.9 26.6 27.0 28.3 26.9 28.5 29.0 28.8 27.1 31.2 31.2

Top 1 Percent 11.0 10.7 11.5 13.0 11.4 12.3 13.0 12.8 11.0 15.4 15.4

After-Tax Income

 

Lowest Quintile 3.5 3.4 2.8 3.0 3.2 3.1 3.0 3.1 3.6 3.3 3.3

Second Quintile 7.5 7.3 6.8 7.1 7.5 7.3 7.2 7.2 7.3 7.2 7.2

Middle Quintile 11.7 11.9 12.0 12.1 11.6 11.8 12.0 12.4 12.4 11.6 11.6

Fourth Quintile 21.4 21.3 20.8 20.3 21.5 20.0 20.6 21.3 21.5 20.3 20.3

Highest Quintile 56.3 57.0 58.2 58.5 56.8 58.7 57.6 56.6 55.8 57.9 57.9

All Quintiles 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 36.9 38.6 40.1 40.5 38.6 40.6 39.7 39.1 37.9 40.7 40.7

Top 5 Percent 23.4 25.0 26.1 27.6 25.4 27.2 27.5 26.8 24.8 28.7 28.8

Top 1 Percent 9.3 9.8 11.1 12.6 10.7 11.6 12.1 11.4 9.3 13.6 13.6

Minimum Adjusted Income (1997 dollars)

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 13,000 12,200 11,300 12,300 12,700 13,200 12,900 12,800 13,400 13,700 13,700

Middle Quintile 21,100 20,100 19,400 20,700 21,700 22,300 22,000 22,000 23,000 23,600 23,600

Fourth Quintile 29,200 28,300 28,300 30,000 31,300 32,200 31,800 31,900 33,100 34,400 34,400

Highest Quintile 41,200 40,600 41,300 43,800 46,200 47,200 46,300 47,800 48,600 50,800 50,800

Top 10 Percent 53,000 52,800 53,700 58,200 60,700 62,400 61,800 63,500 65,500 69,900 69,900

Top 5 Percent 67,200 67,200 69,200 76,100 78,500 81,600 80,500 81,900 86,800 93,300 93,300

Top 1 Percent 130,800 126,500 133,800 154,900 162,600 181,000 173,700 182,000 199,000 245,700 245,700

NOTES: (Continued)

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted for household size—that is, divided

by the square root of the household’s size. Quintiles, or fifths, of the income distribution contain equal numbers of people.

Appendix H

Distributional Estimates Using

Household Cash Income, by Dollar

Income Category, 1979-1997
98 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-1a.

Effective Federal Tax Rates for All Households, by Dollar Income Category, Using Household

Cash Income Plus Taxes Paid by Businesses, 1979-1997 (In percent)

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate 

$0 to $10,000 8.2 7.3 7.1 8.3 8.6 7.9 8.1 8.0 6.9 7.2 7.1

$10,000 to $20,000 11.2 11.3 11.2 12.6 12.0 11.6 11.5 11.4 10.1 9.7 9.6

$20,000 to $30,000 16.2 16.9 15.9 16.8 16.0 16.1 16.1 16.1 16.1 15.6 15.0

$30,000 to $40,000 19.3 19.8 18.3 18.8 18.6 18.5 18.5 18.7 19.0 18.7 17.9

$40,000 to $50,000 21.2 21.9 20.1 20.2 20.2 20.7 20.5 20.9 21.4 20.8 20.0

$50,000 to $75,000 23.0 24.0 21.9 22.2 21.9 22.3 22.4 22.8 23.4 22.9 22.1

$75,000 to $100,000 24.3 25.7 23.1 23.4 23.8 24.0 24.1 24.7 25.5 24.6 24.0

$100,000 to $150,000 26.2 27.2 24.0 24.1 25.1 25.0 25.3 26.1 26.9 26.0 25.7

$150,000 to $200,000 29.8 28.5 24.3 24.3 26.6 26.0 26.6 27.3 28.7 27.8 27.6

$200,000 and Over 36.2 31.4 26.7 25.8 29.5 28.3 28.6 32.5 35.1 32.4 31.9

All Categories 23.4 23.5 21.2 21.8 22.6 22.8 22.6 23.8 24.9 24.6 24.1

Effective Individual Income Tax Rate

$0 to $10,000 -0.5 -0.3 -0.4 -0.4 -0.9 -1.0 -1.3 -1.9 -3.9 -4.3 -4.3

$10,000 to $20,000 1.3 2.2 2.0 2.1 1.1 1.0 0.4 0 -1.7 -2.1 -2.2

$20,000 to $30,000 4.9 6.1 5.1 5.2 4.2 4.2 4.1 3.5 3.1 2.8 2.2

$30,000 to $40,000 7.4 8.5 7.2 7.0 6.2 6.3 6.2 5.8 5.6 5.6 4.8

$40,000 to $50,000 9.2 10.3 8.7 8.3 7.7 7.9 7.7 7.4 7.5 7.3 6.5

$50,000 to $75,000 11.1 12.3 10.3 9.8 9.1 9.3 9.3 8.9 9.0 9.0 8.2

$75,000 to $100,000 13.1 14.6 12.0 11.6 11.3 11.2 11.1 10.9 11.2 10.8 10.2

$100,000 to $150,000 15.0 16.6 13.8 13.2 13.2 13.0 12.8 12.6 13.0 12.8 12.5

$150,000 to $200,000 17.6 18.7 15.2 14.5 15.5 15.2 15.1 14.9 15.3 14.9 14.7

$200,000 and Over 22.4 21.8 19.0 18.0 20.3 19.1 19.1 21.4 22.2 21.7 21.2

All Categories 11.6 12.6 10.7 10.7 10.8 10.9 10.5 10.8 11.3 11.9 11.3

Effective Social Insurance Tax Rate

$0 to $10,000 3.5 4.0 4.1 4.3 4.5 5.5 4.9 5.1 5.6 5.9 5.9

$10,000 to $20,000 6.0 6.5 6.6 7.2 7.3 7.6 7.9 7.7 7.7 7.8 7.8

$20,000 to $30,000 7.6 8.3 8.4 8.8 8.7 8.9 9.2 9.4 9.4 9.5 9.5

$30,000 to $40,000 8.5 9.1 8.8 9.5 9.6 9.5 9.7 10.0 10.1 10.1 10.1

$40,000 to $50,000 9.0 9.4 9.3 9.7 9.9 10.4 10.4 10.9 11.1 10.7 10.7

$50,000 to $75,000 8.8 9.5 9.5 10.3 10.4 10.8 10.9 11.4 11.7 11.4 11.4

$75,000 to $100,000 8.0 8.6 9.1 9.8 10.0 10.6 10.8 11.5 11.4 11.3 11.3

$100,000 to $150,000 6.4 7.1 7.5 8.2 8.9 9.3 10.1 10.4 10.5 10.0 10.0

$150,000 to $200,000 4.4 4.9 5.5 6.5 6.9 7.1 8.0 8.3 8.5 8.7 8.7

$200,000 and Over 1.7 1.8 2.0 2.2 2.5 2.4 3.4 3.3 3.9 3.4 3.4

All Categories 7.2 7.8 7.8 8.2 8.4 8.5 9.0 9.2 9.3 8.7 8.7

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by household cash income plus taxes paid by businesses.

A household consists of the people who share a housing unit, regardless of the relationships among them.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 99

Table H-1a.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Effective Corporate Income Tax Rate

 

$0 to $10,000 1.4 0.8 0.7 0.6 0.6 0.8 0.6 0.7 0.6 0.5 0.5

$10,000 to $20,000 2.0 1.1 0.9 1.0 1.2 1.1 1.0 1.3 1.3 1.2 1.2

$20,000 to $30,000 2.3 1.4 1.2 1.2 1.6 1.5 1.3 1.5 1.7 1.5 1.5

$30,000 to $40,000 2.1 1.3 1.3 1.2 1.6 1.5 1.4 1.5 1.7 1.7 1.7

$40,000 to $50,000 1.9 1.4 1.2 1.3 1.6 1.4 1.3 1.5 1.5 1.6 1.6

$50,000 to $75,000 2.1 1.4 1.2 1.2 1.7 1.4 1.3 1.5 1.5 1.5 1.5

$75,000 to $100,000 2.4 1.8 1.3 1.3 1.8 1.5 1.4 1.6 1.9 1.7 1.7

$100,000 to $150,000 4.0 2.9 2.1 2.0 2.3 2.1 1.8 2.3 2.5 2.5 2.5

$150,000 to $200,000 7.1 4.5 3.0 2.7 3.6 3.1 2.9 3.4 4.3 3.6 3.6

$200,000 and over 11.7 7.4 5.3 5.2 6.4 6.4 5.8 7.4 8.6 6.9 6.9

All Categories 3.6 2.3 1.9 2.0 2.5 2.5 2.1 2.7 3.2 3.1 3.1

Effective Federal Excise Tax Rate

$0 to $10,000 3.7 2.8 2.7 3.9 4.4 2.6 3.9 4.0 4.5 5.0 5.0

$10,000 to $20,000 2.0 1.5 1.7 2.3 2.3 1.9 2.2 2.4 2.8 2.8 2.8

$20,000 to $30,000 1.5 1.1 1.2 1.6 1.5 1.5 1.5 1.7 2.0 1.7 1.7

$30,000 to $40,000 1.2 0.9 1.0 1.2 1.2 1.2 1.3 1.4 1.6 1.4 1.4

$40,000 to $50,000 1.1 0.8 0.9 1.0 1.0 1.0 1.1 1.2 1.3 1.2 1.2

$50,000 to $75,000 1.0 0.7 0.8 0.9 0.9 0.9 0.9 1.0 1.1 1.0 1.0

$75,000 to $100,000 0.8 0.6 0.7 0.7 0.7 0.8 0.8 0.8 0.9 0.8 0.8

$100,000 to $150,000 0.7 0.6 0.6 0.7 0.7 0.6 0.7 0.7 0.8 0.7 0.7

$150,000 to $200,000 0.6 0.5 0.5 0.6 0.6 0.5 0.6 0.6 0.7 0.6 0.6

$200,000 and over 0.5 0.4 0.4 0.4 0.3 0.3 0.4 0.5 0.4 0.3 0.3

All Categories 1.0 0.8 0.9 1.0 0.9 0.9 1.0 1.1 1.1 0.9 0.9

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
100 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-1b.

Shares of Federal Tax Liabilities for All Households, by Dollar Income Category, Using Household Cash

Income Plus Taxes Paid by Businesses, 1979-1997 (In percent)

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities

 

$0 to $10,000 0.6 0.5 0.6 0.6 0.6 0.5 0.5 0.5 0.4 0.4 0.4

$10,000 to $20,000 2.3 2.5 2.8 2.7 2.4 2.2 2.3 2.2 1.7 1.5 1.5

$20,000 to $30,000 5.4 5.9 6.1 5.8 5.0 4.8 5.0 4.7 4.2 3.7 3.6

$30,000 to $40,000 7.8 8.4 8.2 8.1 7.2 6.6 7.4 6.7 6.1 5.2 5.1

$40,000 to $50,000 10.2 10.4 9.9 8.5 8.3 8.1 8.2 7.6 7.3 6.5 6.4

$50,000 to $75,000 24.6 24.6 24.0 22.6 20.5 20.3 20.9 18.7 18.2 17.0 16.8

$75,000 to $100,000 14.8 15.8 15.4 15.3 15.3 14.8 15.3 15.3 14.7 13.0 13.0

$100,000 to $150,000 12.5 13.6 13.4 13.9 14.9 15.0 14.7 14.8 14.4 14.2 14.4

$150,000 to $200,000 5.1 5.0 4.6 5.3 6.5 6.2 5.9 6.2 6.6 6.8 6.9

$200,000 and Over 16.7 13.3 15.0 17.0 19.3 21.4 19.7 23.2 26.3 31.7 32.0

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Individual Income Tax Liabilities

$0 to $10,000 -0.1 0 -0.1 -0.1 -0.1 -0.1 -0.2 -0.3 -0.5 -0.5 -0.5

$10,000 to $20,000 0.5 0.9 1.0 0.9 0.5 0.4 0.2 0 -0.6 -0.6 -0.7

$20,000 to $30,000 3.3 4.0 3.9 3.7 2.7 2.6 2.7 2.3 1.8 1.4 1.1

$30,000 to $40,000 6.1 6.7 6.4 6.1 5.0 4.7 5.3 4.6 4.0 3.2 2.9

$40,000 to $50,000 8.9 9.1 8.4 7.1 6.6 6.5 6.7 5.9 5.7 4.7 4.4

$50,000 to $75,000 24.0 23.7 22.5 20.5 17.8 17.6 18.6 16.0 15.6 13.8 13.3

$75,000 to $100,000 16.0 16.8 15.8 15.5 15.2 14.4 15.1 14.8 14.3 11.8 11.7

$100,000 to $150,000 14.5 15.5 15.2 15.6 16.4 16.2 16.0 15.8 15.4 14.5 14.8

$150,000 to $200,000 6.0 6.1 5.7 6.5 7.9 7.6 7.2 7.5 7.7 7.5 7.8

$200,000 and Over 20.8 17.3 21.2 24.3 27.9 30.2 28.3 33.5 36.7 44.1 45.2

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Social Insurance Tax Liabilities

$0 to $10,000 0.8 0.9 1.0 0.8 0.8 0.9 0.8 0.8 0.9 0.9 0.9

$10,000 to $20,000 4.0 4.3 4.5 4.2 3.9 3.9 3.9 3.8 3.6 3.3 3.3

$20,000 to $30,000 8.2 8.7 8.8 8.2 7.3 7.1 7.2 7.1 6.6 6.4 6.4

$30,000 to $40,000 11.3 11.6 10.8 10.8 10.0 9.1 9.6 9.3 8.7 7.9 7.9

$40,000 to $50,000 14.1 13.4 12.5 10.7 11.0 10.9 10.5 10.2 10.2 9.6 9.6

$50,000 to $75,000 30.6 29.4 28.4 28.0 26.3 26.3 25.5 24.1 24.4 24.0 24.0

$75,000 to $100,000 15.8 16.0 16.5 17.0 17.5 17.5 17.3 18.3 17.6 16.9 16.9

$100,000 to $150,000 10.0 10.7 11.4 12.5 14.3 14.9 14.7 15.3 15.0 15.5 15.5

$150,000 to $200,000 2.4 2.6 2.8 3.8 4.6 4.5 4.5 4.9 5.2 6.0 6.0

$200,000 and Over 2.5 2.3 3.0 3.8 4.4 4.9 5.9 6.1 7.9 9.5 9.5

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 101

Table H-1b.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Corporate Income Tax Liabilities

 

$0 to $10,000 0.6 0.6 0.6 0.5 0.4 0.4 0.4 0.4 0.3 0.2 0.2

$10,000 to $20,000 2.7 2.5 2.6 2.4 2.2 2.0 2.0 2.1 1.8 1.4 1.4

$20,000 to $30,000 5.0 4.8 5.0 4.5 4.6 4.2 4.1 3.9 3.5 2.9 2.9

$30,000 to $40,000 5.6 5.8 6.4 5.8 5.7 5.1 5.8 4.8 4.2 3.7 3.7

$40,000 to $50,000 5.8 6.5 6.5 5.9 5.8 5.2 5.5 4.7 4.0 4.1 4.1

$50,000 to $75,000 14.9 14.3 15.1 13.3 13.8 11.8 12.6 11.0 9.4 9.0 9.0

$75,000 to $100,000 9.7 11.1 9.9 9.6 10.1 8.5 9.4 8.6 8.4 7.3 7.3

$100,000 to $150,000 12.5 14.8 13.1 13.0 12.1 11.7 11.0 11.5 10.6 11.0 11.0

$150,000 to $200,000 7.9 7.9 6.5 6.6 7.9 6.9 6.9 6.9 7.7 6.9 6.9

$200,000 and Over 35.1 31.5 34.0 38.3 37.6 44.7 42.1 46.1 50.2 53.9 53.9

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Federal Excise Tax Liabilities

$0 to $10,000 5.9 6.1 5.6 6.3 6.8 4.1 6.2 5.8 5.6 6.7 6.7

$10,000 to $20,000 9.3 9.8 10.5 11.2 11.0 9.4 10.1 10.6 10.5 11.1 11.1

$20,000 to $30,000 11.1 11.4 11.5 12.4 11.2 11.2 11.2 11.5 11.3 10.6 10.6

$30,000 to $40,000 11.1 11.5 11.4 11.5 11.4 11.0 11.7 11.0 11.4 10.0 10.0

$40,000 to $50,000 11.6 11.3 11.1 9.6 10.1 10.4 10.4 9.5 9.9 9.6 9.6

$50,000 to $75,000 23.4 21.9 22.0 19.8 19.2 20.3 20.0 18.2 19.1 18.5 18.5

$75,000 to $100,000 11.4 11.5 11.0 10.8 11.3 11.9 11.4 11.4 11.9 10.8 10.8

$100,000 to $150,000 7.9 8.3 8.3 8.5 9.6 9.9 9.0 9.4 9.5 10.0 10.0

$150,000 to $200,000 2.4 2.5 2.5 2.8 3.2 3.4 3.0 3.4 3.4 4.0 4.0

$200,000 and Over 5.3 4.6 5.3 5.5 4.9 6.5 6.2 8.0 6.4 7.7 7.7

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
102 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-1c.

Number of Households, Average Pretax and After-Tax Income, and Shares of Pretax and After-Tax 

Income for All Households, by Dollar Income Category, Using Household Cash Income Plus Taxes

Paid by Businesses, 1979-1997

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

 1997

 Law

Under

2000

Law 

Number of Households (Millions)

 

$0 to $10,000 9.6 10.5 11.5 10.9 11.2 10.8 11.9 12.3 12.2 12.3 12.3

$10,000 to $20,000 12.2 13.1 13.7 13.7 13.8 14.4 14.4 15.2 15.3 15.0 15.0

$20,000 to $30,000 11.7 12.4 12.8 13.1 13.0 13.4 13.6 13.9 13.8 13.8 13.8

$30,000 to $40,000 10.2 10.8 10.6 11.6 11.5 11.5 12.5 12.2 12.1 11.6 11.6

$40,000 to $50,000 9.4 9.4 9.1 8.8 9.5 9.8 9.8 9.5 10.0 10.3 10.3

$50,000 to $75,000 15.5 15.0 14.8 15.8 15.9 16.6 16.7 15.9 16.6 17.7 17.7

$75,000 to $100,000 6.2 6.4 6.4 7.2 7.8 8.0 8.1 8.5 8.8 9.0 9.0

$100,000 to $150,000 3.6 3.7 3.9 4.6 5.2 5.6 5.3 5.6 5.8 6.7 6.7

$150,000 to $200,000 0.9 0.9 0.9 1.2 1.5 1.6 1.4 1.6 1.7 2.1 2.1

$200,000 and Over 1.0 0.9 1.1 1.4 1.5 1.7 1.7 1.8 2.0 2.6 2.6

All Categories 81.4 84.2 86.2 89.5 92.0 94.6 96.7 98.2 99.7 102.9 102.9

Average Income (1997 dollars)

Pretax Income

$0 to $10,000 6,400 6,300 6,100 6,200 6,100 6,200 6,200 6,100 6,200 6,200 6,200

$10,000 to $20,000 15,000 14,900 15,000 14,900 14,900 15,000 14,900 14,900 14,900 14,700 14,700

$20,000 to $30,000 24,900 24,800 24,800 25,000 24,800 25,000 25,000 25,000 25,000 25,000 25,000

$30,000 to $40,000 34,900 34,900 34,900 34,900 34,900 34,800 34,800 34,800 34,900 34,900 34,900

$40,000 to $50,000 44,900 44,800 44,700 44,900 44,900 44,800 44,700 44,800 44,900 44,800 44,800

$50,000 to $75,000 61,000 60,900 61,100 61,000 61,100 61,300 61,200 61,000 61,300 61,300 61,300

$75,000 to $100,000 85,600 85,700 85,600 85,700 85,900 86,000 85,900 85,900 85,900 86,200 86,200

$100,000 to $150,000 118,400 117,800 118,900 118,900 118,900 119,100 119,600 119,800 119,600 120,000 120,000

$150,000 to $200,000 171,100 170,800 171,200 168,900 171,100 169,200 169,900 170,900 170,500 171,000 171,000

$200,000 and Over 401,100 402,700 438,500 460,700 461,100 489,200 445,400 466,600 478,900 546,000 546,000

All Categories 46,300 44,800 45,100 48,300 50,000 52,000 50,000 50,600 52,600 57,800 57,800

After-Tax Income

$0 to $10,000 5,800 5,800 5,700 5,700 5,600 5,700 5,700 5,600 5,700 5,700 5,700

$10,000 to $20,000 13,300 13,200 13,300 13,000 13,100 13,200 13,200 13,200 13,400 13,300 13,300

$20,000 to $30,000 20,900 20,600 20,900 20,800 20,800 20,900 21,000 20,900 21,000 21,100 21,200

$30,000 to $40,000 28,200 28,000 28,500 28,300 28,400 28,300 28,300 28,300 28,200 28,400 28,600

$40,000 to $50,000 35,400 34,900 35,700 35,800 35,800 35,600 35,500 35,400 35,300 35,500 35,900

$50,000 to $75,000 47,000 46,300 47,700 47,500 47,700 47,600 47,500 47,100 47,000 47,300 47,800

$75,000 to $100,000 64,700 63,700 65,900 65,600 65,500 65,400 65,200 64,600 64,100 65,000 65,500

$100,000 to $150,000 87,500 85,700 90,300 90,300 89,100 89,300 89,300 88,500 87,500 88,700 89,100

$150,000 to $200,000 120,200 122,200 129,600 127,900 125,600 125,300 124,800 124,200 121,500 123,500 123,800

$200,000 and Over 255,700 276,300 321,600 342,000 324,900 350,800 317,800 314,700 310,900 369,000 371,800

All Categories 35,400 34,300 35,600 37,800 38,700 40,200 38,700 38,500 39,500 43,600 43,900

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 103

Table H-1c.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

 1997

 Law

Under

2000

Law 

Share of Income (Percent)

Pretax Income

 

$0 to $10,000 1.6 1.7 1.8 1.6 1.5 1.4 1.5 1.5 1.4 1.3 1.3

$10,000 to $20,000 4.9 5.2 5.3 4.7 4.5 4.4 4.4 4.6 4.3 3.7 3.7

$20,000 to $30,000 7.8 8.1 8.2 7.5 7.0 6.8 7.0 7.0 6.6 5.8 5.8

$30,000 to $40,000 9.5 10.0 9.5 9.4 8.7 8.1 9.0 8.6 8.0 6.8 6.8

$40,000 to $50,000 11.2 11.1 10.4 9.1 9.2 9.0 9.1 8.6 8.5 7.8 7.8

$50,000 to $75,000 25.1 24.1 23.3 22.2 21.2 20.7 21.1 19.5 19.4 18.3 18.3

$75,000 to $100,000 14.2 14.4 14.2 14.3 14.6 14.1 14.4 14.8 14.4 13.0 13.0

$100,000 to $150,000 11.2 11.7 11.8 12.6 13.4 13.6 13.2 13.5 13.3 13.5 13.5

$150,000 to $200,000 4.0 4.1 4.0 4.7 5.5 5.5 5.0 5.5 5.7 6.0 6.0

$200,000 and Over 10.8 10.0 12.0 14.4 14.8 17.2 15.6 17.0 18.7 24.1 24.1

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

After-Tax Income

$0 to $10,000 1.9 2.1 2.1 1.8 1.8 1.6 1.8 1.8 1.8 1.6 1.6

$10,000 to $20,000 5.6 6.0 5.9 5.3 5.1 5.0 5.1 5.3 5.2 4.5 4.4

$20,000 to $30,000 8.5 8.8 8.7 8.0 7.6 7.4 7.6 7.7 7.3 6.5 6.5

$30,000 to $40,000 10.0 10.5 9.8 9.7 9.2 8.6 9.4 9.1 8.7 7.3 7.4

$40,000 to $50,000 11.6 11.4 10.6 9.3 9.5 9.2 9.3 8.9 8.9 8.2 8.2

$50,000 to $75,000 25.2 24.0 23.1 22.1 21.4 20.8 21.1 19.8 19.8 18.7 18.8

$75,000 to $100,000 14.0 14.0 13.8 14.0 14.4 13.8 14.1 14.6 14.3 13.0 13.0

$100,000 to $150,000 10.8 11.1 11.4 12.2 13.0 13.2 12.7 13.1 13.0 13.2 13.2

$150,000 to $200,000 3.7 3.9 3.8 4.6 5.2 5.2 4.8 5.2 5.4 5.8 5.8

$200,000 and Over 9.0 8.9 11.1 13.7 13.5 16.0 14.4 15.0 16.2 21.6 21.6

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
104 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-2a.

Effective Federal Tax Rates for Households with Children, by Dollar Income Category, Using Household

Cash Income Plus Taxes Paid by Businesses, 1979-1997 (In percent)

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate 

 

$0 to $10,000 6.5 6.2 6.3 7.2 4.4 6.0 4.7 4.1 -2.0 -2.7 -2.9

$10,000 to $20,000 8.0 10.0 10.6 11.9 9.4 8.2 6.4 6.6 1.6 0.6 0.2

$20,000 to $30,000 14.6 16.3 15.7 16.7 15.7 14.9 14.5 14.2 12.8 12.2 10.4

$30,000 to $40,000 17.8 19.3 18.4 18.9 18.5 18.4 18.5 18.3 18.3 17.7 15.6

$40,000 to $50,000 19.8 21.2 20.0 20.2 19.6 20.1 20.2 20.5 20.6 20.0 18.1

$50,000 to $75,000 21.7 23.2 21.7 22.0 21.2 21.7 22.0 22.2 22.6 22.0 20.6

$75,000 to $100,000 23.0 24.7 22.6 22.8 23.0 23.2 23.5 24.2 24.5 23.7 22.6

$100,000 to $150,000 24.4 25.9 23.3 23.2 23.9 24.1 24.7 25.6 26.0 25.3 24.8

$150,000 to $200,000 27.2 26.5 23.2 24.2 25.2 24.8 25.7 26.4 28.2 27.2 27.0

$200,000 and Over 33.3 29.7 26.9 25.6 30.0 27.7 28.6 32.6 35.3 32.9 32.3

All Categories 22.2 22.8 21.3 21.8 22.4 22.3 22.3 23.7 24.8 24.3 23.3

Effective Individual Income Tax Rate

$0 to $10,000 -2.7 -2.7 -2.7 -2.9 -4.2 -4.9 -5.4 -6.4 -13.5 -15.6 -15.7

$10,000 to $20,000 -2.4 -0.4 -0.4 -0.3 -2.9 -4.5 -6.3 -6.3 -11.7 -12.7 -13.1

$20,000 to $30,000 3.0 4.5 3.6 3.7 2.3 1.6 1.0 0.2 -1.7 -2.0 -3.7

$30,000 to $40,000 6.0 7.3 6.3 5.9 4.9 5.0 4.7 4.2 3.7 3.3 1.2

$40,000 to $50,000 8.1 9.3 7.9 7.3 6.3 6.6 6.4 6.0 5.9 5.6 3.7

$50,000 to $75,000 10.4 11.5 9.8 9.2 7.9 8.2 8.0 7.7 7.7 7.5 6.1

$75,000 to $100,000 12.4 13.9 11.4 10.9 10.5 10.2 10.1 10.0 10.0 9.5 8.5

$100,000 to $150,000 14.3 15.6 13.2 12.3 12.2 12.1 12.0 12.1 12.1 11.8 11.3

$150,000 to $200,000 16.4 17.4 14.5 14.5 15.0 14.6 14.4 14.4 15.2 14.5 14.3

$200,000 and Over 22.1 21.8 20.1 18.8 22.7 20.1 20.3 22.7 23.0 23.1 22.6

All Categories 11.0 11.7 10.3 10.2 10.4 10.1 9.7 10.4 10.8 11.3 10.3

Effective Social Insurance Tax Rate

$0 to $10,000 5.8 6.3 5.9 6.1 5.4 7.9 6.5 6.5 7.4 8.8 8.8

$10,000 to $20,000 8.0 8.7 9.0 9.9 9.9 10.5 10.5 10.2 10.3 10.5 10.5

$20,000 to $30,000 9.5 10.3 10.6 11.2 11.6 11.6 11.7 12.0 12.3 12.1 12.1

$30,000 to $40,000 9.9 10.7 10.7 11.5 11.9 11.9 12.2 12.5 12.6 12.6 12.6

$40,000 to $50,000 10.0 10.7 11.0 11.5 11.8 12.1 12.3 13.0 13.0 12.8 12.8

$50,000 to $75,000 9.5 10.5 10.7 11.5 11.9 12.1 12.5 13.1 13.2 13.0 13.0

$75,000 to $100,000 8.4 9.3 9.9 10.6 11.1 11.6 12.0 12.6 12.7 12.6 12.6

$100,000 to $150,000 6.8 8.0 8.4 9.1 9.6 10.2 10.9 11.4 11.7 11.4 11.4

$150,000 to $200,000 5.0 5.6 6.3 7.3 7.5 7.6 8.9 9.0 9.5 9.8 9.8

$200,000 and Over 1.9 2.2 2.5 2.5 2.9 2.7 4.3 3.7 4.2 4.0 4.0

All Categories 8.1 9.1 9.2 9.6 9.9 10.0 10.7 10.7 10.6 10.2 10.2

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by household cash income plus taxes paid by businesses.

A household consists of the people who share a housing unit, regardless of the relationships among them. A household with

children has at least one member under age 18.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 105

Table H-2a.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Effective Corporate Income Tax Rate

 

$0 to $10,000 0.8 0.6 0.6 0.3 0.3 0.3 0.2 0.4 0.2 0.2 0.2

$10,000 to $20,000 0.5 0.3 0.2 0.3 0.3 0.3 0.2 0.4 0.4 0.2 0.2

$20,000 to $30,000 0.6 0.4 0.3 0.3 0.4 0.3 0.3 0.4 0.3 0.4 0.4

$30,000 to $40,000 0.6 0.4 0.4 0.3 0.5 0.4 0.3 0.4 0.4 0.5 0.5

$40,000 to $50,000 0.7 0.4 0.3 0.4 0.4 0.4 0.4 0.5 0.4 0.5 0.5

$50,000 to $75,000 0.9 0.6 0.4 0.4 0.6 0.6 0.5 0.5 0.6 0.6 0.6

$75,000 to $100,000 1.4 0.9 0.7 0.6 0.7 0.7 0.7 0.8 0.9 0.8 0.8

$100,000 to $150,000 2.6 1.8 1.1 1.1 1.4 1.2 1.1 1.4 1.4 1.4 1.4

$150,000 to $200,000 5.3 3.0 2.0 1.8 2.1 2.0 1.8 2.4 2.8 2.4 2.4

$200,000 and Over 8.9 5.4 3.9 3.9 4.1 4.6 3.7 5.6 7.8 5.5 5.5

All Categories 2.1 1.2 1.0 1.1 1.3 1.3 1.1 1.6 2.4 2.0 2.0

Effective Federal Excise Tax Rate

$0 to $10,000 2.6 2.0 2.5 3.7 2.9 2.6 3.5 3.5 3.9 3.8 3.8

$10,000 to $20,000 1.9 1.4 1.7 2.1 2.1 1.9 2.0 2.3 2.6 2.5 2.5

$20,000 to $30,000 1.5 1.1 1.2 1.5 1.5 1.4 1.5 1.7 1.9 1.7 1.7

$30,000 to $40,000 1.2 0.9 1.0 1.2 1.2 1.1 1.2 1.3 1.5 1.3 1.3

$40,000 to $50,000 1.0 0.8 0.9 1.0 1.0 1.0 1.1 1.1 1.3 1.1 1.1

$50,000 to $75,000 0.9 0.7 0.7 0.9 0.8 0.8 0.9 0.9 1.1 0.9 0.9

$75,000 to $100,000 0.8 0.6 0.6 0.7 0.7 0.7 0.7 0.8 0.9 0.8 0.8

$100,000 to $150,000 0.7 0.5 0.6 0.6 0.7 0.6 0.7 0.7 0.8 0.7 0.7

$150,000 to $200,000 0.6 0.4 0.5 0.6 0.6 0.5 0.6 0.6 0.7 0.6 0.6

$200,000 and Over 0.5 0.3 0.3 0.4 0.3 0.3 0.4 0.6 0.3 0.3 0.3

All Categories 0.9 0.7 0.8 0.9 0.9 0.8 0.9 1.0 1.0 0.8 0.8

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
106 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-2b.

Shares of Federal Tax Liabilities for Households with Children, by Dollar Income Category, 

Using Household Cash Income Plus Taxes Paid by Businesses, 1979-1997 (In percent)

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities

 

$0 to $10,000 0.2 0.3 0.4 0.3 0.2 0.2 0.2 0.2 -0.1 -0.1 -0.1

$10,000 to $20,000 1.1 1.6 1.9 1.8 1.3 1.1 0.9 0.8 0.2 0.1 0

$20,000 to $30,000 3.9 4.7 5.1 4.7 3.7 3.5 3.6 3.2 2.4 2.2 1.9

$30,000 to $40,000 7.0 8.3 7.7 7.5 6.5 6.0 6.4 5.5 4.8 4.1 3.8

$40,000 to $50,000 10.8 11.1 10.3 8.6 8.2 8.3 8.4 7.3 6.7 6.2 5.9

$50,000 to $75,000 27.9 28.8 26.7 25.6 22.1 23.2 23.1 19.4 18.9 18.2 17.7

$75,000 to $100,000 16.4 17.3 16.7 16.7 17.1 16.4 17.3 16.8 15.3 14.0 13.9

$100,000 to $150,000 12.4 12.8 12.3 13.7 15.7 15.6 15.9 16.5 14.6 14.7 15.0

$150,000 to $200,000 4.8 4.7 4.5 5.0 6.1 6.1 5.5 6.4 6.6 7.6 7.9

$200,000 and Over 15.4 10.4 14.2 16.0 18.9 19.5 18.6 23.7 30.5 33.2 34.0

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Individual Income Tax Liabilities

$0 to $10,000 -0.2 -0.2 -0.3 -0.3 -0.4 -0.4 -0.6 -0.7 -1.1 -1.0 -1.1

$10,000 to $20,000 -0.6 -0.1 -0.1 -0.1 -0.9 -1.3 -2.1 -1.8 -3.0 -2.7 -3.1

$20,000 to $30,000 1.6 2.5 2.4 2.2 1.2 0.8 0.6 0.1 -0.7 -0.8 -1.6

$30,000 to $40,000 4.8 6.0 5.4 5.0 3.7 3.5 3.8 2.9 2.2 1.7 0.7

$40,000 to $50,000 8.9 9.5 8.4 6.6 5.7 6.0 6.1 4.9 4.4 3.7 2.7

$50,000 to $75,000 26.8 27.7 24.8 22.7 17.7 19.3 19.6 15.3 14.7 13.4 11.8

$75,000 to $100,000 17.8 18.9 17.3 16.9 16.8 15.8 17.1 15.8 14.3 12.1 11.8

$100,000 to $150,000 14.7 14.9 14.4 15.5 17.3 17.2 17.9 17.9 15.6 14.7 15.5

$150,000 to $200,000 5.8 6.0 5.7 6.4 7.9 7.9 7.1 7.9 8.2 8.7 9.4

$200,000 and Over 20.5 14.8 22.0 25.0 30.9 31.2 30.5 37.6 45.6 50.2 53.9

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Social Insurance Tax Liabilities

$0 to $10,000 0.6 0.7 0.8 0.6 0.5 0.7 0.6 0.7 0.6 0.6 0.6

$10,000 to $20,000 2.9 3.4 3.8 3.3 3.1 3.1 3.1 2.8 2.7 2.5 2.5

$20,000 to $30,000 6.9 7.4 8.0 7.1 6.2 6.1 6.1 5.9 5.4 5.2 5.2

$30,000 to $40,000 10.6 11.4 10.4 10.3 9.5 8.6 8.9 8.4 7.8 7.0 7.0

$40,000 to $50,000 14.9 14.0 13.1 11.1 11.2 11.2 10.7 10.3 9.9 9.5 9.5

$50,000 to $75,000 33.3 32.3 30.5 30.5 28.1 28.9 27.6 25.3 26.0 25.6 25.6

$75,000 to $100,000 16.4 16.3 17.0 17.6 18.6 18.2 18.5 19.4 18.6 17.8 17.8

$100,000 to $150,000 9.5 9.9 10.3 12.2 14.3 14.7 14.7 16.3 15.3 15.8 15.8

$150,000 to $200,000 2.4 2.5 2.8 3.5 4.2 4.2 4.0 4.8 5.2 6.5 6.5

$200,000 and Over 2.4 1.9 3.1 3.5 4.2 4.3 5.8 6.0 8.4 9.6 9.6

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. A household with

children has at least one member under age 18.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 107

Table H-2b.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Corporate Income Tax Liabilities

 

$0 to $10,000 0.3 0.5 0.7 0.3 0.2 0.2 0.2 0.3 0.1 0.1 0.1

$10,000 to $20,000 0.6 0.8 0.9 0.8 0.7 0.6 0.7 0.7 0.5 0.3 0.3

$20,000 to $30,000 1.7 2.1 2.1 1.7 1.8 1.3 1.5 1.2 0.6 0.8 0.8

$30,000 to $40,000 2.7 3.6 3.5 2.7 2.8 2.1 2.4 1.6 1.2 1.4 1.4

$40,000 to $50,000 3.8 4.2 3.8 3.2 3.2 3.0 3.2 2.3 1.5 1.8 1.8

$50,000 to $75,000 12.8 13.3 12.0 10.2 10.2 10.5 10.2 6.5 5.2 5.9 5.9

$75,000 to $100,000 10.5 12.3 10.6 9.5 9.6 8.0 10.0 7.7 5.7 5.6 5.6

$100,000 to $150,000 14.0 16.9 12.7 13.0 16.0 13.7 14.7 12.6 8.4 10.0 10.0

$150,000 to $200,000 9.8 10.2 8.4 7.8 9.1 8.3 7.8 8.5 6.9 8.1 8.1

$200,000 and Over 43.6 35.7 44.9 50.6 45.7 55.3 49.5 58.6 69.9 67.3 67.3

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Federal Excise Tax Liabilities

$0 to $10,000 2.2 2.6 3.8 4.1 3.4 2.9 4.1 3.9 3.3 3.5 3.5

$10,000 to $20,000 6.0 6.9 8.4 7.4 7.4 6.7 7.0 7.1 7.4 7.4 7.4

$20,000 to $30,000 9.4 9.9 10.6 10.4 9.0 8.9 9.1 9.2 8.8 8.8 8.8

$30,000 to $40,000 11.1 12.2 11.3 11.1 10.7 9.6 10.3 9.4 9.9 9.3 9.3

$40,000 to $50,000 13.4 12.9 11.8 10.1 10.8 10.8 11.0 9.7 10.4 10.1 10.1

$50,000 to $75,000 28.1 26.6 24.6 24.3 22.7 23.4 23.5 20.3 22.4 22.2 22.2

$75,000 to $100,000 13.5 13.2 12.8 12.9 13.9 13.9 13.5 13.7 14.2 13.2 13.2

$100,000 to $150,000 8.3 8.3 8.2 9.1 11.9 11.1 10.6 11.2 11.3 11.4 11.4

$150,000 to $200,000 2.4 2.4 2.5 2.9 3.5 3.5 3.2 3.8 3.9 4.9 4.9

$200,000 and Over 5.0 3.7 4.9 5.7 5.0 5.8 6.9 10.0 7.2 8.2 8.2

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
108 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-2c.

Number of Households, Average Pretax and After-Tax Income, and Shares of Pretax and After-Tax 

Income for Households with Children, by Dollar Income Category, Using Household Cash Income

Plus Taxes Paid by Businesses, 1979-1997

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Number of Households (Millions)

 

$0 to $10,000 2.2 2.6 3.3 3.0 3.2 3.0 3.4 3.8 3.2 3.1 3.1

$10,000 to $20,000 3.4 3.8 4.1 3.9 3.8 3.8 4.0 4.2 4.2 4.0 4.0

$20,000 to $30,000 4.0 4.3 4.5 4.4 4.0 4.1 4.2 4.4 4.1 4.2 4.2

$30,000 to $40,000 4.3 4.5 4.1 4.4 4.3 4.1 4.3 4.3 4.2 4.0 4.0

$40,000 to $50,000 4.6 4.3 4.0 3.7 3.9 4.0 4.0 3.9 4.1 4.1 4.1

$50,000 to $75,000 8.0 7.5 6.9 7.4 7.2 7.6 7.4 7.1 7.6 8.0 8.0

$75,000 to $100,000 3.2 3.0 3.0 3.3 3.7 3.6 3.7 4.0 4.1 4.1 4.1

$100,000 to $150,000 1.6 1.5 1.5 1.9 2.3 2.4 2.3 2.7 2.6 2.9 2.9

$150,000 to $200,000 0.4 0.4 0.4 0.5 0.6 0.6 0.5 0.7 0.8 1.0 1.0

$200,000 and Over 0.4 0.3 0.5 0.6 0.6 0.6 0.7 0.8 0.9 1.1 1.1

All Categories 32.4 32.6 32.7 33.6 34.0 34.2 34.8 36.3 36.2 36.9 36.9

Average Income (1997 dollars)

Pretax Income

$0 to $10,000 6,100 6,000 6,000 6,000 5,900 5,900 5,900 5,900 6,000 5,900 5,900

$10,000 to $20,000 15,200 15,100 15,100 15,000 15,100 15,100 15,100 14,900 14,900 14,900 14,900

$20,000 to $30,000 25,100 24,900 24,900 25,000 24,900 25,000 25,000 25,000 25,200 25,000 25,000

$30,000 to $40,000 35,100 35,100 35,000 35,000 35,000 34,800 34,900 35,000 35,000 35,000 35,000

$40,000 to $50,000 45,000 44,800 44,700 45,100 45,000 44,900 44,800 45,000 44,900 44,900 44,900

$50,000 to $75,000 61,000 61,000 61,200 61,300 61,000 61,400 61,400 61,100 61,500 61,700 61,700

$75,000 to $100,000 85,600 85,500 85,700 85,600 86,000 85,800 85,700 86,000 86,100 86,100 86,100

$100,000 to $150,000 118,400 117,200 118,400 118,700 118,300 118,000 119,100 119,700 119,100 120,400 120,400

$150,000 to $200,000 169,500 170,900 170,600 169,000 170,600 170,200 170,100 171,700 170,200 170,300 170,300

$200,000 and Over 391,000 392,800 398,100 440,900 451,400 497,400 405,000 452,500 516,800 528,900 528,900

All Categories 52,800 49,400 49,300 53,400 55,700 57,200 55,200 57,600 62,500 66,700 66,700

After-Tax Income

$0 to $10,000 5,700 5,600 5,600 5,500 5,600 5,600 5,700 5,700 6,100 6,000 6,000

$10,000 to $20,000 14,000 13,600 13,500 13,200 13,700 13,800 14,100 13,900 14,700 14,800 14,800

$20,000 to $30,000 21,400 20,900 21,000 20,900 21,000 21,300 21,400 21,500 22,000 22,000 22,400

$30,000 to $40,000 28,900 28,300 28,600 28,400 28,500 28,400 28,500 28,600 28,600 28,800 29,500

$40,000 to $50,000 36,000 35,300 35,700 36,000 36,200 35,900 35,800 35,700 35,700 36,000 36,800

$50,000 to $75,000 47,800 46,800 47,900 47,800 48,100 48,100 47,900 47,500 47,600 48,100 49,000

$75,000 to $100,000 65,900 64,400 66,300 66,000 66,200 65,900 65,500 65,200 65,000 65,700 66,600

$100,000 to $150,000 89,600 86,800 90,800 91,200 90,000 89,600 89,700 89,100 88,100 89,900 90,500

$150,000 to $200,000 123,300 125,700 131,000 128,000 127,600 128,000 126,500 126,300 122,200 123,900 124,200

$200,000 and Over 260,700 276,100 291,200 327,900 316,000 359,600 289,100 305,000 334,200 355,100 358,000

All Categories 41,100 38,100 38,800 41,800 43,300 44,500 42,900 43,900 46,900 50,500 51,100

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. A household with

children has at least one member under age 18.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 109

Table H-2c.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Income (Percent)

Pretax Income

 

$0 to $10,000 0.8 1.0 1.2 1.0 1.0 0.9 1.1 1.1 0.8 0.7 0.7

$10,000 to $20,000 3.0 3.5 3.8 3.2 3.1 2.9 3.1 3.0 2.8 2.4 2.4

$20,000 to $30,000 5.9 6.6 7.0 6.1 5.3 5.3 5.5 5.3 4.6 4.3 4.3

$30,000 to $40,000 8.7 9.8 8.9 8.7 7.9 7.2 7.8 7.2 6.6 5.6 5.6

$40,000 to $50,000 12.1 12.0 11.0 9.2 9.3 9.2 9.3 8.5 8.1 7.5 7.5

$50,000 to $75,000 28.5 28.3 26.2 25.4 23.3 23.9 23.5 20.7 20.8 20.0 20.0

$75,000 to $100,000 15.8 16.0 15.7 15.9 16.6 15.8 16.4 16.5 15.5 14.3 14.3

$100,000 to $150,000 11.3 11.2 11.2 12.9 14.7 14.5 14.4 15.3 13.9 14.1 14.1

$150,000 to $200,000 3.9 4.0 4.1 4.5 5.5 5.5 4.8 5.8 5.8 6.8 6.8

$200,000 and Over 10.2 8.0 11.3 13.6 14.1 15.7 14.5 17.3 21.5 24.5 24.5

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

After-Tax Income

$0 to $10,000 0.9 1.2 1.4 1.2 1.2 1.1 1.3 1.4 1.1 1.0 1.0

$10,000 to $20,000 3.5 4.1 4.4 3.6 3.6 3.5 3.8 3.7 3.7 3.2 3.2

$20,000 to $30,000 6.5 7.2 7.4 6.5 5.8 5.8 6.1 5.9 5.4 5.0 5.0

$30,000 to $40,000 9.2 10.2 9.2 9.0 8.3 7.6 8.2 7.7 7.1 6.1 6.2

$40,000 to $50,000 12.4 12.3 11.2 9.4 9.7 9.5 9.5 8.8 8.6 8.0 8.0

$50,000 to $75,000 28.6 28.1 26.1 25.3 23.7 24.1 23.6 21.2 21.4 20.6 20.7

$75,000 to $100,000 15.7 15.6 15.4 15.7 16.4 15.6 16.1 16.4 15.6 14.5 14.5

$100,000 to $150,000 11.0 10.8 11.0 12.7 14.4 14.1 13.9 15.0 13.7 13.9 13.8

$150,000 to $200,000 3.6 3.9 4.0 4.4 5.3 5.3 4.6 5.6 5.6 6.5 6.4

$200,000 and Over 8.8 7.3 10.5 12.9 12.7 14.6 13.3 15.2 18.5 21.7 21.6

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
110 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-3a.

Effective Federal Tax Rates for Elderly Childless Households, by Dollar Income Category, 

Using Household Cash Income Plus Taxes Paid by Businesses, 1979-1997 (In percent)

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate 

 

$0 to $10,000 5.9 4.1 3.0 4.5 5.0 2.7 5.2 5.4 3.9 6.0 6.0

$10,000 to $20,000 7.2 5.1 4.8 6.1 6.5 5.6 6.2 6.7 7.0 7.1 7.1

$20,000 to $30,000 11.2 9.0 8.7 8.9 9.3 9.3 9.0 9.5 10.7 10.0 9.9

$30,000 to $40,000 15.4 12.9 11.2 11.5 11.9 11.9 11.2 11.9 13.0 13.0 13.0

$40,000 to $50,000 18.2 15.9 14.0 14.3 14.8 14.8 14.4 14.8 16.3 15.8 16.0

$50,000 to $75,000 22.3 19.7 17.0 17.3 18.5 17.8 17.7 18.9 20.3 19.9 19.9

$75,000 to $100,000 24.8 23.3 20.2 21.2 21.9 21.4 21.2 21.6 24.6 23.0 22.8

$100,000 to $150,000 27.8 27.1 23.6 24.0 24.8 24.0 23.7 24.8 26.9 25.2 24.9

$150,000 to $200,000 33.6 29.7 25.7 25.4 26.8 27.1 26.1 27.6 28.9 27.6 27.4

$200,000 and Over 43.2 35.3 28.8 27.4 30.7 29.3 28.4 32.2 34.1 30.4 30.0

All Categories 21.1 19.0 16.3 17.1 18.8 18.7 17.4 18.6 20.7 21.0 20.8

Effective Individual Income Tax Rate

$0 to $10,000 0 0 0 0 0 0 0 0 0 0 0

$10,000 to $20,000 0.1 0.3 0.4 0.3 0.2 0.3 0.4 0.3 0.3 0.2 0.3

$20,000 to $30,000 1.3 2.2 2.2 2.0 1.6 2.0 2.1 1.6 1.9 1.7 1.7

$30,000 to $40,000 3.5 4.5 3.8 3.7 3.1 3.6 3.6 3.2 3.5 3.8 3.9

$40,000 to $50,000 5.3 6.5 5.8 5.7 5.3 5.7 5.9 5.1 5.8 5.7 5.9

$50,000 to $75,000 7.8 9.1 8.0 8.1 7.7 7.8 8.2 7.8 8.4 8.9 8.9

$75,000 to $100,000 10.0 12.2 10.7 11.3 10.1 10.5 10.9 9.5 11.4 10.9 10.7

$100,000 to $150,000 12.5 15.7 13.7 13.8 12.6 12.3 12.6 11.6 13.0 12.7 12.4

$150,000 to $200,000 15.3 17.6 15.3 15.4 13.6 15.1 14.6 13.9 13.7 13.4 13.2

$200,000 and Over 23.4 22.6 18.7 17.4 18.3 16.7 15.5 16.4 16.6 16.2 15.8

All Categories 7.9 9.6 8.2 8.5 8.5 8.9 8.1 7.6 8.6 9.6 9.4

Effective Social Insurance Tax Rate

$0 to $10,000 0.3 0.3 0.3 0.1 0.2 0.2 0.3 0.2 0.2 0.2 0.2

$10,000 to $20,000 0.9 0.9 0.8 0.7 0.7 0.8 0.8 0.8 0.8 0.7 0.7

$20,000 to $30,000 1.7 1.8 1.8 1.5 1.4 1.3 1.5 1.4 1.4 1.4 1.4

$30,000 to $40,000 2.7 2.6 2.2 2.3 2.2 2.1 1.9 2.2 2.2 2.2 2.2

$40,000 to $50,000 2.8 2.9 2.6 2.7 2.6 2.7 2.6 2.7 3.0 2.8 2.8

$50,000 to $75,000 3.4 3.4 2.8 3.3 3.0 3.7 3.3 3.8 4.0 3.3 3.3

$75,000 to $100,000 3.6 3.5 3.8 4.1 3.7 4.2 4.0 4.2 4.4 4.0 4.0

$100,000 to $150,000 3.3 2.8 2.8 3.1 3.4 3.9 4.5 4.4 4.5 3.7 3.7

$150,000 to $200,000 1.7 1.9 2.5 2.6 2.9 3.6 3.6 4.1 3.9 3.6 3.6

$200,000 and Over 0.9 1.0 0.9 1.1 1.1 1.2 1.4 1.8 1.9 1.5 1.5

All Categories 2.2 2.2 2.1 2.3 2.2 2.4 2.5 2.7 2.8 2.4 2.4

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by household cash income plus taxes paid by businesses.

A household consists of the people who share a housing unit, regardless of the relationships among them. An elderly childless

household is one headed by a person age 65 or older and with no member under age 18.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 111

Table H-3a.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Effective Corporate Income Tax Rate

 

$0 to $10,000 1.5 0.8 0.7 0.7 0.8 0.8 0.8 0.9 0.9 0.8 0.8

$10,000 to $20,000 4.2 2.4 1.9 2.2 2.8 2.5 2.2 2.7 2.9 2.6 2.6

$20,000 to $30,000 6.7 4.0 3.3 3.5 4.4 4.2 3.5 4.4 4.8 4.5 4.5

$30,000 to $40,000 8.0 4.9 3.9 4.0 5.1 4.7 4.1 4.7 5.2 5.1 5.1

$40,000 to $50,000 8.9 5.6 4.5 4.5 5.6 5.2 4.5 5.5 5.8 5.7 5.7

$50,000 to $75,000 10.1 6.3 5.3 4.9 6.7 5.2 5.0 6.1 6.4 6.4 6.4

$75,000 to $100,000 10.2 6.9 5.0 5.0 7.2 5.8 5.3 6.8 7.6 7.0 7.0

$100,000 to $150,000 11.3 8.0 6.5 6.3 8.0 7.1 5.8 7.9 8.3 7.8 7.8

$150,000 to $200,000 15.9 9.6 7.4 6.7 9.6 7.7 7.3 8.8 10.4 9.5 9.5

$200,000 and Over 18.4 11.3 8.7 8.3 10.9 10.9 11.1 13.4 15.0 12.3 12.3

All Categories 9.7 6.3 5.0 5.0 6.8 6.4 5.5 6.8 7.7 7.6 7.6

Effective Federal Excise Tax Rate

$0 to $10,000 4.1 3.0 2.1 3.6 4.0 1.7 4.2 4.3 2.8 5.0 5.0

$10,000 to $20,000 2.0 1.6 1.7 2.9 2.8 2.0 2.8 2.9 3.1 3.5 3.5

$20,000 to $30,000 1.4 1.0 1.4 2.0 1.9 1.7 1.9 2.2 2.6 2.4 2.4

$30,000 to $40,000 1.3 1.0 1.2 1.5 1.5 1.4 1.5 1.7 2.1 1.9 1.9

$40,000 to $50,000 1.2 0.9 1.1 1.3 1.3 1.2 1.4 1.5 1.7 1.6 1.6

$50,000 to $75,000 1.0 0.8 0.9 1.0 1.1 1.0 1.2 1.2 1.5 1.3 1.3

$75,000 to $100,000 0.9 0.7 0.7 0.8 0.9 0.9 1.0 1.0 1.3 1.0 1.0

$100,000 to $150,000 0.7 0.6 0.6 0.8 0.8 0.8 0.8 1.0 1.1 1.0 1.0

$150,000 to $200,000 0.6 0.5 0.5 0.7 0.7 0.7 0.6 0.8 0.9 1.0 1.0

$200,000 and Over 0.5 0.4 0.3 0.5 0.4 0.4 0.4 0.6 0.6 0.4 0.4

All Categories 1.3 0.9 1.0 1.3 1.3 1.1 1.3 1.5 1.6 1.4 1.4

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
112 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-3b.

Shares of Federal Tax Liabilities for Elderly Childless Households, by Dollar Income Category, 

Using Household Cash Income Plus Taxes Paid by Businesses, 1979-1997 (In percent)

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities

 

$0 to $10,000 1.4 1.0 0.8 1.0 0.8 0.4 1.0 0.9 0.6 0.7 0.7

$10,000 to $20,000 3.9 2.8 2.9 3.1 2.7 2.3 2.8 3.1 2.8 2.2 2.3

$20,000 to $30,000 6.6 5.4 6.1 5.5 5.3 5.0 5.5 5.4 5.4 3.9 3.9

$30,000 to $40,000 7.9 7.3 7.6 7.2 6.6 6.6 7.7 7.1 6.8 5.4 5.4

$40,000 to $50,000 7.8 7.6 8.2 7.7 7.3 6.6 7.7 7.5 6.6 6.1 6.2

$50,000 to $75,000 18.6 16.4 17.7 16.6 16.4 14.2 17.1 17.8 15.0 13.5 13.6

$75,000 to $100,000 9.9 10.9 10.9 11.6 11.1 9.9 12.4 11.3 12.2 10.6 10.5

$100,000 to $150,000 11.5 14.4 13.9 16.7 11.4 12.2 13.4 12.2 12.9 13.3 13.2

$150,000 to $200,000 6.8 7.7 6.2 5.9 7.4 8.3 6.2 6.4 7.1 5.6 5.6

$200,000 and Over 25.5 26.6 25.7 24.6 31.1 34.5 26.3 28.3 30.6 38.8 38.5

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Individual Income Tax Liabilities

$0 to $10,000 0 0 0 0 0 0 0 0 0 0 0

$10,000 to $20,000 0.1 0.3 0.4 0.3 0.2 0.3 0.4 0.3 0.3 0.2 0.2

$20,000 to $30,000 2.1 2.6 3.1 2.5 2.0 2.2 2.8 2.2 2.3 1.4 1.4

$30,000 to $40,000 4.8 5.0 5.2 4.7 3.7 4.3 5.3 4.7 4.4 3.5 3.6

$40,000 to $50,000 6.1 6.2 6.8 6.3 5.7 5.3 6.8 6.3 5.7 4.9 5.1

$50,000 to $75,000 17.3 15.1 16.5 15.6 15.1 13.2 17.2 17.8 14.9 13.1 13.4

$75,000 to $100,000 10.7 11.3 11.5 12.5 11.4 10.2 13.7 12.1 13.5 11.0 10.9

$100,000 to $150,000 13.8 16.5 16.0 19.3 12.7 13.2 15.4 13.9 14.9 14.7 14.6

$150,000 to $200,000 8.3 9.1 7.3 7.2 8.3 9.7 7.6 7.8 8.1 6.0 6.0

$200,000 and Over 36.8 33.9 33.2 31.6 40.8 41.6 31.0 35.0 35.8 45.4 44.8

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Social Insurance Tax Liabilities

$0 to $10,000 0.7 0.5 0.5 0.2 0.2 0.2 0.3 0.3 0.3 0.2 0.2

$10,000 to $20,000 4.6 4.0 3.9 2.6 2.6 2.6 2.7 2.6 2.4 2.0 2.0

$20,000 to $30,000 9.4 9.6 9.8 6.8 6.9 5.6 6.5 5.5 5.4 4.6 4.6

$30,000 to $40,000 13.0 12.7 11.7 10.7 10.2 9.1 9.3 9.2 8.8 7.9 7.9

$40,000 to $50,000 11.5 11.8 11.9 11.0 11.1 9.5 9.8 9.6 9.0 9.3 9.3

$50,000 to $75,000 26.3 24.2 22.7 23.6 22.8 23.0 22.3 24.7 21.9 19.8 19.8

$75,000 to $100,000 13.6 14.0 15.7 16.8 16.3 15.1 16.4 15.5 16.3 16.2 16.2

$100,000 to $150,000 13.0 12.5 12.7 16.1 13.4 15.4 17.7 15.0 16.2 17.1 17.1

$150,000 to $200,000 3.2 4.3 4.6 4.6 6.9 8.5 6.0 6.5 7.1 6.4 6.4

$200,000 and Over 4.8 6.3 6.5 7.6 9.5 11.1 9.0 11.2 12.7 16.3 16.3

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. An elderly childless

household is one headed by a person age 65 or older and with no member under age 18.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 113

Table H-3b.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Corporate Income Tax Liabilities

 

$0 to $10,000 0.8 0.6 0.6 0.5 0.3 0.3 0.4 0.4 0.3 0.2 0.2

$10,000 to $20,000 4.9 3.9 3.7 3.8 3.2 3.0 3.1 3.4 3.0 2.3 2.3

$20,000 to $30,000 8.7 7.2 7.5 7.4 6.9 6.6 6.7 6.8 6.5 4.9 4.9

$30,000 to $40,000 9.0 8.3 8.7 8.5 7.8 7.7 8.8 7.7 7.3 5.8 5.8

$40,000 to $50,000 8.4 8.1 8.6 8.4 7.6 6.8 7.6 7.6 6.3 6.1 6.1

$50,000 to $75,000 18.4 15.9 18.0 16.1 16.4 12.3 15.2 15.8 12.7 11.9 11.9

$75,000 to $100,000 8.9 9.7 8.9 9.4 10.0 7.9 9.8 9.8 10.1 8.9 8.9

$100,000 to $150,000 10.2 12.9 12.6 14.9 10.1 10.7 10.3 10.6 10.6 11.3 11.3

$150,000 to $200,000 7.0 7.5 5.8 5.3 7.3 6.9 5.5 5.6 6.9 5.3 5.3

$200,000 and Over 23.7 25.8 25.6 25.6 30.4 37.8 32.5 32.3 36.1 43.3 43.3

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Federal Excise Tax Liabilities

$0 to $10,000 16.5 15.1 8.5 10.0 9.5 4.4 10.0 9.0 5.1 8.8 8.8

$10,000 to $20,000 18.0 17.3 17.0 19.1 17.5 14.2 16.7 17.0 15.6 16.5 16.5

$20,000 to $30,000 13.8 12.7 15.7 16.0 15.6 16.2 14.9 15.4 16.6 13.9 13.9

$30,000 to $40,000 10.9 11.1 13.3 12.5 12.7 14.1 13.7 13.1 14.2 11.6 11.6

$40,000 to $50,000 8.3 8.6 10.2 9.2 9.4 9.8 9.5 9.5 9.1 9.3 9.3

$50,000 to $75,000 14.4 13.5 15.7 12.7 14.1 14.6 14.9 14.6 14.3 13.6 13.6

$75,000 to $100,000 6.1 6.7 6.5 5.7 6.8 7.1 7.3 6.9 8.4 7.0 7.0

$100,000 to $150,000 5.0 6.5 5.9 6.9 5.5 6.8 5.8 5.9 6.7 7.9 7.9

$150,000 to $200,000 2.0 2.6 2.0 2.1 2.8 3.7 2.0 2.4 2.8 3.0 3.0

$200,000 and Over 4.9 5.7 5.0 5.8 6.1 9.1 5.1 6.1 7.3 8.3 8.3

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
114 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-3c.

Number of Households, Average Pretax and After-Tax Income, and Shares of Pretax and AfterTax Income for Elderly Childless Households, by Dollar Income Category, Using Household 

Cash Income Plus Taxes Paid by Businesses, 1979-1997

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Number of Households (Millions)

 

$0 to $10,000 3.9 3.9 3.7 3.7 3.3 3.2 3.7 3.6 3.6 3.5 3.5

$10,000 to $20,000 4.1 4.2 4.2 4.2 4.3 4.5 4.4 4.7 4.7 4.6 4.6

$20,000 to $30,000 2.7 2.7 2.9 3.0 3.4 3.5 3.5 3.4 3.6 3.3 3.3

$30,000 to $40,000 1.7 1.8 2.0 2.2 2.4 2.6 2.8 2.6 2.7 2.5 2.5

$40,000 to $50,000 1.1 1.2 1.4 1.5 1.6 1.6 1.7 1.7 1.6 1.8 1.8

$50,000 to $75,000 1.5 1.6 1.8 1.9 2.2 2.1 2.3 2.3 2.2 2.4 2.4

$75,000 to $100,000 0.5 0.6 0.7 0.8 0.9 0.9 1.0 0.9 1.0 1.1 1.1

$100,000 to $150,000 0.4 0.5 0.5 0.7 0.6 0.7 0.7 0.6 0.7 0.9 0.9

$150,000 to $200,000 0.1 0.2 0.1 0.2 0.2 0.3 0.2 0.2 0.3 0.2 0.2

$200,000 and Over 0.2 0.2 0.2 0.2 0.3 0.4 0.3 0.2 0.3 0.4 0.4

All Categories 16.3 17.0 17.6 18.4 19.2 19.8 20.5 20.2 20.9 21.0 21.0

Average Income (1997 dollars)

Pretax Income

$0 to $10,000 7,000 7,100 7,100 7,100 7,000 7,200 7,000 6,900 7,000 7,000 7,000

$10,000 to $20,000 14,600 14,500 14,800 14,600 14,700 14,700 14,800 14,700 14,800 14,700 14,700

$20,000 to $30,000 24,700 24,700 24,800 24,800 24,800 24,900 24,900 24,700 24,800 24,800 24,800

$30,000 to $40,000 34,400 34,500 34,600 34,700 34,600 34,700 34,700 34,600 34,600 34,900 34,900

$40,000 to $50,000 44,700 44,500 44,700 44,800 44,500 44,700 44,600 44,600 44,800 44,600 44,600

$50,000 to $75,000 61,000 60,100 60,800 59,900 60,900 60,500 60,300 61,200 60,600 60,800 60,800

$75,000 to $100,000 85,500 85,900 85,400 85,900 85,400 86,200 86,400 85,500 85,400 85,900 85,900

$100,000 to $150,000 118,000 120,200 120,300 120,900 119,800 120,700 120,400 121,000 120,000 119,900 119,900

$150,000 to $200,000 175,500 172,000 173,200 169,700 174,600 169,100 171,700 169,100 171,300 171,900 171,900

$200,000 and Over 430,800 387,400 436,100 481,600 486,300 536,500 520,400 523,200 482,800 641,900 641,900

All Categories 32,800 34,900 36,000 38,400 41,200 43,500 39,800 39,300 41,200 48,000 48,000

After-Tax Income

$0 to $10,000 6,600 6,800 6,800 6,800 6,700 7,000 6,700 6,600 6,800 6,600 6,600

$10,000 to $20,000 13,500 13,800 14,100 13,700 13,700 13,900 13,900 13,700 13,700 13,700 13,600

$20,000 to $30,000 21,900 22,400 22,600 22,600 22,500 22,500 22,700 22,400 22,100 22,300 22,300

$30,000 to $40,000 29,100 30,100 30,700 30,700 30,500 30,500 30,800 30,500 30,100 30,400 30,400

$40,000 to $50,000 36,600 37,400 38,500 38,400 37,900 38,100 38,200 37,900 37,500 37,600 37,500

$50,000 to $75,000 47,400 48,300 50,500 49,500 49,700 49,800 49,700 49,600 48,400 48,600 48,600

$75,000 to $100,000 64,300 65,900 68,200 67,700 66,600 67,800 68,100 67,100 64,400 66,100 66,300

$100,000 to $150,000 85,200 87,600 91,900 91,900 90,000 91,700 91,900 91,000 87,700 89,800 90,100

$150,000 to $200,000 116,600 120,900 128,600 126,500 127,700 123,300 126,900 122,400 121,800 124,500 124,900

$200,000 and Over 244,800 250,800 310,700 349,900 337,000 379,400 372,800 355,000 318,200 446,400 449,300

All Categories 25,900 28,300 30,100 31,900 33,500 35,400 32,900 32,000 32,600 37,900 38,000

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. An elderly childless

household is one headed by a person age 65 or older and with no member under age 18.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 115

Table H-3c.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Income (Percent)

Pretax Income

 

$0 to $10,000 5.1 4.6 4.1 3.7 2.9 2.7 3.2 3.1 2.9 2.4 2.4

$10,000 to $20,000 11.3 10.3 9.9 8.7 8.0 7.7 7.9 8.6 8.1 6.6 6.6

$20,000 to $30,000 12.4 11.4 11.4 10.7 10.6 10.0 10.6 10.6 10.4 8.2 8.2

$30,000 to $40,000 10.9 10.7 11.1 10.7 10.3 10.4 11.9 11.1 10.9 8.7 8.7

$40,000 to $50,000 9.1 9.1 9.6 9.3 9.2 8.3 9.3 9.4 8.4 8.1 8.1

$50,000 to $75,000 17.5 15.8 17.0 16.4 16.7 15.0 16.8 17.5 15.3 14.2 14.2

$75,000 to $100,000 8.4 8.9 8.8 9.4 9.5 8.6 10.1 9.8 10.3 9.6 9.6

$100,000 to $150,000 8.7 10.1 9.6 11.9 8.6 9.5 9.8 9.2 9.9 11.1 11.1

$150,000 to $200,000 4.3 4.9 3.9 4.0 5.2 5.7 4.2 4.3 5.1 4.2 4.2

$200,000 and Over 12.4 14.3 14.6 15.4 19.0 22.1 16.2 16.4 18.6 26.8 26.8

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

After-Tax Income

$0 to $10,000 6.1 5.5 4.8 4.2 3.5 3.2 3.7 3.6 3.5 2.9 2.9

$10,000 to $20,000 13.3 12.1 11.2 9.8 9.2 9.0 9.0 9.9 9.6 7.8 7.8

$20,000 to $30,000 13.9 12.8 12.5 11.7 11.8 11.1 11.6 11.8 11.7 9.3 9.3

$30,000 to $40,000 11.6 11.5 11.7 11.4 11.2 11.3 12.8 12.1 11.9 9.6 9.6

$40,000 to $50,000 9.4 9.4 9.9 9.6 9.6 8.7 9.6 9.8 8.9 8.7 8.6

$50,000 to $75,000 17.2 15.6 16.9 16.4 16.7 15.1 16.8 17.4 15.4 14.4 14.4

$75,000 to $100,000 8.0 8.4 8.4 8.9 9.2 8.4 9.7 9.4 9.8 9.4 9.4

$100,000 to $150,000 8.0 9.1 8.8 10.9 7.9 8.9 9.1 8.5 9.1 10.5 10.5

$150,000 to $200,000 3.6 4.3 3.5 3.6 4.7 5.1 3.7 3.8 4.6 3.9 3.9

$200,000 and Over 9.0 11.4 12.4 13.5 16.2 19.2 14.0 13.6 15.5 23.6 23.7

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
116 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-4a.

Effective Federal Tax Rates for Nonelderly Childless Households, by Dollar Income Category, 

Using Household Cash Income Plus Taxes Paid by Businesses, 1979-1997 (In percent)

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate 

 

$0 to $10,000 0.4 1.0 1.0 0.9 0.7 0.8 0.6 0.2 -1.1 -1.2 -1.2

$10,000 to $20,000 4.9 5.6 5.0 5.1 4.6 4.9 4.9 4.0 3.7 3.0 2.9

$20,000 to $30,000 8.3 9.4 8.0 8.0 7.2 7.4 7.4 7.0 7.1 6.8 6.5

$30,000 to $40,000 10.4 11.4 9.6 9.4 8.7 8.8 8.8 8.4 8.4 8.2 8.0

$40,000 to $50,000 11.7 12.7 10.5 10.3 10.1 10.0 9.7 9.8 9.7 9.5 9.3

$50,000 to $75,000 13.0 14.2 11.7 11.1 10.8 10.9 10.9 10.6 10.8 10.6 10.3

$75,000 to $100,000 14.6 16.0 12.9 12.4 12.4 12.3 12.2 12.2 12.6 12.1 12.0

$100,000 to $150,000 16.5 17.8 14.4 13.9 14.3 14.0 13.6 13.5 14.0 13.8 13.6

$150,000 to $200,000 19.9 20.5 15.9 14.2 16.6 15.8 15.7 15.7 15.9 15.7 15.6

$200,000 and Over 22.3 21.4 18.0 17.5 19.1 19.6 19.5 21.8 23.6 22.9 22.4

All Categories 13.6 14.6 12.0 11.9 12.1 12.5 12.2 12.5 12.8 13.4 13.1

Effective Individual Income Tax Rate

$0 to $10,000 0.4 1.0 1.0 0.9 0.7 0.8 0.6 0.2 -1.1 -1.2 -1.2

$10,000 to $20,000 4.9 5.6 5.0 5.1 4.6 4.9 4.9 4.0 3.7 3.0 2.9

$20,000 to $30,000 8.3 9.4 8.0 8.0 7.2 7.4 7.4 7.0 7.1 6.8 6.5

$30,000 to $40,000 10.4 11.4 9.6 9.4 8.7 8.8 8.8 8.4 8.4 8.2 8.0

$40,000 to $50,000 11.7 12.7 10.5 10.3 10.1 10.0 9.7 9.8 9.7 9.5 9.3

$50,000 to $75,000 13.0 14.2 11.7 11.1 10.8 10.9 10.9 10.6 10.8 10.6 10.3

$75,000 to $100,000 14.6 16.0 12.9 12.4 12.4 12.3 12.2 12.2 12.6 12.1 12.0

$100,000 to $150,000 16.5 17.8 14.4 13.9 14.3 14.0 13.6 13.5 14.0 13.8 13.6

$150,000 to $200,000 19.9 20.5 15.9 14.2 16.6 15.8 15.7 15.7 15.9 15.7 15.6

$200,000 and Over 22.3 21.4 18.0 17.5 19.1 19.6 19.5 21.8 23.6 22.9 22.4

All Categories 13.6 14.6 12.0 11.9 12.1 12.5 12.2 12.5 12.8 13.4 13.1

Effective Social Insurance Tax Rate

$0 to $10,000 6.3 6.9 6.9 7.4 7.6 8.6 8.2 8.2 8.9 8.6 8.6

$10,000 to $20,000 8.7 9.3 9.3 10.1 10.3 10.7 11.2 11.0 11.1 11.1 11.1

$20,000 to $30,000 9.2 10.1 10.1 10.9 10.9 11.5 11.8 11.9 12.0 12.0 12.0

$30,000 to $40,000 9.5 10.1 10.0 10.8 11.0 11.4 11.6 11.7 12.1 12.0 12.0

$40,000 to $50,000 9.5 10.0 10.1 10.6 11.0 11.6 11.7 12.3 12.3 12.1 12.1

$50,000 to $75,000 9.1 10.0 10.1 10.9 11.1 11.5 11.7 12.2 12.4 12.2 12.2

$75,000 to $100,000 8.4 9.1 9.5 10.3 10.5 11.1 11.5 12.0 12.0 12.0 12.0

$100,000 to $150,000 6.8 7.6 8.1 9.1 9.5 10.0 10.9 10.9 11.0 10.6 10.6

$150,000 to $200,000 4.8 5.4 5.9 6.9 7.8 8.1 8.6 8.9 9.0 9.0 9.0

$200,000 and Over 1.8 2.0 2.0 2.3 2.8 2.9 3.5 3.5 4.6 3.8 3.8

All Categories 7.8 8.6 8.6 9.1 9.4 9.6 10.0 10.2 10.6 9.8 9.8

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by household cash income plus taxes paid by businesses.

A household consists of the people who share a housing unit, regardless of the relationships among them. A nonelderly childless

household is one headed by a person under age 65 and with no member under age 18.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 117

Table H-4a.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Effective Corporate Income Tax Rate

 

$0 to $10,000 1.7 1.0 0.8 0.7 0.8 1.0 0.7 0.8 0.7 0.6 0.6

$10,000 to $20,000 1.3 0.8 0.7 0.6 0.7 0.7 0.6 0.8 0.7 0.7 0.7

$20,000 to $30,000 1.3 0.9 0.7 0.6 0.9 0.8 0.6 0.8 0.7 0.8 0.8

$30,000 to $40,000 1.3 0.8 0.9 0.8 1.0 0.8 0.8 1.0 0.8 0.9 0.9

$40,000 to $50,000 1.3 1.1 0.9 0.9 1.1 0.9 0.9 0.8 0.9 1.0 1.0

$50,000 to $75,000 1.7 1.1 0.9 0.9 1.2 1.1 0.9 1.0 1.1 1.0 1.0

$75,000 to $100,000 2.1 1.6 1.1 1.1 1.4 1.3 1.1 1.2 1.4 1.2 1.2

$100,000 to $150,000 3.6 2.5 1.6 1.4 1.8 1.6 1.3 2.0 2.1 2.0 2.0

$150,000 to $200,000 5.9 3.6 2.4 2.3 2.8 2.2 2.6 2.9 3.7 3.2 3.2

$200,000 and Over 11.9 6.9 5.1 5.1 6.2 5.5 5.4 7.0 6.6 5.9 5.9

All Categories 3.1 2.0 1.6 1.7 2.0 1.9 1.8 2.2 2.2 2.4 2.4

Effective Federal Excise Tax Rate

$0 to $10,000 3.9 3.0 3.6 4.4 5.7 3.5 4.0 4.2 6.2 5.6 5.6

$10,000 to $20,000 2.0 1.5 1.7 2.0 2.2 1.9 1.9 2.2 2.6 2.5 2.5

$20,000 to $30,000 1.5 1.2 1.1 1.4 1.4 1.3 1.4 1.5 1.6 1.4 1.4

$30,000 to $40,000 1.2 0.9 1.0 1.1 1.1 1.1 1.2 1.2 1.4 1.2 1.2

$40,000 to $50,000 1.1 0.8 0.9 0.9 1.0 1.0 1.1 1.1 1.2 1.1 1.1

$50,000 to $75,000 1.0 0.7 0.9 0.8 0.8 0.9 0.9 0.9 1.0 0.9 0.9

$75,000 to $100,000 0.8 0.6 0.7 0.7 0.7 0.7 0.7 0.8 0.9 0.8 0.8

$100,000 to $150,000 0.8 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.6 0.6

$150,000 to $200,000 0.7 0.5 0.6 0.5 0.5 0.5 0.5 0.6 0.6 0.5 0.5

$200,000 and Over 0.6 0.4 0.4 0.3 0.3 0.3 0.3 0.4 0.4 0.3 0.3

All Categories 1.0 0.8 0.9 0.9 0.9 0.9 0.9 1.0 1.1 0.9 0.9

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
118 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-4b.

Shares of Federal Tax Liabilities for Nonelderly Childless Households, by Dollar Income Category, 

Using Household Cash Income Plus Taxes Paid by Businesses, 1979-1997 (In percent)

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities

 

$0 to $10,000 0.6 0.7 0.8 0.7 0.8 0.7 0.7 0.7 0.8 0.7 0.7

$10,000 to $20,000 3.1 3.2 3.6 3.5 3.2 3.2 3.2 3.2 3.0 2.5 2.5

$20,000 to $30,000 6.5 7.0 7.0 6.9 6.0 5.8 6.0 6.0 5.7 5.0 5.0

$30,000 to $40,000 8.5 8.9 8.8 8.9 8.0 7.2 8.0 7.7 7.2 6.0 6.0

$40,000 to $50,000 10.2 10.4 9.9 8.6 8.7 8.4 8.3 7.8 8.2 7.0 7.0

$50,000 to $75,000 23.1 23.1 23.3 21.6 20.4 19.8 20.1 18.2 18.6 17.0 17.0

$75,000 to $100,000 14.6 15.7 15.4 15.1 15.1 15.0 14.5 15.0 14.8 12.9 12.9

$100,000 to $150,000 12.9 14.0 14.2 13.3 15.2 15.3 14.2 13.9 14.6 14.2 14.2

$150,000 to $200,000 4.9 4.5 4.2 5.3 6.5 5.7 6.2 6.1 6.3 6.5 6.5

$200,000 and Over 15.5 12.2 12.8 15.9 16.0 18.8 18.8 21.3 20.8 28.2 28.0

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Individual Income Tax Liabilities

$0 to $10,000 0 0.1 0.1 0.1 0.1 0.1 0.1 0 -0.1 -0.1 -0.1

$10,000 to $20,000 1.7 1.9 2.1 2.0 1.7 1.7 1.7 1.5 1.3 0.9 0.8

$20,000 to $30,000 5.0 5.5 5.4 5.2 4.3 4.1 4.3 4.1 3.9 3.2 3.1

$30,000 to $40,000 7.5 7.8 7.5 7.5 6.4 5.7 6.4 6.0 5.5 4.4 4.4

$40,000 to $50,000 9.5 9.6 8.9 7.7 7.6 7.2 7.0 6.6 6.8 5.6 5.5

$50,000 to $75,000 22.8 22.5 22.0 20.0 18.6 17.6 18.4 16.1 16.5 14.4 14.3

$75,000 to $100,000 15.4 16.4 15.7 15.0 15.1 14.5 14.1 14.5 14.5 11.8 11.9

$100,000 to $150,000 14.5 15.6 15.7 14.5 16.7 16.3 14.8 14.4 15.3 14.2 14.4

$150,000 to $200,000 5.8 5.5 5.2 6.3 7.8 6.7 7.2 7.1 7.2 7.1 7.1

$200,000 and Over 17.8 15.1 17.3 21.7 21.7 26.1 26.0 29.6 29.1 38.6 38.5

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Social Insurance Tax Liabilities

$0 to $10,000 1.1 1.2 1.2 1.1 1.1 1.1 1.1 1.1 1.2 1.2 1.2

$10,000 to $20,000 5.3 5.3 5.3 5.2 4.8 4.8 4.8 4.9 4.6 4.3 4.3

$20,000 to $30,000 9.6 9.9 9.5 9.3 8.4 8.2 8.3 8.5 8.0 7.8 7.8

$30,000 to $40,000 11.9 11.7 11.0 11.3 10.5 9.6 10.3 10.2 9.6 8.8 8.8

$40,000 to $50,000 13.5 12.9 11.9 10.4 10.7 10.7 10.3 10.2 10.5 9.7 9.7

$50,000 to $75,000 27.9 26.8 26.8 25.8 24.7 24.0 23.9 22.7 23.0 22.8 22.8

$75,000 to $100,000 15.4 15.8 16.2 16.5 16.5 17.0 16.2 17.5 16.7 16.0 16.0

$100,000 to $150,000 10.3 11.4 12.5 12.5 14.4 15.1 14.5 14.2 14.5 15.0 15.0

$150,000 to $200,000 2.4 2.5 2.7 4.0 4.8 4.4 4.8 4.9 4.9 5.5 5.5

$200,000 and Over 2.5 2.4 2.7 3.8 4.1 4.9 5.8 5.7 6.9 8.8 8.8

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. A nonelderly childless

household is one headed by a person under age 65 and with no member under age 18.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 119

Table H-4b.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Corporate Income Tax Liabilities

 

$0 to $10,000 0.7 0.7 0.7 0.5 0.5 0.6 0.5 0.5 0.5 0.3 0.3

$10,000 to $20,000 1.9 2.0 2.2 1.8 1.6 1.6 1.4 1.7 1.5 1.2 1.2

$20,000 to $30,000 3.4 3.6 3.8 2.8 3.1 2.8 2.5 2.5 2.4 2.0 2.0

$30,000 to $40,000 4.0 4.1 5.3 4.5 4.5 3.4 4.0 4.0 3.1 2.7 2.7

$40,000 to $50,000 4.7 6.0 5.6 4.7 4.8 4.3 4.3 3.1 3.7 3.3 3.3

$50,000 to $75,000 12.8 13.1 13.5 11.8 12.2 12.0 10.8 8.8 9.6 7.7 7.7

$75,000 to $100,000 9.8 11.9 10.7 9.9 10.6 9.6 8.7 7.9 9.2 6.5 6.5

$100,000 to $150,000 13.8 15.8 13.9 10.9 12.4 11.9 9.8 11.6 13.0 11.6 11.6

$150,000 to $200,000 7.5 7.0 6.1 7.4 7.8 6.1 8.2 7.1 9.6 8.1 8.1

$200,000 and Over 41.1 35.7 37.8 45.6 42.5 47.4 49.7 52.7 47.4 56.5 56.5

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Share of Federal Excise Tax Liabilities

$0 to $10,000 5.0 5.4 6.0 6.3 8.5 5.0 5.9 5.8 8.2 8.4 8.4

$10,000 to $20,000 8.9 9.2 9.4 10.5 10.5 9.5 9.3 10.3 10.6 11.0 11.0

$20,000 to $30,000 11.7 12.3 10.3 12.2 10.7 10.7 10.9 11.4 10.5 10.2 10.2

$30,000 to $40,000 11.1 11.1 10.7 11.4 11.2 10.6 11.8 11.5 11.2 9.7 9.7

$40,000 to $50,000 11.3 11.1 10.9 9.3 9.9 10.5 10.4 9.2 9.8 9.4 9.4

$50,000 to $75,000 22.5 21.1 22.4 19.4 18.8 20.2 19.8 18.2 18.6 18.3 18.3

$75,000 to $100,000 11.6 11.9 11.3 11.5 11.5 12.5 11.8 11.7 11.8 11.1 11.1

$100,000 to $150,000 8.8 9.2 9.5 8.8 9.8 10.4 9.4 9.7 9.3 10.2 10.2

$150,000 to $200,000 2.6 2.5 2.6 3.0 3.2 3.1 3.4 3.5 3.2 3.7 3.7

$200,000 and Over 5.7 5.0 5.8 5.1 4.2 5.8 6.2 7.2 5.1 6.8 6.8

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.
120 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table H-4c.

Number of Households, Average Pretax and After-Tax Income, and Shares of Pretax and After-Tax 

Income for Nonelderly Childless Households, by Dollar Income Category, Using Household Cash 

Income Plus Taxes Paid by Businesses, 1979-1997

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Number of Households (Millions)

 

$0 to $10,000 3.5 4.0 4.5 4.2 4.7 4.5 4.7 5.0 5.4 5.6 5.6

$10,000 to $20,000 4.7 5.1 5.4 5.7 5.7 6.0 6.0 6.4 6.3 6.4 6.4

$20,000 to $30,000 5.0 5.4 5.4 5.6 5.6 5.8 5.9 6.1 6.0 6.2 6.2

$30,000 to $40,000 4.3 4.5 4.5 5.0 4.9 4.9 5.4 5.4 5.1 5.1 5.1

$40,000 to $50,000 3.8 3.9 3.8 3.6 3.9 4.2 4.2 3.9 4.3 4.3 4.3

$50,000 to $75,000 6.0 5.9 6.1 6.4 6.5 6.9 7.0 6.5 6.8 7.4 7.4

$75,000 to $100,000 2.5 2.7 2.8 3.1 3.3 3.6 3.4 3.6 3.7 3.7 3.7

$100,000 to $150,000 1.5 1.7 1.8 1.9 2.3 2.6 2.3 2.3 2.5 2.9 2.9

$150,000 to $200,000 0.4 0.4 0.4 0.6 0.6 0.7 0.7 0.7 0.7 0.9 0.9

$200,000 and Over 0.4 0.4 0.4 0.6 0.6 0.8 0.7 0.8 0.8 1.1 1.1

All Categories 32.7 34.7 35.9 37.5 38.9 40.6 41.3 41.6 42.7 45.0 45.0

Average Income (1997 dollars)

Pretax Income

$0 to $10,000 5,800 5,600 5,400 5,600 5,600 5,700 5,800 5,600 5,700 5,800 5,800

$10,000 to $20,000 15,200 15,100 15,000 15,100 15,000 15,200 14,900 15,000 14,900 14,700 14,700

$20,000 to $30,000 24,900 24,900 24,800 25,100 24,800 25,000 25,000 25,000 24,900 25,100 25,100

$30,000 to $40,000 34,900 34,900 34,900 34,800 34,900 34,700 34,700 34,800 34,900 34,800 34,800

$40,000 to $50,000 44,800 44,800 44,600 44,800 44,900 44,800 44,600 44,800 44,800 44,800 44,800

$50,000 to $75,000 61,000 60,900 61,100 61,100 61,200 61,300 61,200 60,800 61,200 61,100 61,100

$75,000 to $100,000 85,600 85,800 85,600 85,700 85,900 86,200 86,000 85,900 85,900 86,400 86,400

$100,000 to $150,000 118,500 117,800 118,800 118,400 119,400 119,700 119,800 119,600 120,100 119,500 119,500

$150,000 to $200,000 171,400 170,200 171,000 168,700 170,300 168,400 169,300 170,500 170,500 171,500 171,500

$200,000 and Over 401,100 419,700 486,700 471,500 457,500 460,400 457,100 462,900 431,500 526,500 526,500

All Categories 46,500 45,400 45,900 48,500 49,300 51,700 50,700 49,900 49,800 55,200 55,200

After-Tax Income

$0 to $10,000 5,100 5,000 4,800 4,900 4,800 4,900 5,000 4,900 4,900 5,000 5,000

$10,000 to $20,000 12,600 12,500 12,500 12,400 12,300 12,400 12,200 12,300 12,200 12,200 12,200

$20,000 to $30,000 19,900 19,500 19,900 19,800 19,700 19,800 19,700 19,800 19,600 19,800 19,900

$30,000 to $40,000 27,100 26,800 27,400 27,200 27,200 27,100 26,900 27,000 27,000 27,000 27,100

$40,000 to $50,000 34,200 33,700 34,600 34,700 34,500 34,300 34,200 34,100 34,000 34,200 34,300

$50,000 to $75,000 45,900 45,000 46,700 46,600 46,600 46,300 46,300 45,700 45,800 46,000 46,100

$75,000 to $100,000 63,400 62,400 64,900 64,700 64,300 64,300 64,100 63,400 62,900 63,900 64,100

$100,000 to $150,000 85,700 84,300 89,400 88,700 88,000 88,400 88,200 87,200 86,800 87,200 87,400

$150,000 to $200,000 117,900 119,100 128,500 128,200 123,000 123,600 122,900 122,700 120,700 122,800 123,000

$200,000 and Over 254,500 290,900 362,800 352,500 327,600 330,300 325,700 311,800 279,600 353,300 356,000

All Categories 34,500 33,600 35,300 37,100 37,300 38,800 38,100 37,000 36,500 40,600 40,700

SOURCE: Congressional Budget Office.

NOTES: A household consists of the people who share a housing unit, regardless of the relationships among them. A nonelderly childless

household is one headed by a person under age 65 and with no member under age 18.
APPENDIX H DISTRIBUTIONAL ESTIMATES USING HOUSEHOLD CASH INCOME 121

Table H-4c.

Continued

1997

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Income (Percent)

Pretax Income

 

$0 to $10,000 1.3 1.4 1.5 1.3 1.4 1.2 1.3 1.3 1.5 1.3 1.3

$10,000 to $20,000 4.7 4.9 4.9 4.7 4.4 4.3 4.3 4.6 4.4 3.8 3.8

$20,000 to $30,000 8.2 8.5 8.1 7.8 7.3 6.9 7.0 7.4 7.1 6.3 6.3

$30,000 to $40,000 9.8 9.9 9.5 9.5 8.9 8.1 8.9 9.0 8.4 7.2 7.2

$40,000 to $50,000 11.1 11.0 10.2 8.9 9.2 8.9 8.8 8.4 9.1 7.8 7.8

$50,000 to $75,000 23.9 23.0 22.8 21.4 20.9 20.1 20.5 19.1 19.7 18.2 18.2

$75,000 to $100,000 14.4 14.9 14.7 14.5 14.8 14.7 14.1 14.9 14.8 13.0 13.0

$100,000 to $150,000 12.0 12.8 13.2 12.5 14.2 14.5 13.4 13.3 14.1 13.8 13.8

$150,000 to $200,000 4.0 3.9 3.9 5.3 5.7 5.3 5.6 5.6 5.8 6.0 6.0

$200,000 and Over 10.8 10.3 11.6 14.8 13.8 16.6 16.3 16.9 15.8 22.6 22.6

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

After-Tax Income

$0 to $10,000 1.6 1.7 1.7 1.5 1.5 1.4 1.5 1.6 1.7 1.5 1.5

$10,000 to $20,000 5.3 5.5 5.3 5.1 4.8 4.7 4.7 5.1 4.9 4.3 4.3

$20,000 to $30,000 8.8 9.0 8.4 8.0 7.7 7.3 7.4 7.8 7.6 6.8 6.8

$30,000 to $40,000 10.3 10.3 9.7 9.7 9.2 8.4 9.2 9.4 8.9 7.6 7.6

$40,000 to $50,000 11.4 11.2 10.2 9.0 9.3 9.1 9.0 8.7 9.4 8.1 8.1

$50,000 to $75,000 24.2 23.0 22.6 21.3 21.1 20.2 20.7 19.4 20.1 18.6 18.6

$75,000 to $100,000 14.3 14.6 14.5 14.4 14.6 14.6 14.0 14.9 14.8 13.1 13.1

$100,000 to $150,000 11.6 12.4 12.9 12.3 13.8 14.3 13.1 13.1 13.9 13.7 13.7

$150,000 to $200,000 3.7 3.7 3.9 5.2 5.5 5.2 5.4 5.4 5.6 5.9 5.9

$200,000 and Over 9.2 9.7 11.3 14.5 13.1 15.8 15.5 15.4 14.0 20.6 20.7

All Categories 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

NOTES: (Continued)

Pretax household cash income equals cash income plus taxes paid by businesses. 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. Taxes paid by businesses include the corporate income tax and the employer’s share of Social Security,

Medicare, and federal unemployment insurance payroll taxes. Households with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

Appendix I

Distributional Estimates Using

Alternative Measures of Income, 1979-1997
124 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-1a.

Effective Federal Tax Rates for All Families, by Income Quintile, 

Using Family Cash Income, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Total Effective Federal Tax Rate

 

Lowest Quintile 11.2 10.2 9.9 11.6 11.8 11.3 11.1 10.2 9.3 9.4 9.3

Second Quintile 18.3 18.2 16.3 18.0 17.5 17.9 17.5 17.4 17.5 17.2 16.5

Middle Quintile 22.5 22.6 20.4 21.1 21.4 21.6 21.3 21.7 22.5 22.3 21.5

Fourth Quintile 24.6 25.4 23.1 23.6 23.7 24.1 24.1 24.7 25.6 25.3 24.5

Highest Quintile 30.9 29.6 25.9 26.0 28.4 28.0 28.2 30.6 32.8 31.5 31.0

All Quintiles 25.2 25.1 22.5 23.2 24.2 24.3 24.2 25.6 27.0 26.5 25.9

Top 10 Percent 33.5 30.9 26.6 26.5 29.6 28.9 29.2 32.2 34.8 33.1 32.6

Top 5 Percent 36.4 32.1 27.3 26.8 30.7 29.7 30.0 33.7 36.8 34.5 34.0

Top 1 Percent 42.5 34.3 28.9 27.9 32.7 30.5 31.6 36.9 41.2 36.9 36.2

Effective Individual Income Tax Rate

 

Lowest Quintile 0.8 1.1 0.8 1.1 0.4 0.3 -0.5 -1.5 -3.2 -3.5 -3.6

Second Quintile 5.9 6.7 5.1 5.6 4.8 5.0 4.5 3.8 3.4 3.4 2.7

Middle Quintile 9.6 10.3 8.4 8.4 7.9 8.2 7.9 7.5 7.7 7.8 7.0

Fourth Quintile 11.9 13.0 10.7 10.5 9.9 10.2 10.1 9.7 10.1 10.3 9.5

Highest Quintile 18.1 18.5 15.6 15.3 16.5 16.3 15.9 17.0 18.1 18.5 18.0

All Quintiles 12.5 13.4 11.4 11.3 11.5 11.7 11.2 11.6 12.2 12.7 12.1

Top 10 Percent 20.2 20.2 17.1 16.7 18.4 18.0 17.6 19.2 20.4 20.6 20.2

Top 5 Percent 22.5 21.7 18.4 17.9 20.1 19.4 19.2 21.3 22.6 22.6 22.1

Top 1 Percent 26.6 24.0 20.9 19.9 22.8 21.3 21.7 25.3 27.0 25.9 25.1

Effective Social Insurance Tax Rate

 

Lowest Quintile 5.6 5.9 6.0 6.7 7.1 7.8 7.7 7.3 7.9 8.2 8.2

Second Quintile 8.3 8.9 8.7 9.5 9.4 9.9 10.1 10.1 10.2 10.3 10.3

Middle Quintile 9.5 9.9 9.7 10.3 10.6 10.7 10.8 11.3 11.5 11.4 11.4

Fourth Quintile 9.5 10.2 10.1 11.0 11.0 11.6 11.6 12.2 12.5 12.3 12.3

Highest Quintile 6.1 6.7 6.8 7.0 7.3 7.3 8.3 8.5 8.7 7.5 7.5

All Quintiles 7.7 8.3 8.3 8.7 9.0 9.1 9.6 9.9 10.1 9.4 9.4

Top 10 Percent 4.8 5.3 5.4 5.4 5.8 5.7 6.9 6.9 7.2 6.0 6.0

Top 5 Percent 3.5 4.0 4.0 4.0 4.3 4.1 5.3 5.2 5.6 4.6 4.6

Top 1 Percent 1.6 1.7 1.6 1.7 1.8 1.6 2.4 2.2 3.2 2.5 2.5

SOURCE: Congressional Budget Office.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 125

Table I-1a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Effective Corporate Income Tax Rate

 

Lowest Quintile 2.2 1.1 0.8 0.9 1.0 1.0 0.8 1.2 1.1 0.9 0.9

Second Quintile 2.5 1.5 1.1 1.2 1.7 1.6 1.3 1.6 1.8 1.7 1.7

Middle Quintile 2.3 1.5 1.3 1.3 1.7 1.6 1.4 1.6 1.8 1.8 1.8

Fourth Quintile 2.3 1.5 1.3 1.3 1.8 1.5 1.4 1.8 1.8 1.8 1.8

Highest Quintile 6.0 3.9 2.9 3.0 3.9 3.9 3.4 4.3 5.3 5.0 5.0

All Quintiles 3.9 2.5 2.0 2.1 2.7 2.6 2.3 2.9 3.4 3.3 3.3

Top 10 Percent 7.8 4.9 3.6 3.8 4.8 4.8 4.2 5.5 6.6 6.0 6.0

Top 5 Percent 9.9 6.0 4.4 4.6 5.8 5.8 5.1 6.6 8.1 6.9 6.9

Top 1 Percent 13.8 8.2 5.9 6.0 7.8 7.3 7.1 8.8 10.7 8.4 8.4

Effective Federal Excise Tax Rate

 

Lowest Quintile 2.6 2.0 2.3 3.0 3.2 2.3 3.0 3.3 3.6 3.8 3.8

Second Quintile 1.5 1.2 1.3 1.7 1.6 1.5 1.6 1.9 2.1 1.8 1.8

Middle Quintile 1.2 0.9 1.0 1.1 1.2 1.1 1.2 1.3 1.5 1.3 1.3

Fourth Quintile 1.0 0.8 0.9 0.9 0.9 0.9 1.0 1.0 1.2 1.0 1.0

Highest Quintile 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.5 0.5

All Quintiles 1.1 0.8 0.9 1.0 1.0 1.0 1.0 1.1 1.2 1.0 1.0

Top 10 Percent 0.7 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.5 0.5

Top 5 Percent 0.6 0.5 0.5 0.5 0.4 0.4 0.5 0.6 0.5 0.4 0.4

Top 1 Percent 0.5 0.4 0.4 0.4 0.3 0.3 0.4 0.5 0.3 0.2 0.2

NOTES: Effective tax rates are calculated by dividing tax liabilities by family cash income.

Families are people related by blood, marriage, or adoption who live together.

Family 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. Families with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to families paying those taxes. Payroll taxes are distributed to families paying those

taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to families according to their

consumption of the taxed good or service. Corporate income taxes are distributed to families according to their share of capital

income.

a. Income categories are defined by ranking all people by their family cash income. Quintiles, or fifths, of the income distribution contain equal

numbers of people.
126 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-1b.

Shares of Federal Tax Liabilities for All Families, by Income Quintile,

Using Family Cash Income, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Total Federal Tax Liabilities

 

Lowest Quintile 2.9 2.4 2.3 2.7 2.5 2.5 2.3 1.9 1.7 1.6 1.6

Second Quintile 9.6 9.3 8.5 9.3 8.6 8.6 8.5 7.8 7.4 6.9 6.8

Middle Quintile 15.7 15.8 15.2 15.1 14.6 14.3 14.4 13.7 13.2 12.5 12.3

Fourth Quintile 21.5 22.3 23.0 21.7 21.2 20.7 21.4 20.5 19.7 18.9 18.7

Highest Quintile 50.1 50.0 50.9 51.1 53.1 53.9 53.3 56.0 58.0 60.2 60.6

All Quintiles 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 35.9 34.5 35.6 35.9 38.1 39.3 38.3 41.0 43.4 46.7 47.1

Top 5 Percent 26.6 24.6 25.4 25.8 28.1 29.4 28.3 30.9 33.5 36.8 37.1

Top 1 Percent 13.8 12.0 13.0 13.7 15.2 15.9 14.8 17.4 19.3 22.7 22.7

Share of Individual Income Tax Liabilities

 

Lowest Quintile 0.4 0.5 0.4 0.5 0.2 0.1 -0.2 -0.6 -1.3 -1.2 -1.3

Second Quintile 6.3 6.4 5.2 5.9 4.9 5.0 4.7 3.7 3.1 2.8 2.4

Middle Quintile 13.4 13.5 12.4 12.2 11.3 11.3 11.5 10.4 10.0 9.1 8.5

Fourth Quintile 20.9 21.2 21.2 19.7 18.6 18.2 19.3 17.8 17.2 16.0 15.5

Highest Quintile 58.9 58.4 60.7 61.7 65.0 65.4 64.8 68.7 70.9 73.3 75.0

All Quintiles 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 43.7 42.1 45.1 46.4 49.8 51.0 49.7 53.8 56.3 60.5 62.1

Top 5 Percent 33.0 31.0 34.0 35.0 38.9 40.1 38.8 43.0 45.5 50.1 51.4

Top 1 Percent 17.4 15.7 18.7 19.9 22.3 23.1 21.9 26.3 28.0 33.0 33.7

Share of Social Insurance Tax Liabilities

 

Lowest Quintile 4.8 4.2 3.8 4.1 4.2 4.5 4.0 3.5 3.8 3.9 3.9

Second Quintile 14.3 13.8 12.4 13.0 12.5 12.6 12.4 11.7 11.5 11.6 11.6

Middle Quintile 21.5 20.9 19.6 19.5 19.5 19.0 18.3 18.4 18.1 18.0 18.0

Fourth Quintile 27.0 27.0 27.5 26.8 26.6 26.5 25.9 26.1 25.7 25.8 25.8

Highest Quintile 32.3 34.0 36.5 36.5 37.2 37.3 39.3 40.3 41.0 40.6 40.6

All Quintiles 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 16.7 17.8 19.8 19.6 20.4 20.5 22.6 22.6 23.9 23.9 23.9

Top 5 Percent 8.3 9.1 10.1 10.1 10.8 10.9 12.5 12.2 13.7 13.9 13.9

Top 1 Percent 1.6 1.8 2.0 2.2 2.3 2.2 2.8 2.7 4.0 4.2 4.2

SOURCE: Congressional Budget Office.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 127

Table I-1b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Corporate Income Tax Liabilities

 

Lowest Quintile 3.8 2.6 2.1 2.2 2.0 2.0 1.9 1.9 1.5 1.3 1.3

Second Quintile 8.7 7.6 6.7 7.0 7.6 6.9 6.5 6.3 6.0 5.2 5.2

Middle Quintile 10.4 10.3 10.9 10.6 10.5 9.9 10.4 9.1 8.2 8.1 8.1

Fourth Quintile 13.0 13.2 15.1 13.0 14.7 12.2 13.2 13.0 11.0 10.4 10.4

Highest Quintile 63.8 66.1 64.9 67.0 65.3 69.5 67.9 69.7 73.3 75.3 75.3

All Quintiles 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 54.9 55.5 54.9 57.5 55.2 60.9 58.5 61.3 64.9 66.9 66.9

Top 5 Percent 47.1 46.3 46.6 48.9 47.2 53.4 51.1 53.4 57.5 58.7 58.7

Top 1 Percent 29.3 28.9 30.3 32.7 32.2 35.5 35.5 36.7 39.2 40.7 40.7

Share of Federal Excise Tax Liabilities

 

Lowest Quintile 15.4 14.3 12.8 15.3 16.5 12.6 14.8 13.8 14.0 16.5 16.5

Second Quintile 18.1 18.0 17.1 19.4 18.6 18.5 18.4 18.8 19.3 19.0 19.0

Middle Quintile 18.3 18.6 19.1 18.2 18.8 19.4 19.3 18.6 19.3 18.4 18.4

Fourth Quintile 20.2 19.9 21.4 18.7 18.9 19.7 19.9 19.2 19.5 18.6 18.6

Highest Quintile 27.4 28.2 28.7 26.6 25.8 27.9 26.7 28.4 26.8 26.6 26.6

All Quintiles 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 16.4 16.7 17.4 16.1 15.4 16.8 16.1 18.0 16.0 16.7 16.7

Top 5 Percent 10.3 10.4 10.8 10.0 9.2 10.6 10.3 11.9 9.8 10.2 10.2

Top 1 Percent 3.9 4.0 4.3 4.0 3.2 4.1 4.1 5.6 3.4 3.5 3.5

NOTES: Families are people related by blood, marriage, or adoption who live together.

Family 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. Families with negative income are excluded from the lowest

income category but are included in totals.

Individual income taxes are distributed directly to families paying those taxes. Payroll taxes are distributed to families paying those

taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to families according to their

consumption of the taxed good or service. Corporate income taxes are distributed to families according to their share of capital

income.

a. Income categories are defined by ranking all people by their family cash income. Quintiles, or fifths, of the income distribution contain equal

numbers of people.
128 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-1c.

Number of Families, Average Pretax and After-Tax Income, Shares of Pretax and 

After-Tax Income, and Income Category Minimums for All Families, by Income Quintile, 

Using Family Cash Income, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Number of Families (Millions)

Lowest Quintile 23.6 23.4 23.1 24.6 25.6 26.5 26.9 27.5 28.6 29.7 29.7

Second Quintile 19.2 19.9 20.3 21.3 22.2 23.0 23.7 24.4 24.8 25.5 25.5

Middle Quintile 15.9 16.8 17.5 18.3 18.8 19.5 20.1 20.7 20.7 21.2 21.2

Fourth Quintile 14.0 14.6 15.7 15.8 16.5 16.8 17.4 17.7 17.8 18.6 18.6

Highest Quintile 12.9 13.8 14.3 14.9 15.2 15.7 16.1 16.4 16.8 17.4 17.4

All Quintiles 86.1 89.3 91.8 95.7 98.7 102.1 104.7 107.2 109.1 112.9 112.9

Top 10 Percent 6.4 6.9 7.2 7.4 7.5 7.9 8.0 8.0 8.4 8.8 8.8

Top 5 Percent 3.2 3.5 3.6 3.7 3.8 4.1 4.1 4.1 4.3 4.4 4.4

Top 1 Percent 0.7 0.8 0.8 0.8 0.8 0.9 0.9 0.9 0.9 0.9 0.9

Average Income (1997 dollars)

Pretax Income

 

Lowest Quintile 9,700 9,000 8,200 8,800 8,800 9,100 8,600 7,900 8,200 8,300 8,300

Second Quintile 24,200 22,900 21,200 22,600 22,900 23,200 22,500 21,600 22,100 22,800 22,800

Middle Quintile 38,600 36,900 35,000 36,700 37,700 38,000 36,800 36,000 37,100 38,400 38,400

Fourth Quintile 54,900 53,300 52,600 54,800 56,300 56,900 55,600 55,300 56,300 58,400 58,400

Highest Quintile 110,900 108,600 113,500 123,800 128,400 136,400 128,700 132,200 137,300 160,200 160,200

All Quintiles 40,600 39,700 40,000 42,400 43,500 45,000 43,200 43,000 44,400 48,700 48,700

Top 10 Percent 148,400 144,300 154,000 171,400 178,300 191,700 179,300 186,700 194,900 234,800 234,800

Top 5 Percent 200,300 192,200 211,600 241,600 249,000 272,000 251,100 266,200 278,400 352,400 352,400

Top 1 Percent 423,800 398,600 480,300 568,900 580,000 677,300 594,300 638,100 699,900 944,800 944,800

After-Tax Income

Lowest Quintile 8,600 8,100 7,300 7,800 7,800 8,100 7,600 7,100 7,400 7,500 7,500

Second Quintile 19,800 18,700 17,700 18,500 18,900 19,100 18,600 17,800 18,300 18,900 19,000

Middle Quintile 29,900 28,600 27,900 29,000 29,600 29,800 29,000 28,100 28,700 29,800 30,200

Fourth Quintile 41,300 39,700 40,400 41,900 43,000 43,200 42,200 41,600 41,800 43,700 44,100

Highest Quintile 76,600 76,400 84,200 91,600 92,000 98,200 92,400 91,800 92,300 109,700 110,500

All Quintiles 30,400 29,700 31,000 32,600 33,000 34,000 32,800 32,000 32,400 35,800 36,100

Top 10 Percent 98,700 99,700 113,000 126,000 125,600 136,200 127,000 126,600 127,100 157,200 158,200

Top 5 Percent 127,300 130,500 153,900 176,800 172,700 191,300 175,700 176,400 176,000 230,800 232,500

Top 1 Percent 243,700 262,000 341,500 410,100 390,100 470,400 406,600 402,700 411,800 596,000 602,800

SOURCE: Congressional Budget Office.

NOTES: Families are people related by blood, marriage, or adoption who live together.

Family 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. Families with negative income are excluded from the lowest

income category but are included in totals.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 129

Table I-1c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Income (Percent)

Pretax Income

Lowest Quintile 6.6 5.9 5.1 5.3 5.2 5.3 5.1 4.7 4.8 4.5 4.5

Second Quintile 13.3 12.8 11.7 11.9 11.9 11.7 11.8 11.4 11.4 10.6 10.6

Middle Quintile 17.5 17.5 16.7 16.5 16.5 16.1 16.4 16.1 15.8 14.8 14.8

Fourth Quintile 22.0 22.0 22.4 21.3 21.6 20.9 21.4 21.3 20.7 19.8 19.8

Highest Quintile 40.8 42.3 44.4 45.5 45.3 46.8 45.7 46.9 47.7 50.6 50.6

All Quintiles 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 27.0 28.0 30.1 31.4 31.2 33.1 31.7 32.6 33.6 37.4 37.4

Top 5 Percent 18.4 19.2 21.0 22.2 22.2 24.2 22.8 23.5 24.5 28.3 28.3

Top 1 Percent 8.2 8.7 10.1 11.3 11.2 12.7 11.3 12.1 12.6 16.3 16.3

After-Tax Income

Lowest Quintile 7.8 7.1 6.0 6.1 6.1 6.2 6.0 5.7 6.0 5.5 5.5

Second Quintile 14.5 14.0 12.6 12.7 12.9 12.7 12.8 12.7 12.8 11.9 11.9

Middle Quintile 18.2 18.1 17.2 17.0 17.1 16.7 17.0 17.0 16.8 15.7 15.7

Fourth Quintile 22.2 21.8 22.3 21.2 21.8 20.9 21.4 21.6 21.1 20.1 20.2

Highest Quintile 37.7 39.7 42.5 43.9 42.9 44.5 43.3 43.8 43.9 47.2 47.1

All Quintiles 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 24.0 25.8 28.5 30.1 29.0 31.1 29.6 29.7 30.0 34.0 34.0

Top 5 Percent 15.6 17.4 19.7 21.2 20.4 22.5 21.0 20.9 21.2 25.2 25.2

Top 1 Percent 6.3 7.7 9.3 10.6 10.0 11.6 10.2 10.3 10.2 14.0 14.0

Minimum Income (1997 dollars)

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 17,500 16,400 14,900 16,000 16,000 16,500 15,700 15,000 15,300 15,500 15,500

Middle Quintile 31,400 29,900 27,900 29,600 30,300 30,300 29,600 28,600 29,400 30,400 30,400

Fourth Quintile 46,100 44,500 42,800 45,300 46,100 46,500 45,200 44,500 45,500 47,200 47,200

Highest Quintile 65,600 64,400 64,300 67,000 69,400 70,000 68,500 69,400 69,900 72,900 72,900

Top 10 Percent 85,600 84,700 84,700 89,000 92,600 94,400 91,400 93,100 94,300 100,200 100,200

Top 5 Percent 109,300 105,400 108,100 116,700 120,300 123,300 120,600 123,400 126,200 136,900 136,900

Top 1 Percent 214,200 199,900 212,700 234,400 247,400 271,300 251,600 263,100 280,900 372,100 372,100

NOTES: (Continued)

Individual income taxes are distributed directly to families paying those taxes. Payroll taxes are distributed to families paying those

taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to families according to their

consumption of the taxed good or service. Corporate income taxes are distributed to families according to their share of capital

income.

a. Income categories are defined by ranking all people by their family cash income. Quintiles, or fifths, of the income distribution contain equal

numbers of people.
130 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-2a.

Effective Federal Tax Rates for All Households, by Income Quintile, 

Using Household Cash Income, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate

 

Lowest Quintile 11.4 10.5 10.0 11.8 11.7 11.5 11.2 10.6 9.8 9.8 9.6

Second Quintile 18.5 18.4 16.6 18.2 17.8 18.1 17.8 17.9 18.1 18.1 17.4

Middle Quintile 22.6 22.7 20.5 21.2 21.4 21.9 21.6 22.0 22.8 22.6 21.7

Fourth Quintile 24.7 25.4 23.2 23.7 23.9 24.3 24.2 24.9 25.7 25.3 24.5

Highest Quintile 30.9 29.6 25.8 25.9 28.3 28.0 28.1 30.6 32.8 31.5 31.1

All Quintiles 25.2 25.1 22.5 23.2 24.2 24.4 24.2 25.7 27.0 26.5 25.9

Top 10 Percent 33.5 30.9 26.6 26.4 29.5 28.9 29.2 32.2 34.9 33.1 32.6

Top 5 Percent 36.4 32.1 27.3 26.8 30.7 29.7 30.0 33.7 37.0 34.5 34.0

Top 1 Percent 42.5 34.4 28.8 27.9 32.6 30.6 31.7 36.8 41.4 36.8 36.1

Effective Individual Income Tax Rate

 

Lowest Quintile 0.9 1.4 0.9 1.3 0.6 0.5 -0.2 -1.1 -2.6 -2.8 -2.9

Second Quintile 6.1 6.8 5.3 5.8 5.0 5.2 4.9 4.3 4.0 4.2 3.4

Middle Quintile 9.6 10.4 8.5 8.4 7.9 8.3 8.0 7.6 7.9 8.0 7.1

Fourth Quintile 12.0 13.0 10.8 10.6 10.1 10.3 10.2 9.9 10.2 10.3 9.5

Highest Quintile 18.0 18.5 15.5 15.3 16.5 16.3 15.9 17.1 18.2 18.5 18.1

All Quintiles 12.5 13.4 11.4 11.3 11.5 11.7 11.2 11.7 12.2 12.8 12.2

Top 10 Percent 20.2 20.1 17.0 16.7 18.4 18.0 17.6 19.2 20.4 20.7 20.3

Top 5 Percent 22.4 21.7 18.4 17.8 20.1 19.4 19.1 21.4 22.8 22.6 22.1

Top 1 Percent 26.4 23.9 20.8 19.9 22.7 21.3 22.0 25.4 27.1 25.7 25.0

Effective Social Insurance Tax Rate

Lowest Quintile 5.6 6.0 6.0 6.7 6.9 7.6 7.6 7.2 7.7 7.8 7.8

Second Quintile 8.4 8.9 8.7 9.4 9.4 9.7 10.0 10.1 10.2 10.4 10.4

Middle Quintile 9.5 9.9 9.6 10.3 10.6 10.9 10.9 11.5 11.7 11.6 11.6

Fourth Quintile 9.4 10.2 10.2 10.9 11.0 11.6 11.7 12.2 12.5 12.3 12.3

Highest Quintile 6.1 6.7 6.8 7.0 7.3 7.2 8.2 8.4 8.6 7.4 7.4

All Quintiles 7.7 8.3 8.3 8.7 8.9 9.1 9.6 9.9 10.1 9.4 9.4

Top 10 Percent 4.8 5.3 5.4 5.4 5.8 5.6 6.8 6.8 7.1 5.9 5.9

Top 5 Percent 3.5 4.0 4.0 4.0 4.4 4.0 5.2 5.1 5.6 4.5 4.5

Top 1 Percent 1.6 1.7 1.6 1.6 1.9 1.6 2.3 2.2 3.1 2.4 2.4

SOURCE: Congressional Budget Office.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 131

Table I-2a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Effective Corporate Income Tax Rate

 

Lowest Quintile 2.3 1.2 0.9 0.9 1.2 1.2 0.9 1.3 1.3 1.2 1.2

Second Quintile 2.6 1.5 1.3 1.3 1.8 1.7 1.4 1.7 1.9 1.8 1.8

Middle Quintile 2.3 1.5 1.3 1.3 1.7 1.6 1.5 1.6 1.7 1.8 1.8

Fourth Quintile 2.3 1.5 1.3 1.3 1.9 1.5 1.4 1.7 1.8 1.8 1.8

Highest Quintile 6.0 3.9 2.9 3.1 3.9 3.9 3.4 4.4 5.4 5.0 5.0

All Quintiles 3.9 2.5 2.0 2.1 2.7 2.6 2.3 2.9 3.5 3.3 3.3

Top 10 Percent 7.8 4.9 3.7 3.8 4.8 4.9 4.2 5.6 6.8 6.0 6.0

Top 5 Percent 9.8 6.0 4.4 4.6 5.7 5.8 5.2 6.6 8.1 6.9 6.9

Top 1 Percent 14.0 8.4 5.9 5.9 7.7 7.4 7.0 8.7 10.8 8.4 8.4

Effective Federal Excise Tax Rate

 

Lowest Quintile 2.5 2.0 2.2 2.9 3.0 2.2 2.9 3.1 3.4 3.6 3.6

Second Quintile 1.5 1.1 1.3 1.6 1.5 1.5 1.6 1.8 2.0 1.7 1.7

Middle Quintile 1.1 0.9 1.0 1.1 1.1 1.1 1.2 1.3 1.5 1.2 1.2

Fourth Quintile 1.0 0.8 0.9 0.9 0.9 0.9 1.0 1.0 1.2 1.0 1.0

Highest Quintile 0.8 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.6 0.6

All Quintiles 1.1 0.8 0.9 1.0 1.0 0.9 1.0 1.1 1.2 1.0 1.0

Top 10 Percent 0.7 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.5 0.5

Top 5 Percent 0.6 0.5 0.5 0.5 0.4 0.4 0.5 0.6 0.5 0.4 0.4

Top 1 Percent 0.5 0.4 0.4 0.4 0.3 0.3 0.4 0.5 0.3 0.2 0.2

NOTES: Effective tax rates are calculated by dividing tax liabilities by household cash income.

Households are people who share a single housing unit, regardless of the relationships among them.

Household 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. Households with negative income are excluded from the

lowest income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their household cash income. Quintiles, or fifths, of the income distribution contain

equal numbers of people.
132 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-2b.

Shares of Federal Tax Liabilities for All Households, by Income Quintile,

Using Household Cash Income, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities

 

Lowest Quintile 3.0 2.6 2.4 2.8 2.7 2.6 2.5 2.1 1.9 1.8 1.8

Second Quintile 9.8 9.5 8.8 9.4 8.8 8.7 8.8 8.2 7.8 7.4 7.2

Middle Quintile 15.7 15.7 15.3 15.1 14.6 14.6 14.6 13.8 13.3 12.6 12.4

Fourth Quintile 21.7 22.5 23.0 22.1 21.5 21.0 21.6 20.9 19.9 18.7 18.6

Highest Quintile 49.7 49.6 50.4 50.5 52.3 53.0 52.3 54.9 57.0 59.5 59.9

All Quintiles 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 35.4 34.0 35.0 35.4 37.4 38.5 37.4 40.1 42.4 45.7 46.2

Top 5 Percent 26.1 23.9 24.8 25.1 27.5 28.4 27.4 30.0 32.8 36.1 36.4

Top 1 Percent 13.5 11.7 12.8 13.4 14.8 15.5 14.4 16.9 18.9 22.2 22.3

Share of Individual Income Tax Liabilities

 

Lowest Quintile 0.5 0.6 0.4 0.6 0.3 0.2 -0.1 -0.5 -1.1 -1.1 -1.2

Second Quintile 6.5 6.6 5.6 6.1 5.2 5.3 5.2 4.3 3.8 3.5 3.0

Middle Quintile 13.5 13.5 12.6 12.2 11.3 11.5 11.7 10.5 10.2 9.2 8.7

Fourth Quintile 21.2 21.5 21.3 20.1 19.1 18.6 19.5 18.3 17.5 15.8 15.3

Highest Quintile 58.3 57.8 60.1 60.9 64.0 64.4 63.6 67.3 69.7 72.5 74.1

All Quintiles 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 42.9 41.3 44.3 45.6 49.0 49.9 48.5 52.6 55.0 59.3 60.9

Top 5 Percent 32.3 30.2 33.1 34.0 37.9 38.8 37.6 41.9 44.6 49.1 50.3

Top 1 Percent 16.9 15.2 18.3 19.5 21.6 22.5 21.5 25.7 27.4 32.2 32.8

Share of Social Insurance Tax Liabilities

 

Lowest Quintile 4.9 4.4 3.9 4.3 4.3 4.7 4.3 3.7 4.0 4.1 4.1

Second Quintile 14.4 13.8 12.5 13.0 12.7 12.6 12.4 12.0 11.7 12.0 12.0

Middle Quintile 21.6 20.7 19.7 19.5 19.5 19.4 18.5 18.6 18.4 18.3 18.3

Fourth Quintile 26.9 27.0 27.5 27.1 26.9 26.7 26.2 26.5 25.9 25.8 25.8

Highest Quintile 32.0 33.8 36.1 36.0 36.5 36.5 38.5 39.1 39.9 39.7 39.7

All Quintiles 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 16.6 17.7 19.3 19.3 20.0 19.9 22.0 21.8 23.0 23.3 23.3

Top 5 Percent 8.3 8.9 9.9 9.9 10.6 10.3 12.0 11.8 13.3 13.5 13.5

Top 1 Percent 1.6 1.7 2.0 2.1 2.3 2.2 2.7 2.6 3.8 4.1 4.1

SOURCE: Congressional Budget Office.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 133

Table I-2b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Corporate Income Tax Liabilities

 

Lowest Quintile 4.1 2.9 2.3 2.5 2.4 2.5 2.3 2.3 2.1 1.7 1.7

Second Quintile 9.1 8.0 7.5 7.5 8.0 7.5 7.3 6.9 6.5 5.8 5.8

Middle Quintile 10.2 10.3 10.9 10.5 10.6 9.7 10.6 8.9 7.8 7.7 7.7

Fourth Quintile 13.1 13.2 14.8 13.1 14.9 12.0 12.8 12.8 11.0 10.4 10.4

Highest Quintile 63.3 65.3 64.2 66.3 64.0 68.9 66.9 69.1 72.6 74.7 74.7

All Quintiles 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 53.8 54.6 54.4 56.9 54.1 60.0 57.4 60.9 64.2 65.6 65.6

Top 5 Percent 45.9 45.1 45.4 47.5 46.0 51.6 49.9 51.7 56.2 57.5 57.5

Top 1 Percent 28.9 28.6 29.8 31.8 31.2 34.5 33.9 35.2 38.5 40.3 40.3

 

Share of Federal Excise Tax Liabilities

 

Lowest Quintile 15.2 14.4 12.8 15.6 16.5 12.9 15.0 14.3 14.6 17.2 17.2

Second Quintile 17.7 17.6 17.0 18.9 18.3 18.2 18.1 18.4 19.1 18.3 18.3

Middle Quintile 18.3 18.3 19.1 17.9 18.5 19.0 19.2 18.1 18.6 17.9 17.9

Fourth Quintile 20.5 20.2 21.4 19.1 19.2 19.8 19.8 19.4 19.8 18.8 18.8

Highest Quintile 27.8 28.6 28.9 26.9 26.2 28.1 27.0 28.6 26.8 27.1 27.1

All Quintiles 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 16.5 16.9 17.5 16.3 15.5 16.8 16.3 18.2 15.9 16.5 16.5

Top 5 Percent 10.3 10.3 10.8 9.8 9.1 10.4 10.1 11.8 9.6 10.0 10.0

Top 1 Percent 3.9 3.9 4.2 3.9 3.1 4.0 4.0 5.5 3.2 3.5 3.5

NOTES: Households are people who share a single housing unit, regardless of the relationships among them.

Household 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. Households with negative income are excluded from the

lowest income category but are included in totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their household cash income. Quintiles, or fifths, of the income distribution contain

equal numbers of people.
134 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-2c.

Number of Households, Average Pretax and After-Tax Income, Shares of Pretax and

After-Tax Income, and Income Category Minimums for All Households, by Income Quintile,

Using Household Cash Income, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Number of Households (Millions)

 

Lowest Quintile 22.4 22.3 22.0 23.3 24.3 25.2 25.5 25.8 26.9 28.0 28.0

Second Quintile 17.9 18.7 19.0 19.8 20.5 21.0 21.5 22.2 22.4 22.8 22.8

Middle Quintile 15.0 15.7 16.4 16.9 17.4 17.9 18.4 18.5 18.6 19.1 19.1

Fourth Quintile 13.4 13.9 14.7 15.0 15.5 15.7 16.2 16.4 16.4 16.9 16.9

Highest Quintile 12.1 13.0 13.4 13.9 13.9 14.4 14.6 14.7 15.2 15.7 15.7

All Quintiles 81.4 84.2 86.2 89.5 92.0 94.6 96.7 98.2 99.7 102.9 102.9

Top 10 Percent 5.9 6.4 6.6 6.9 6.9 7.2 7.2 7.2 7.5 7.8 7.8

Top 5 Percent 3.0 3.2 3.3 3.3 3.5 3.6 3.6 3.6 3.8 3.9 3.9

Top 1 Percent 0.6 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.9 0.9

Average Income (1997 dollars)

Pretax Income

 

Lowest Quintile 10,400 9,700 8,900 9,700 9,700 10,200 9,700 9,200 9,600 9,700 9,700

Second Quintile 26,000 24,600 23,000 24,600 25,200 25,800 25,200 24,400 25,300 26,100 26,100

Middle Quintile 40,900 39,200 37,700 39,600 40,800 41,700 40,400 39,900 41,200 42,900 42,900

Fourth Quintile 57,700 56,300 55,900 58,500 60,500 61,700 60,300 60,600 61,700 64,300 64,300

Highest Quintile 116,700 114,600 120,600 132,300 138,200 147,100 139,100 144,100 149,200 175,600 175,600

All Quintiles 43,000 42,000 42,600 45,400 46,700 48,600 46,800 47,000 48,600 53,700 53,700

Top 10 Percent 156,700 153,100 165,000 184,100 192,500 207,200 194,900 203,700 213,100 260,400 260,400

Top 5 Percent 211,900 206,000 228,600 263,600 270,300 298,200 274,600 291,500 304,100 390,800 390,800

Top 1 Percent 446,100 424,000 511,300 616,000 625,600 730,000 641,500 686,300 763,300 1,019,800 1,019,800

After-Tax Income

Lowest Quintile 9,300 8,700 8,000 8,500 8,600 9,100 8,600 8,200 8,600 8,700 8,700

Second Quintile 21,200 20,100 19,200 20,200 20,700 21,100 20,700 20,000 20,700 21,400 21,600

Middle Quintile 31,700 30,300 29,900 31,200 32,000 32,600 31,700 31,100 31,800 33,200 33,600

Fourth Quintile 43,500 42,000 42,900 44,600 46,100 46,700 45,700 45,500 45,800 48,000 48,500

Highest Quintile 80,600 80,700 89,400 98,000 99,100 105,900 100,000 100,000 100,200 120,300 121,100

All Quintiles 32,100 31,500 33,000 34,900 35,400 36,800 35,500 34,900 35,500 39,400 39,700

Top 10 Percent 104,200 105,800 121,000 135,400 135,600 147,300 138,000 138,100 138,800 174,300 175,400

Top 5 Percent 134,700 139,800 166,200 192,900 187,400 209,700 192,200 193,100 191,500 256,000 257,900

Top 1 Percent 256,400 278,400 364,000 444,200 421,500 506,800 438,200 433,700 447,100 644,300 651,700

SOURCE: Congressional Budget Office.

NOTES: Households are people who share a single housing unit, regardless of the relationships among them.

Household 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. Households with negative income are excluded from the

lowest income category but are included in totals.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 135

Table I-2c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Income (Percent)

Pretax Income

 

Lowest Quintile 6.7 6.1 5.3 5.5 5.5 5.6 5.5 5.2 5.3 4.9 4.9

Second Quintile 13.3 13.0 11.9 12.0 12.0 11.8 12.0 11.7 11.7 10.8 10.8

Middle Quintile 17.5 17.3 16.8 16.4 16.5 16.2 16.4 16.0 15.8 14.8 14.8

Fourth Quintile 22.2 22.1 22.4 21.5 21.8 21.0 21.5 21.5 20.8 19.7 19.7

Highest Quintile 40.5 42.0 43.9 45.1 44.7 46.1 44.9 46.0 46.8 50.1 50.1

All Quintiles 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 26.6 27.5 29.6 31.0 30.7 32.4 31.0 31.9 32.8 36.7 36.7

Top 5 Percent 18.0 18.7 20.5 21.7 21.7 23.3 22.0 22.8 23.9 27.7 27.7

Top 1 Percent 8.0 8.5 10.0 11.1 11.0 12.3 11.0 11.8 12.3 16.0 16.0

After-Tax Income

 

Lowest Quintile 7.9 7.3 6.2 6.4 6.4 6.6 6.4 6.2 6.6 6.0 6.0

Second Quintile 14.5 14.1 12.8 12.8 13.0 12.8 13.0 13.0 13.1 12.0 12.1

Middle Quintile 18.1 17.9 17.3 16.9 17.1 16.7 16.9 16.8 16.7 15.6 15.6

Fourth Quintile 22.3 22.0 22.2 21.4 21.9 21.0 21.5 21.8 21.2 20.0 20.1

Highest Quintile 37.4 39.4 42.1 43.4 42.3 43.9 42.6 43.0 43.1 46.7 46.6

All Quintiles 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 23.6 25.4 28.0 29.7 28.5 30.4 28.9 29.1 29.3 33.4 33.3

Top 5 Percent 15.3 16.9 19.2 20.6 19.9 21.7 20.3 20.3 20.6 24.7 24.7

Top 1 Percent 6.1 7.4 9.2 10.4 9.7 11.3 9.9 10.0 9.9 13.8 13.8

Minimum Income (1997 dollars)

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 18,900 17,600 16,300 17,600 17,900 18,500 17,800 17,300 17,700 18,400 18,400

Middle Quintile 33,700 32,100 30,200 31,900 32,900 33,400 32,700 32,000 33,200 34,500 34,500

Fourth Quintile 48,500 46,900 45,800 48,400 49,500 50,700 49,300 49,100 50,200 52,400 52,400

Highest Quintile 69,200 68,000 68,100 71,400 74,800 75,900 74,200 75,700 76,100 79,900 79,900

Top 10 Percent 90,800 89,600 90,100 95,600 100,300 102,000 100,200 101,900 103,500 111,200 111,200

Top 5 Percent 116,200 113,600 116,500 126,100 131,000 134,900 131,900 136,400 138,400 151,500 151,500

Top 1 Percent 222,700 210,000 228,100 253,000 270,200 294,400 287,000 278,300 312,600 428,400 428,400

NOTES: (Continued)

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their household cash income. Quintiles, or fifths, of the income distribution contain

equal numbers of people.
136 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-3a.

Effective Federal Tax Rates for All Households, by Income Quintile, 

Using Household Cash Income Plus Taxes Paid by Businesses and Employee Contributions 

to 401(k) Retirement Plans, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Total Effective Federal Tax Rate

Lowest Quintile 10.4 9.7 9.2 11.1 10.8 10.4 10.3 9.6 8.8 8.9 8.8

Second Quintile 17.3 17.3 15.6 17.0 16.6 16.8 16.5 16.4 16.6 16.5 15.8

Middle Quintile 21.0 21.4 19.4 19.8 19.9 20.4 20.0 20.4 20.9 20.6 19.8

Fourth Quintile 23.0 23.9 21.8 22.1 22.1 22.4 22.5 22.9 23.5 23.0 22.3

Highest Quintile 28.5 27.7 24.4 24.3 26.2 25.9 26.0 28.0 29.7 28.8 28.4

All Quintiles 23.4 23.5 21.2 21.7 22.5 22.6 22.4 23.6 24.6 24.3 23.7

Top 10 Percent 30.6 28.8 25.1 24.7 27.3 26.7 27.0 29.5 31.5 30.3 29.9

Top 5 Percent 32.9 29.9 25.7 25.1 28.4 27.5 27.8 30.9 33.3 31.6 31.1

Top 1 Percent 37.3 31.8 27.0 26.2 30.1 28.3 29.4 33.7 37.0 33.7 33.0

Effective Individual Income Tax Rate

 

Lowest Quintile 0.8 1.2 0.8 1.2 0.5 0.3 -0.2 -1.1 -2.6 -2.7 -2.9

Second Quintile 5.7 6.4 5.0 5.4 4.7 4.8 4.5 3.9 3.6 3.8 3.1

Middle Quintile 9.0 9.8 8.1 8.0 7.4 7.8 7.5 7.1 7.2 7.3 6.5

Fourth Quintile 11.2 12.2 10.2 9.9 9.4 9.5 9.5 9.2 9.4 9.3 8.7

Highest Quintile 16.5 17.2 14.6 14.3 15.2 15.0 14.7 15.5 16.3 16.9 16.5

All Quintiles 11.6 12.6 10.7 10.6 10.7 10.8 10.4 10.7 11.1 11.7 11.2

Top 10 Percent 18.2 18.7 16.0 15.5 17.0 16.5 16.2 17.5 18.4 18.9 18.5

Top 5 Percent 20.0 20.1 17.3 16.6 18.5 17.9 17.7 19.4 20.4 20.7 20.2

Top 1 Percent 22.7 22.1 19.5 18.6 20.9 19.7 20.3 23.0 24.1 23.5 22.8

Effective Social Insurance Tax Rate

 

Lowest Quintile 5.3 5.6 5.5 6.2 6.4 6.9 7.0 6.6 7.0 7.2 7.2

Second Quintile 7.9 8.4 8.3 8.8 8.8 9.0 9.2 9.3 9.4 9.5 9.5

Middle Quintile 9.0 9.4 9.1 9.6 9.9 10.1 10.1 10.6 10.8 10.6 10.6

Fourth Quintile 8.7 9.6 9.6 10.2 10.2 10.7 10.9 11.2 11.4 11.2 11.2

Highest Quintile 5.6 6.3 6.4 6.5 6.8 6.7 7.7 7.7 7.8 6.8 6.8

All Quintiles 7.2 7.8 7.8 8.1 8.3 8.4 8.9 9.1 9.2 8.6 8.6

Top 10 Percent 4.3 5.0 5.1 5.1 5.4 5.2 6.3 6.2 6.4 5.4 5.4

Top 5 Percent 3.1 3.7 3.8 3.7 4.0 3.7 4.8 4.7 5.0 4.2 4.2

Top 1 Percent 1.3 1.5 1.5 1.5 1.7 1.5 2.2 2.0 2.8 2.2 2.2

SOURCE: Congressional Budget Office.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 137

Table I-3a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Effective Corporate Income Tax Rate 

 

Lowest Quintile 1.9 1.0 0.8 0.9 1.0 1.1 0.8 1.1 1.1 1.0 1.0

Second Quintile 2.3 1.4 1.1 1.2 1.6 1.5 1.3 1.5 1.7 1.6 1.6

Middle Quintile 1.9 1.3 1.2 1.2 1.6 1.4 1.3 1.5 1.6 1.6 1.6

Fourth Quintile 2.1 1.4 1.2 1.1 1.7 1.4 1.3 1.5 1.6 1.6 1.6

Highest Quintile 5.7 3.7 2.8 2.9 3.7 3.6 3.2 4.1 4.9 4.6 4.6

All Quintiles 3.6 2.3 1.9 1.9 2.5 2.4 2.1 2.7 3.2 3.1 3.1

Top 10 Percent 7.4 4.7 3.5 3.6 4.5 4.5 3.9 5.2 6.2 5.5 5.5

Top 5 Percent 9.2 5.7 4.2 4.3 5.4 5.4 4.9 6.3 7.5 6.4 6.4

Top 1 Percent 12.8 7.9 5.7 5.7 7.2 6.9 6.6 8.2 9.8 7.8 7.8

Effective Federal Excise Tax Rate

 

Lowest Quintile 2.4 1.9 2.1 2.8 2.9 2.1 2.7 3.0 3.3 3.4 3.4

Second Quintile 1.4 1.1 1.2 1.5 1.4 1.4 1.5 1.7 1.9 1.6 1.6

Middle Quintile 1.1 0.8 1.0 1.1 1.1 1.0 1.1 1.2 1.3 1.1 1.1

Fourth Quintile 1.0 0.7 0.8 0.9 0.8 0.8 0.9 0.9 1.1 0.9 0.9

Highest Quintile 0.7 0.5 0.6 0.6 0.6 0.5 0.6 0.6 0.6 0.5 0.5

All Quintiles 1.0 0.8 0.9 1.0 0.9 0.9 1.0 1.0 1.1 0.9 0.9

Top 10 Percent 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.5 0.4 0.4

Top 5 Percent 0.6 0.4 0.5 0.4 0.4 0.4 0.4 0.5 0.5 0.3 0.3

Top 1 Percent 0.5 0.4 0.4 0.3 0.3 0.3 0.4 0.5 0.3 0.2 0.2

NOTES: Effective tax rates are calculated by dividing tax liabilities by household cash income plus taxes paid by businesses and employee

contributions to 401(k) retirement plans.

Households are people who share a single housing unit, regardless of the relationships among them.

Household 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. Taxes paid by businesses include corporate income taxes

and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Households with negative

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

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their household cash income plus taxes paid by businesses and employee contributions to 401(k) retirement plans. Quintiles, or fifths, of the income distribution contain equal numbers of people.
138 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-3b.

Shares of Federal Tax Liabilities for All Households, by Income Quintile, Using Household 

Cash Income Plus Taxes Paid by Businesses and Employee Contributions to 401(k)

Retirement Plans, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Total Federal Tax Liabilities

 

Lowest Quintile 2.9 2.5 2.2 2.8 2.6 2.5 2.4 2.0 1.8 1.7 1.7

Second Quintile 9.7 9.4 8.7 9.3 8.8 8.7 8.7 8.0 7.7 7.2 7.1

Middle Quintile 15.5 15.8 15.3 15.1 14.5 14.6 14.6 13.8 13.3 12.5 12.3

Fourth Quintile 21.7 22.4 23.0 22.1 21.6 21.0 21.7 20.9 20.0 18.8 18.6

Highest Quintile 50.1 49.8 50.6 50.6 52.5 53.2 52.5 55.1 57.1 59.7 60.2

All Quintiles 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 35.9 34.2 35.0 35.4 37.5 38.6 37.5 40.3 42.6 46.0 46.4

Top 5 Percent 26.5 24.2 24.9 25.1 27.6 28.6 27.3 30.2 33.0 36.3 36.6

Top 1 Percent 13.8 11.8 12.8 13.4 14.8 15.5 14.5 17.2 19.0 22.3 22.4

Share of Individual Income Tax Liabilities

 

Lowest Quintile 0.5 0.6 0.4 0.6 0.2 0.2 -0.1 -0.5 -1.2 -1.1 -1.2

Second Quintile 6.4 6.5 5.5 6.1 5.2 5.2 5.1 4.2 3.7 3.4 2.9

Middle Quintile 13.5 13.6 12.6 12.4 11.3 11.6 11.8 10.6 10.2 9.2 8.6

Fourth Quintile 21.2 21.4 21.3 20.1 19.2 18.7 19.6 18.5 17.7 15.8 15.3

Highest Quintile 58.4 57.9 60.2 60.8 64.0 64.3 63.6 67.3 69.6 72.6 74.3

All Quintiles 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 43.1 41.4 44.3 45.4 48.8 49.9 48.4 52.6 55.1 59.4 61.0

Top 5 Percent 32.5 30.3 33.2 33.9 37.9 38.8 37.4 41.8 44.6 49.2 50.4

Top 1 Percent 16.9 15.3 18.4 19.5 21.6 22.5 21.5 25.8 27.4 32.2 32.9

Share of Social Insurance Tax Liabilities

 

Lowest Quintile 4.8 4.3 3.7 4.1 4.1 4.4 4.1 3.6 3.8 4.0 4.0

Second Quintile 14.5 13.8 12.6 12.8 12.6 12.5 12.2 11.7 11.6 11.8 11.8

Middle Quintile 21.7 20.8 19.7 19.4 19.4 19.4 18.5 18.7 18.3 18.3 18.3

Fourth Quintile 26.9 27.1 27.6 27.1 27.1 26.7 26.4 26.6 26.0 25.9 25.9

Highest Quintile 32.1 33.9 36.3 36.3 36.8 36.9 38.8 39.4 40.1 40.0 40.0

All Quintiles 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 16.6 17.8 19.4 19.5 20.0 20.2 22.1 22.0 23.1 23.4 23.4

Top 5 Percent 8.2 8.9 10.0 10.0 10.6 10.4 11.9 11.8 13.3 13.5 13.5

Top 1 Percent 1.6 1.7 2.0 2.1 2.3 2.2 2.7 2.6 3.8 4.1 4.1

SOURCE: Congressional Budget Office.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 139

Table I-3b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Corporate Income Tax Liabilities

 

Lowest Quintile 3.4 2.7 2.3 2.4 2.2 2.3 2.1 2.0 1.8 1.5 1.5

Second Quintile 8.3 7.5 7.2 7.3 7.7 7.4 7.3 6.6 6.1 5.6 5.6

Middle Quintile 9.2 10.0 10.8 10.4 10.3 9.4 10.2 8.8 7.7 7.6 7.6

Fourth Quintile 13.1 12.9 14.4 12.7 14.6 12.0 12.9 12.3 10.7 10.3 10.3

Highest Quintile 65.9 66.7 65.1 67.0 65.2 69.5 67.5 70.3 73.7 75.4 75.4

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

Top 10 Percent 56.7 56.2 55.0 57.4 55.2 60.5 57.9 61.9 65.1 66.6 66.6

Top 5 Percent 48.4 46.6 46.3 48.0 47.1 52.5 50.7 53.5 57.8 58.6 58.6

Top 1 Percent 30.9 29.4 30.4 32.3 31.6 35.0 34.5 36.7 39.2 40.8 40.8

 

Share of Federal Excise Tax Liabilities

Lowest Quintile 15.1 14.4 12.8 15.7 16.6 12.9 15.1 14.3 14.7 17.3 17.3

Second Quintile 17.6 17.5 16.9 18.8 18.2 18.2 18.1 18.3 19.0 18.3 18.3

Middle Quintile 18.2 18.3 19.0 17.9 18.4 18.9 19.2 18.1 18.6 17.9 17.9

Fourth Quintile 20.6 20.1 21.4 19.0 19.2 19.9 19.8 19.4 19.7 18.5 18.5

Highest Quintile 28.0 28.7 29.0 26.9 26.3 28.2 27.0 28.7 26.9 27.1 27.1

All Quintiles 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 16.8 17.0 17.5 16.3 15.6 16.9 16.3 18.3 16.0 16.7 16.7

Top 5 Percent 10.5 10.5 10.8 9.9 9.2 10.5 10.1 11.9 9.8 10.2 10.2

Top 1 Percent 3.9 4.0 4.2 3.9 3.2 4.1 4.0 5.6 3.3 3.5 3.5

NOTES: Households are people who share a single housing unit, regardless of the relationships among them.

Household 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. Taxes paid by businesses include corporate income taxes

and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Households with negative

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

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their household cash income plus taxes paid by businesses and employee contributions to 401(k) retirement plans. Quintiles, or fifths, of the income distribution contain equal numbers of people.
140 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-3c.

Number of Households, Average Pretax and After-Tax Income, Shares of Pretax and After-Tax Income,

and Income Category Minimums for All Households, by Income Quintile, Using Household Cash Income

Plus Taxes Paid by Businesses and Employee Contributions to 401(k) Retirement Plans, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Number of Households (Millions)

 

Lowest Quintile 22.3 22.3 21.9 23.4 24.3 25.1 25.5 25.8 26.8 27.9 27.9

Second Quintile 17.9 18.6 19.0 19.7 20.5 21.1 21.5 22.1 22.4 22.8 22.8

Middle Quintile 15.0 15.7 16.4 16.9 17.3 17.9 18.4 18.6 18.6 19.1 19.1

Fourth Quintile 13.5 13.9 14.7 14.9 15.6 15.7 16.2 16.4 16.4 16.9 16.9

Highest Quintile 12.2 13.0 13.4 13.9 14.0 14.5 14.7 14.8 15.2 15.8 15.8

All Quintiles 81.4 84.2 86.2 89.5 92.0 94.6 96.7 98.2 99.7 102.9 102.9

Top 10 Percent 6.0 6.4 6.6 6.9 6.9 7.2 7.2 7.3 7.5 7.8 7.8

Top 5 Percent 3.0 3.2 3.3 3.4 3.5 3.6 3.6 3.6 3.8 4.0 4.0

Top 1 Percent 0.6 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.9 0.9

Average Income (1997 dollars)

Pretax Income

 

Lowest Quintile 10,900 10,100 9,200 10,100 10,200 10,700 10,100 9,700 10,000 10,100 10,100

Second Quintile 27,600 26,000 24,300 26,100 26,800 27,500 26,800 26,100 27,100 28,100 28,100

Middle Quintile 43,600 41,600 39,900 42,300 43,700 44,800 43,500 43,200 44,700 46,700 46,700

Fourth Quintile 61,600 59,900 59,300 62,800 65,300 66,800 65,300 66,100 67,700 70,600 70,600

Highest Quintile 127,000 122,700 127,900 141,500 149,200 159,100 150,400 157,600 165,100 192,400 192,400

All Quintiles 46,300 44,800 45,100 48,600 50,300 52,400 50,500 51,100 53,300 58,600 58,600

Top 10 Percent 171,700 164,300 175,300 196,700 207,900 223,500 210,400 222,700 235,900 284,700 284,700

Top 5 Percent 235,000 221,200 242,500 281,100 291,700 321,600 296,800 318,200 336,900 425,600 425,600

Top 1 Percent 506,200 462,600 542,300 658,100 677,700 786,900 691,000 746,000 854,300 1,114,800 1,114,800

After-Tax Income

 

Lowest Quintile 9,800 9,100 8,400 9,000 9,100 9,600 9,100 8,700 9,100 9,200 9,300

Second Quintile 22,900 21,500 20,500 21,700 22,400 22,900 22,400 21,800 22,600 23,500 23,700

Middle Quintile 34,400 32,700 32,200 33,900 35,000 35,700 34,800 34,400 35,400 37,100 37,400

Fourth Quintile 47,400 45,600 46,400 48,900 50,900 51,800 50,600 51,000 51,800 54,400 54,800

Highest Quintile 90,800 88,700 96,700 107,200 110,100 117,900 111,300 113,500 116,000 137,000 137,800

All Quintiles 35,400 34,300 35,600 38,000 39,000 40,600 39,200 39,100 40,200 44,400 44,700

Top 10 Percent 119,200 117,000 131,300 148,000 151,100 163,700 153,600 157,000 161,700 198,400 199,600

Top 5 Percent 157,700 155,100 180,200 210,500 208,900 233,300 214,300 219,900 224,700 291,100 293,100

Top 1 Percent 317,300 315,500 395,700 485,900 473,900 564,200 488,100 494,800 538,400 739,400 746,800

SOURCE: Congressional Budget Office.

NOTES: Households are people who share a single housing unit, regardless of the relationships among them.

Household 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. Taxes paid by businesses include corporate income taxes

and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Households with negative

income are excluded from the lowest income category but are included in totals.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 141

Table I-3c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Income (Percent)

Pretax Income

 

Lowest Quintile 6.5 6.0 5.2 5.4 5.3 5.4 5.3 5.0 5.0 4.7 4.7

Second Quintile 13.1 12.8 11.8 11.9 11.9 11.7 11.8 11.5 11.4 10.6 10.6

Middle Quintile 17.3 17.3 16.8 16.5 16.4 16.1 16.4 16.0 15.6 14.8 14.8

Fourth Quintile 22.1 22.1 22.4 21.6 21.9 21.1 21.6 21.6 20.9 19.8 19.8

Highest Quintile 41.2 42.3 44.1 45.2 45.0 46.3 45.2 46.4 47.4 50.4 50.4

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

Top 10 Percent 27.5 27.9 29.6 31.0 30.9 32.6 31.1 32.3 33.3 36.8 36.8

Top 5 Percent 18.9 19.0 20.6 21.7 21.9 23.5 22.0 23.1 24.4 27.9 27.9

Top 1 Percent 8.6 8.7 10.1 11.1 11.1 12.4 11.0 12.0 12.6 16.1 16.1

After-Tax Income

 

Lowest Quintile 7.5 7.0 6.0 6.1 6.1 6.2 6.1 5.9 6.1 5.7 5.6

Second Quintile 14.2 13.9 12.7 12.6 12.8 12.5 12.7 12.6 12.6 11.7 11.7

Middle Quintile 17.9 17.8 17.2 16.9 16.9 16.6 16.9 16.7 16.4 15.5 15.5

Fourth Quintile 22.2 22.0 22.3 21.4 22.0 21.2 21.6 21.8 21.2 20.1 20.2

Highest Quintile 38.5 40.0 42.3 43.7 42.9 44.3 43.0 43.7 44.2 47.4 47.3

All Quintiles 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 24.9 26.0 28.2 29.8 28.9 30.8 29.2 29.8 30.3 33.9 33.9

Top 5 Percent 16.5 17.4 19.4 20.7 20.2 22.0 20.5 20.8 21.5 25.2 25.2

Top 1 Percent 7.1 7.8 9.3 10.5 10.0 11.5 10.0 10.4 10.6 14.1 14.1

Minimum Income (1997 dollars)

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 19,900 18,400 17,100 18,500 18,900 19,600 18,900 18,200 18,800 19,500 19,500

Middle Quintile 35,800 34,000 32,000 34,000 35,300 35,900 35,100 34,400 35,700 37,400 37,400

Fourth Quintile 51,800 50,000 48,700 51,800 53,300 54,700 53,200 53,400 54,800 57,100 57,100

Highest Quintile 73,700 72,400 72,300 76,700 80,700 82,100 80,400 82,900 83,600 88,000 88,000

Top 10 Percent 96,600 95,300 95,400 102,500 108,600 110,600 108,800 111,100 113,600 122,300 122,300

Top 5 Percent 124,600 120,300 123,400 134,900 141,100 145,900 143,200 148,100 152,200 166,500 166,500

Top 1 Percent 236,400 220,100 238,000 270,300 287,300 320,300 302,200 308,700 355,100 456,100 456,100

NOTES: (Continued)

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their household cash income plus taxes paid by businesses and employee contributions to 401(k) retirement plans. Quintiles, or fifths, of the income distribution contain equal numbers of people.
142 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-4a.

Effective Federal Tax Rates for All Households, by Income Quintile, Using Household Cash Income

Plus Taxes Paid by Businesses, Employee Contributions to 401(k) Retirement Plans, and Nonhealth

In-Kind Benefits, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate 

Lowest Quintile 10.2 9.6 8.9 10.6 10.3 10.1 9.8 9.5 8.7 8.6 8.5

Second Quintile 17.2 17.1 15.5 16.8 16.5 16.7 16.4 16.2 16.4 16.4 15.7

Middle Quintile 20.9 21.3 19.3 19.8 19.9 20.3 20.0 20.3 20.8 20.6 19.8

Fourth Quintile 23.0 23.8 21.7 22.1 22.1 22.4 22.5 22.8 23.5 23.0 22.3

Highest Quintile 28.5 27.7 24.4 24.3 26.2 25.9 26.0 28.0 29.7 28.8 28.4

All Quintiles 23.3 23.4 21.1 21.5 22.4 22.4 22.3 23.4 24.5 24.2 23.6

Top 10 Percent 30.6 28.8 25.1 24.7 27.3 26.7 27.0 29.5 31.5 30.3 29.9

Top 5 Percent 32.9 29.9 25.7 25.1 28.4 27.5 27.8 30.9 33.3 31.6 31.1

Top 1 Percent 37.3 31.8 27.0 26.2 30.1 28.3 29.4 33.7 37.0 33.7 33.0

Effective Individual Income Tax Rate

 

Lowest Quintile 1.0 1.4 0.9 1.3 0.6 0.5 0 -0.5 -2.0 -2.3 -2.4

Second Quintile 5.7 6.4 5.0 5.4 4.7 4.8 4.5 3.8 3.6 3.8 3.1

Middle Quintile 9.0 9.8 8.0 7.9 7.4 7.8 7.5 7.1 7.2 7.3 6.5

Fourth Quintile 11.2 12.2 10.2 9.9 9.4 9.5 9.4 9.2 9.4 9.3 8.6

Highest Quintile 16.5 17.2 14.6 14.3 15.2 15.0 14.6 15.5 16.4 16.9 16.5

All Quintiles 11.6 12.5 10.6 10.5 10.7 10.8 10.3 10.6 11.1 11.7 11.1

Top 10 Percent 18.2 18.7 16.0 15.5 17.0 16.5 16.2 17.5 18.4 18.9 18.5

Top 5 Percent 20.0 20.1 17.3 16.6 18.5 17.9 17.7 19.4 20.4 20.7 20.2

Top 1 Percent 22.7 22.0 19.5 18.6 20.9 19.7 20.3 23.0 24.1 23.5 22.8

Effective Social Insurance Tax Rate

 

Lowest Quintile 5.1 5.4 5.2 5.9 6.1 6.6 6.5 6.3 6.6 6.8 6.8

Second Quintile 7.9 8.3 8.2 8.7 8.8 9.0 9.2 9.2 9.3 9.5 9.5

Middle Quintile 8.9 9.3 9.1 9.6 9.8 10.1 10.0 10.6 10.8 10.6 10.6

Fourth Quintile 8.7 9.6 9.6 10.2 10.2 10.7 10.9 11.2 11.4 11.2 11.2

Highest Quintile 5.6 6.3 6.4 6.5 6.8 6.7 7.7 7.7 7.8 6.8 6.8

All Quintiles 7.1 7.8 7.7 8.1 8.3 8.4 8.9 9.1 9.1 8.5 8.5

Top 10 Percent 4.3 5.0 5.1 5.1 5.4 5.2 6.3 6.2 6.4 5.4 5.4

Top 5 Percent 3.1 3.7 3.8 3.7 4.0 3.7 4.8 4.7 5.0 4.2 4.2

Top 1 Percent 1.3 1.5 1.5 1.5 1.7 1.5 2.2 2.0 2.8 2.2 2.2

SOURCE: Congressional Budget Office.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 143

Table I-4a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Effective Corporate Income Tax Rate 

 

Lowest Quintile 1.8 1.0 0.8 0.8 1.0 1.0 0.8 1.0 1.1 1.0 1.0

Second Quintile 2.2 1.4 1.1 1.2 1.6 1.5 1.3 1.5 1.7 1.6 1.6

Middle Quintile 1.9 1.3 1.2 1.2 1.6 1.4 1.3 1.5 1.5 1.6 1.6

Fourth Quintile 2.1 1.4 1.2 1.1 1.7 1.4 1.2 1.5 1.6 1.6 1.6

Highest Quintile 5.7 3.7 2.8 2.9 3.7 3.6 3.2 4.1 4.9 4.6 4.6

All Quintiles 3.6 2.3 1.9 1.9 2.5 2.4 2.1 2.7 3.1 3.0 3.0

Top 10 Percent 7.4 4.7 3.5 3.6 4.5 4.5 3.9 5.2 6.2 5.5 5.5

Top 5 Percent 9.2 5.7 4.2 4.3 5.4 5.4 4.8 6.2 7.5 6.4 6.4

Top 1 Percent 12.8 7.9 5.7 5.7 7.2 6.9 6.6 8.2 9.8 7.8 7.8

Effective Federal Excise Tax Rate

 

Lowest Quintile 2.3 1.8 2.0 2.6 2.7 2.0 2.5 2.7 3.0 3.2 3.2

Second Quintile 1.4 1.1 1.2 1.5 1.4 1.4 1.5 1.6 1.8 1.6 1.6

Middle Quintile 1.1 0.8 1.0 1.1 1.1 1.0 1.1 1.2 1.3 1.1 1.1

Fourth Quintile 1.0 0.7 0.8 0.9 0.8 0.8 0.9 0.9 1.1 0.9 0.9

Highest Quintile 0.7 0.5 0.6 0.6 0.6 0.5 0.6 0.6 0.6 0.5 0.5

All Quintiles 1.0 0.8 0.9 1.0 0.9 0.9 1.0 1.0 1.1 0.9 0.9

Top 10 Percent 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.5 0.4 0.4

Top 5 Percent 0.6 0.4 0.5 0.4 0.4 0.4 0.4 0.5 0.5 0.3 0.3

Top 1 Percent 0.5 0.4 0.4 0.3 0.3 0.3 0.4 0.5 0.3 0.2 0.2

NOTES: Effective tax rates are calculated by dividing tax liabilities by household cash income plus taxes paid by businesses, employee

contributions to 401(k) retirement plans, and nonhealth in-kind benefits.

Households are people who share a single housing unit, regardless of the relationships among them.

Household 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. Taxes paid by businesses include corporate income taxes

and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Nonhealth in-kind benefits

include 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their household cash income plus taxes paid by businesses, employee contributions

to 401(k) retirement plans, and nonhealth in-kind benefits. Quintiles, or fifths, of the income distribution contain equal numbers of people.
144 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-4b.

Shares of Federal Tax Liabilities for All Households, by Income Quintile, Using Household Cash Income

Plus Taxes Paid by Businesses, Employee Contributions to 401(k) Retirement Plans, and Nonhealth

In-Kind Benefits, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities

Lowest Quintile 3.1 2.7 2.4 2.9 2.7 2.7 2.6 2.3 2.0 1.8 1.8

Second Quintile 9.6 9.3 8.6 9.2 8.7 8.6 8.7 7.9 7.6 7.2 7.1

Middle Quintile 15.5 15.7 15.2 15.0 14.5 14.5 14.5 13.8 13.2 12.5 12.3

Fourth Quintile 21.7 22.4 23.0 22.1 21.5 21.0 21.7 20.9 20.0 18.7 18.6

Highest Quintile 50.1 49.8 50.6 50.6 52.4 53.2 52.4 55.1 57.1 59.7 60.2

All Quintiles 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 35.9 34.2 35.0 35.4 37.5 38.6 37.4 40.3 42.6 46.0 46.4

Top 5 Percent 26.5 24.2 24.9 25.1 27.7 28.5 27.3 30.2 33.0 36.3 36.6

Top 1 Percent 13.8 11.8 12.8 13.4 14.8 15.5 14.5 17.2 19.0 22.3 22.4

Share of Individual Income Tax Liabilities

Lowest Quintile 0.6 0.7 0.5 0.7 0.3 0.3 0 -0.3 -1.0 -1.0 -1.1

Second Quintile 6.4 6.5 5.5 6.0 5.2 5.2 5.2 4.1 3.7 3.4 2.9

Middle Quintile 13.4 13.5 12.6 12.3 11.3 11.6 11.7 10.5 10.1 9.2 8.6

Fourth Quintile 21.2 21.4 21.3 20.1 19.1 18.6 19.6 18.4 17.6 15.8 15.3

Highest Quintile 58.3 57.9 60.2 60.8 64.0 64.3 63.5 67.2 69.5 72.6 74.3

All Quintiles 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 43.1 41.3 44.3 45.4 48.8 49.9 48.4 52.6 55.0 59.4 61.0

Top 5 Percent 32.4 30.3 33.2 33.9 37.9 38.8 37.4 41.8 44.6 49.2 50.4

Top 1 Percent 16.9 15.3 18.4 19.5 21.6 22.5 21.5 25.8 27.4 32.2 32.9

Share of Social Insurance Tax Liabilities

 

Lowest Quintile 5.0 4.6 3.9 4.4 4.3 4.7 4.3 3.9 4.1 4.1 4.1

Second Quintile 14.4 13.6 12.4 12.7 12.5 12.4 12.1 11.6 11.5 11.8 11.8

Middle Quintile 21.6 20.7 19.6 19.3 19.4 19.3 18.4 18.6 18.3 18.2 18.2

Fourth Quintile 26.8 27.1 27.6 27.1 27.0 26.7 26.4 26.5 26.0 25.8 25.8

Highest Quintile 32.0 33.9 36.3 36.3 36.7 36.9 38.7 39.3 40.1 40.0 40.0

All Quintiles 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 16.6 17.7 19.4 19.4 19.9 20.2 22.1 22.0 23.1 23.4 23.4

Top 5 Percent 8.2 8.9 10.0 10.0 10.6 10.4 11.9 11.8 13.3 13.5 13.5

Top 1 Percent 1.6 1.7 2.0 2.1 2.3 2.2 2.7 2.6 3.8 4.1 4.1

SOURCE: Congressional Budget Office.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 145

Table I-4b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Corporate Income Tax Liabilities

 

Lowest Quintile 3.6 2.9 2.4 2.5 2.3 2.5 2.3 2.2 2.0 1.6 1.6

Second Quintile 8.2 7.5 7.1 7.3 7.6 7.3 7.2 6.5 6.1 5.5 5.5

Middle Quintile 9.1 9.9 10.8 10.4 10.3 9.4 10.1 8.7 7.6 7.5 7.5

Fourth Quintile 13.1 12.9 14.4 12.7 14.5 12.0 12.8 12.3 10.7 10.3 10.3

Highest Quintile 65.8 66.7 65.1 67.0 65.1 69.4 67.5 70.3 73.6 75.3 75.3

All Quintiles 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 56.7 56.2 55.0 57.4 55.3 60.5 57.9 61.9 65.1 66.6 66.6

Top 5 Percent 48.4 46.6 46.3 48.0 47.1 52.5 50.7 53.5 57.8 58.6 58.6

Top 1 Percent 30.9 29.4 30.4 32.3 31.6 35.0 34.5 36.7 39.2 40.8 40.8

 

Share of Federal Excise Tax Liabilities

 

Lowest Quintile 15.5 14.8 13.2 16.1 16.9 13.3 15.5 14.7 15.3 17.6 17.6

Second Quintile 17.3 17.2 16.7 18.4 18.0 17.9 17.8 18.1 18.6 18.1 18.1

Middle Quintile 18.1 18.2 18.9 17.8 18.4 18.8 19.1 18.0 18.4 17.9 17.9

Fourth Quintile 20.5 20.1 21.4 19.0 19.2 19.9 19.8 19.3 19.7 18.5 18.5

Highest Quintile 27.9 28.7 28.9 26.9 26.3 28.1 27.0 28.7 26.9 27.1 27.1

All Quintiles 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 16.8 17.0 17.5 16.3 15.6 16.9 16.3 18.3 16.0 16.7 16.7

Top 5 Percent 10.5 10.5 10.8 9.9 9.2 10.5 10.1 11.9 9.8 10.2 10.2

Top 1 Percent 3.9 4.0 4.2 3.9 3.2 4.1 4.0 5.6 3.3 3.5 3.5

NOTES: Households are people who share a single housing unit, regardless of the relationships among them.

Household 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. Taxes paid by businesses include corporate income taxes

and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Nonhealth in-kind benefits

include 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their household cash income plus taxes paid by businesses, employee contributions

to 401(k) retirement plans, and nonhealth in-kind benefits. Quintiles, or fifths, of the income distribution contain equal numbers of people.
146 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-4c.

Number of Households, Average Pretax and After-Tax Income, Shares of Pretax and After-Tax

Income, and Income Category Minimums for All Households, by Income Quintile, Using Household

Cash Income Plus Taxes Paid by Businesses, Employee Contributions to 401(k) Retirement Plans,

and Nonhealth In-Kind Benefits, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Number of Households (Millions)

 

Lowest Quintile 22.8 22.8 22.5 23.8 24.7 25.6 26.1 26.4 27.4 28.3 28.3

Second Quintile 17.6 18.2 18.6 19.4 20.2 20.7 21.1 21.7 21.9 22.6 22.6

Middle Quintile 14.9 15.6 16.3 16.8 17.3 17.8 18.2 18.4 18.5 19.0 19.0

Fourth Quintile 13.5 13.9 14.7 14.9 15.5 15.7 16.1 16.3 16.4 16.8 16.8

Highest Quintile 12.2 13.0 13.4 13.9 13.9 14.4 14.6 14.8 15.2 15.8 15.8

All Quintiles 81.4 84.2 86.2 89.5 92.0 94.6 96.7 98.2 99.7 102.9 102.9

Top 10 Percent 6.0 6.4 6.6 6.9 6.9 7.2 7.2 7.3 7.5 7.8 7.8

Top 5 Percent 3.0 3.2 3.3 3.4 3.5 3.6 3.6 3.6 3.8 4.0 4.0

Top 1 Percent 0.6 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.9 0.9

Average Income (1997 dollars)

Pretax Income

 

Lowest Quintile 11,700 10,900 10,100 11,000 11,100 11,500 11,200 10,800 11,000 11,000 11,000

Second Quintile 28,100 26,500 24,700 26,500 27,200 27,900 27,300 26,600 27,600 28,500 28,500

Middle Quintile 43,800 41,800 40,100 42,500 43,900 45,000 43,700 43,400 45,000 46,900 46,900

Fourth Quintile 61,700 60,000 59,400 62,900 65,400 66,900 65,400 66,200 67,900 70,800 70,800

Highest Quintile 127,100 122,800 128,000 141,600 149,400 159,200 150,600 157,800 165,300 192,500 192,500

All Quintiles 46,500 45,100 45,400 48,800 50,600 52,700 50,800 51,500 53,600 58,900 58,900

Top 10 Percent 171,800 164,400 175,400 196,800 207,900 223,600 210,600 222,800 236,100 284,800 284,800

Top 5 Percent 235,100 221,200 242,600 281,100 291,700 321,700 296,900 318,200 337,000 425,600 425,600

Top 1 Percent 506,300 462,600 542,300 658,100 677,700 786,900 691,100 746,000 854,300 1,114,900 1,114,900

After-Tax Income

Lowest Quintile 10,500 9,900 9,200 9,800 9,900 10,400 10,100 9,700 10,000 10,000 10,000

Second Quintile 23,300 21,900 20,900 22,100 22,700 23,200 22,800 22,300 23,100 23,800 24,000

Middle Quintile 34,600 32,900 32,300 34,000 35,200 35,800 35,000 34,600 35,600 37,300 37,600

Fourth Quintile 47,500 45,700 46,500 49,000 51,000 51,900 50,700 51,100 51,900 54,500 55,000

Highest Quintile 90,900 88,800 96,800 107,300 110,200 118,000 111,400 113,600 116,200 137,100 137,900

All Quintiles 35,700 34,500 35,800 38,300 39,300 40,900 39,500 39,400 40,500 44,700 45,000

Top 10 Percent 119,300 117,100 131,400 148,200 151,100 163,800 153,700 157,200 161,900 198,500 199,700

Top 5 Percent 157,800 155,200 180,200 210,500 208,900 233,400 214,300 219,900 224,700 291,200 293,100

Top 1 Percent 317,300 315,500 395,700 485,900 473,900 564,200 488,100 494,900 538,400 739,400 746,900

SOURCE: Congressional Budget Office.

NOTES: Households are people who share a single housing unit, regardless of the relationships among them.

Household 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. Taxes paid by businesses include corporate income taxes

and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Nonhealth in-kind benefits

include 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 totals.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 147

Table I-4c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Income (Percent)

Pretax Income

 

Lowest Quintile 7.0 6.6 5.8 6.0 5.9 5.9 5.9 5.6 5.6 5.1 5.1

Second Quintile 13.1 12.7 11.7 11.8 11.8 11.6 11.7 11.5 11.3 10.6 10.6

Middle Quintile 17.2 17.2 16.7 16.3 16.3 16.0 16.2 15.9 15.5 14.7 14.7

Fourth Quintile 22.0 22.0 22.3 21.5 21.8 21.0 21.5 21.4 20.8 19.7 19.7

Highest Quintile 41.0 42.0 43.8 45.0 44.7 46.1 44.9 46.1 47.0 50.1 50.1

All Quintiles 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 27.3 27.7 29.5 30.9 30.7 32.4 30.9 32.0 33.1 36.7 36.7

Top 5 Percent 18.8 18.9 20.5 21.5 21.8 23.3 21.9 22.9 24.2 27.8 27.8

Top 1 Percent 8.6 8.7 10.0 11.0 11.0 12.3 11.0 11.9 12.6 16.0 16.0

After-Tax Income

 

Lowest Quintile 8.2 7.8 6.7 6.8 6.8 6.9 6.9 6.6 6.8 6.2 6.1

Second Quintile 14.1 13.7 12.6 12.5 12.7 12.5 12.6 12.5 12.5 11.7 11.7

Middle Quintile 17.7 17.7 17.0 16.7 16.8 16.5 16.7 16.5 16.3 15.4 15.4

Fourth Quintile 22.0 21.8 22.1 21.3 21.9 21.0 21.4 21.6 21.1 20.0 20.0

Highest Quintile 38.2 39.7 42.0 43.4 42.5 44.1 42.7 43.3 43.8 47.1 47.0

All Quintiles 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 24.7 25.8 28.0 29.6 28.7 30.6 29.0 29.5 30.1 33.7 33.6

Top 5 Percent 16.4 17.3 19.3 20.6 20.1 21.8 20.3 20.7 21.4 25.0 25.0

Top 1 Percent 7.0 7.7 9.3 10.4 9.9 11.4 10.0 10.3 10.5 14.0 14.0

Minimum Income (1997 dollars)

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 20,800 19,200 17,800 19,100 19,500 20,100 19,700 19,000 19,700 20,100 20,100

Middle Quintile 36,100 34,300 32,200 34,200 35,400 36,100 35,300 34,700 36,000 37,600 37,600

Fourth Quintile 52,000 50,100 48,800 51,900 53,400 54,800 53,400 53,500 55,000 57,300 57,300

Highest Quintile 73,800 72,500 72,300 76,800 80,800 82,200 80,600 83,000 83,700 88,000 88,000

Top 10 Percent 96,700 95,400 95,500 102,600 108,600 110,700 108,900 111,300 113,700 122,400 122,400

Top 5 Percent 124,700 120,300 123,400 134,900 141,100 146,200 143,200 148,100 152,300 166,500 166,500

Top 1 Percent 236,400 220,100 238,000 270,300 287,300 320,300 302,200 308,800 355,100 456,100 456,100

NOTES: (Continued)

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their household cash income plus taxes paid by businesses, employee contributions

to 401(k) retirement plans, and nonhealth in-kind benefits. Quintiles, or fifths, of the income distribution contain equal numbers of people.
148 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-5a.

Effective Federal Tax Rates for All Households, by Income Quintile,

Using Comprehensive Household Income, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Total Effective Federal Tax Rate

 

Lowest Quintile 10.0 9.6 8.9 10.4 10.2 10.0 9.8 9.6 8.6 8.6 8.4

Second Quintile 16.1 16.1 14.5 15.8 15.3 15.4 15.3 14.8 15.0 15.0 14.4

Middle Quintile 19.9 20.2 18.2 18.7 18.5 18.9 18.4 18.5 18.9 18.8 18.1

Fourth Quintile 22.0 22.9 20.7 21.1 21.0 21.2 21.1 21.2 21.8 21.5 20.8

Highest Quintile 27.7 27.0 23.7 23.6 25.5 25.1 25.2 27.0 28.5 27.9 27.5

All Quintiles 22.3 22.4 20.2 20.6 21.3 21.3 21.1 22.0 22.9 22.8 22.3

Top 10 Percent 30.0 28.2 24.6 24.2 26.7 26.1 26.3 28.6 30.5 29.6 29.2

Top 5 Percent 32.4 29.4 25.3 24.7 27.9 27.0 27.3 30.3 32.6 31.1 30.6

Top 1 Percent 37.1 31.5 26.9 26.0 29.9 28.1 29.2 33.5 36.7 33.5 32.8

Effective Individual Income Tax Rate

 

Lowest Quintile 1.2 1.6 1.1 1.4 0.8 0.7 0.3 -0.2 -1.5 -1.8 -2.0

Second Quintile 5.4 6.1 4.7 5.1 4.4 4.5 4.3 3.6 3.5 3.6 3.0

Middle Quintile 8.6 9.3 7.6 7.5 6.9 7.2 6.9 6.4 6.5 6.7 6.0

Fourth Quintile 10.7 11.7 9.7 9.4 8.9 9.0 8.9 8.5 8.7 8.7 8.1

Highest Quintile 16.0 16.8 14.2 13.9 14.8 14.6 14.2 15.0 15.7 16.4 16.0

All Quintiles 11.1 12.0 10.2 10.1 10.2 10.2 9.8 10.0 10.4 11.0 10.5

Top 10 Percent 17.9 18.3 15.7 15.2 16.6 16.1 15.8 17.0 17.9 18.5 18.1

Top 5 Percent 19.7 19.7 17.0 16.4 18.2 17.6 17.4 19.0 19.9 20.3 19.9

Top 1 Percent 22.6 21.8 19.4 18.5 20.8 19.5 20.1 22.9 23.9 23.3 22.7

Effective Social Insurance Tax Rate

 

Lowest Quintile 5.0 5.4 5.3 5.9 6.1 6.6 6.6 6.4 6.6 6.9 6.9

Second Quintile 7.3 7.8 7.6 8.1 8.1 8.3 8.5 8.4 8.4 8.7 8.7

Middle Quintile 8.5 8.8 8.5 9.0 9.1 9.4 9.2 9.6 9.7 9.6 9.6

Fourth Quintile 8.3 9.1 9.1 9.7 9.7 10.0 10.2 10.4 10.6 10.4 10.4

Highest Quintile 5.4 6.1 6.2 6.4 6.6 6.5 7.4 7.4 7.4 6.6 6.6

All Quintiles 6.8 7.5 7.4 7.8 7.9 8.0 8.4 8.5 8.6 8.1 8.1

Top 10 Percent 4.3 4.9 5.0 5.0 5.3 5.1 6.2 6.0 6.2 5.3 5.3

Top 5 Percent 3.1 3.6 3.7 3.7 4.0 3.7 4.7 4.6 4.9 4.1 4.1

Top 1 Percent 1.3 1.5 1.5 1.5 1.7 1.5 2.1 2.0 2.7 2.2 2.2

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by comprehensive household income.

Households are people who share a single housing unit, regardless of the relationships among them.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 149

Table I-5a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Effective Corporate Income Tax Rate

 

Lowest Quintile 1.7 0.9 0.7 0.7 0.9 0.9 0.7 0.9 0.9 0.8 0.8

Second Quintile 2.1 1.2 1.0 1.1 1.5 1.3 1.1 1.3 1.4 1.3 1.3

Middle Quintile 1.8 1.3 1.1 1.2 1.5 1.4 1.3 1.4 1.4 1.5 1.5

Fourth Quintile 2.1 1.3 1.2 1.1 1.6 1.3 1.2 1.5 1.5 1.5 1.5

Highest Quintile 5.6 3.6 2.7 2.8 3.6 3.6 3.1 3.9 4.8 4.5 4.5

All Quintiles 3.4 2.2 1.8 1.8 2.4 2.3 2.0 2.5 2.9 2.9 2.9

Top 10 Percent 7.2 4.6 3.4 3.5 4.4 4.4 3.8 5.0 6.0 5.4 5.4

Top 5 Percent 9.0 5.6 4.2 4.2 5.3 5.3 4.8 6.1 7.3 6.3 6.3

Top 1 Percent 12.7 7.8 5.6 5.6 7.1 6.8 6.5 8.1 9.7 7.7 7.7

Effective Federal Excise Tax Rate

 

Lowest Quintile 2.1 1.6 1.8 2.3 2.4 1.8 2.3 2.4 2.6 2.8 2.8

Second Quintile 1.3 1.0 1.1 1.4 1.3 1.2 1.3 1.5 1.6 1.4 1.4

Middle Quintile 1.0 0.8 0.9 1.0 1.0 1.0 1.1 1.1 1.2 1.0 1.0

Fourth Quintile 0.9 0.7 0.8 0.8 0.8 0.8 0.8 0.9 1.0 0.8 0.8

Highest Quintile 0.7 0.5 0.6 0.6 0.5 0.5 0.6 0.6 0.6 0.5 0.5

All Quintiles 1.0 0.8 0.8 0.9 0.9 0.8 0.9 1.0 1.0 0.9 0.9

Top 10 Percent 0.6 0.5 0.5 0.5 0.5 0.4 0.5 0.6 0.5 0.4 0.4

Top 5 Percent 0.6 0.4 0.4 0.4 0.4 0.4 0.4 0.5 0.4 0.3 0.3

Top 1 Percent 0.5 0.4 0.4 0.3 0.3 0.3 0.3 0.5 0.3 0.2 0.2

NOTES: (Continued)

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their comprehensive household income. Quintiles, or fifths, of the income distribution contain equal numbers of people.
150 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-5b.

Shares of Federal Tax Liabilities for All Households, by Income Quintile,

Using Comprehensive Household Income, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Total Federal Tax Liabilities

Lowest Quintile 3.3 2.9 2.7 3.1 2.9 2.9 2.8 2.5 2.2 2.0 2.1

Second Quintile 9.6 9.3 8.7 9.3 8.8 8.7 8.9 8.2 7.9 7.4 7.3

Middle Quintile 15.4 15.6 15.2 15.0 14.4 14.5 14.5 13.7 13.1 12.5 12.3

Fourth Quintile 21.6 22.3 22.9 22.0 21.5 20.9 21.5 20.8 19.9 18.5 18.4

Highest Quintile 49.9 49.7 50.4 50.4 52.3 53.0 52.3 54.8 56.8 59.5 60.0

All Quintiles 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 35.8 34.0 35.0 35.3 37.4 38.5 37.3 40.0 42.4 45.7 46.2

Top 5 Percent 26.4 24.0 24.8 25.1 27.6 28.5 27.3 30.1 32.9 36.2 36.5

Top 1 Percent 13.8 11.8 12.8 13.4 14.8 15.5 14.4 17.2 18.9 22.3 22.4

Share of Individual Income Tax Liabilities

 

Lowest Quintile 0.8 0.9 0.6 0.9 0.5 0.5 0.2 -0.1 -0.8 -0.9 -1.0

Second Quintile 6.5 6.6 5.6 6.2 5.3 5.3 5.4 4.4 4.1 3.7 3.2

Middle Quintile 13.4 13.4 12.5 12.3 11.2 11.6 11.7 10.5 10.1 9.2 8.6

Fourth Quintile 21.1 21.4 21.2 20.1 19.1 18.5 19.4 18.3 17.6 15.6 15.1

Highest Quintile 58.1 57.7 60.0 60.6 63.8 64.1 63.3 66.9 69.1 72.4 74.1

All Quintiles 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 42.9 41.1 44.2 45.2 48.7 49.6 48.3 52.3 54.8 59.1 60.7

Top 5 Percent 32.4 30.1 33.0 33.9 37.8 38.7 37.4 41.7 44.4 49.0 50.3

Top 1 Percent 16.9 15.3 18.3 19.5 21.7 22.5 21.4 25.9 27.3 32.3 32.9

Share of Social Insurance Tax Liabilities

Lowest Quintile 5.4 5.0 4.3 4.7 4.8 5.1 4.8 4.4 4.6 4.6 4.6

Second Quintile 14.3 13.6 12.4 12.8 12.6 12.5 12.4 11.9 11.9 12.1 12.1

Middle Quintile 21.5 20.5 19.5 19.2 19.1 19.2 18.2 18.4 18.1 18.0 18.0

Fourth Quintile 26.7 26.9 27.4 27.0 26.9 26.5 26.1 26.3 25.8 25.5 25.5

Highest Quintile 32.0 33.9 36.2 36.1 36.5 36.7 38.5 38.9 39.7 39.7 39.7

All Quintiles 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 16.6 17.7 19.4 19.4 19.9 20.0 22.0 21.7 22.9 23.2 23.2

Top 5 Percent 8.2 8.9 9.9 9.9 10.6 10.4 11.9 11.7 13.2 13.4 13.4

Top 1 Percent 1.6 1.7 2.0 2.1 2.3 2.2 2.6 2.6 3.8 4.1 4.1

SOURCE: Congressional Budget Office.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 151

Table I-5b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Corporate Income Tax Liabilities

 

Lowest Quintile 3.7 2.9 2.4 2.4 2.2 2.4 2.2 2.2 1.9 1.5 1.5

Second Quintile 8.1 7.3 7.1 7.1 7.5 7.1 6.8 6.4 5.8 5.1 5.1

Middle Quintile 9.3 10.1 10.8 10.5 10.4 9.7 10.5 8.8 7.7 7.9 7.9

Fourth Quintile 13.2 13.0 14.5 13.0 14.7 12.1 12.9 12.5 10.9 10.2 10.2

Highest Quintile 65.6 66.5 64.9 66.8 65.1 69.4 67.5 70.2 73.7 75.6 75.6

All Quintiles 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 56.3 55.9 54.8 57.2 55.1 60.6 58.0 61.6 65.0 66.5 66.5

Top 5 Percent 48.1 46.3 46.2 47.9 46.9 52.2 50.6 53.4 57.6 58.5 58.5

Top 1 Percent 30.9 29.4 30.3 32.1 31.6 35.0 34.3 36.6 39.0 40.8 40.8

 

Share of Federal Excise Tax Liabilities

 

Lowest Quintile 15.8 15.0 13.1 15.7 16.7 13.0 15.3 14.6 14.8 17.1 17.1

Second Quintile 17.3 17.1 16.7 18.8 18.1 18.0 17.9 18.1 18.9 18.3 18.3

Middle Quintile 18.0 18.2 19.0 18.0 18.4 19.1 19.2 18.2 18.6 18.1 18.1

Fourth Quintile 20.5 20.1 21.4 19.1 19.3 19.9 19.8 19.3 19.8 18.6 18.6

Highest Quintile 27.9 28.6 28.9 26.8 26.3 28.1 27.0 28.6 26.8 27.2 27.2

All Quintiles 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 16.7 17.0 17.5 16.2 15.5 16.8 16.2 18.2 15.9 16.6 16.6

Top 5 Percent 10.5 10.4 10.8 9.9 9.2 10.4 10.1 11.9 9.8 10.1 10.1

Top 1 Percent 3.9 4.0 4.2 3.9 3.2 4.0 4.0 5.6 3.3 3.5 3.5

NOTES: Households are people who share a single housing unit, regardless of the relationships among them.

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their comprehensive household income. Quintiles, or fifths, of the income distribution contain equal numbers of people.
152 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-5c.

Number of Households, Average Pretax and After-Tax Income, Shares of Pretax and

After-Tax Income, and Income Category Minimums for All Households, by Income Quintile,

Using Comprehensive Household Income, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Number of Households (Millions)

Lowest Quintile 23.0 22.9 22.5 23.8 24.7 25.6 26.0 26.4 27.5 28.2 28.2

Second Quintile 17.6 18.2 18.7 19.6 20.3 20.8 21.2 21.9 22.1 22.7 22.7

Middle Quintile 14.8 15.6 16.3 16.8 17.2 17.9 18.3 18.5 18.4 19.1 19.1

Fourth Quintile 13.4 13.9 14.7 14.9 15.5 15.6 16.1 16.3 16.3 16.7 16.7

Highest Quintile 12.2 13.0 13.4 13.8 13.9 14.4 14.6 14.7 15.1 15.7 15.7

All Quintiles 81.4 84.2 86.2 89.5 92.0 94.6 96.7 98.2 99.7 102.9 102.9

Top 10 Percent 6.0 6.4 6.6 6.8 6.8 7.2 7.2 7.2 7.4 7.7 7.7

Top 5 Percent 3.0 3.2 3.3 3.3 3.5 3.6 3.6 3.6 3.8 3.9 3.9

Top 1 Percent 0.6 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.9 0.9

Average Income (1997 dollars)

Pretax Income

 

Lowest Quintile 12,700 11,900 11,000 11,900 12,100 12,700 12,200 11,900 12,400 12,300 12,300

Second Quintile 30,100 28,300 26,600 28,500 29,500 30,400 29,900 29,700 31,100 31,800 31,800

Middle Quintile 46,100 43,900 42,400 45,000 46,800 48,100 47,000 47,500 49,400 51,100 51,100

Fourth Quintile 64,500 62,500 62,200 65,900 68,800 70,600 69,200 71,100 73,000 75,500 75,500

Highest Quintile 130,600 126,000 131,700 145,800 153,900 164,200 155,600 164,100 172,200 198,600 198,600

All Quintiles 48,500 47,000 47,500 51,000 53,100 55,400 53,600 54,800 57,300 62,400 62,400

Top 10 Percent 175,800 168,200 179,400 201,500 212,900 229,400 216,100 230,200 244,000 292,700 292,700

Top 5 Percent 238,900 225,600 247,800 286,000 297,000 328,400 302,800 325,700 345,800 434,400 434,400

Top 1 Percent 508,000 466,300 548,300 665,900 682,800 792,900 701,900 751,400 865,600 1,121,500 1,121,500

After-Tax Income

 

Lowest Quintile 11,400 10,700 10,000 10,600 10,900 11,400 11,000 10,700 11,300 11,300 11,300

Second Quintile 25,300 23,800 22,800 24,000 25,000 25,700 25,400 25,300 26,500 27,100 27,300

Middle Quintile 36,900 35,000 34,700 36,600 38,100 39,000 38,300 38,800 40,100 41,500 41,800

Fourth Quintile 50,400 48,200 49,400 52,000 54,400 55,700 54,600 56,000 57,100 59,300 59,800

Highest Quintile 94,400 92,000 100,500 111,300 114,700 122,900 116,400 119,900 123,100 143,200 144,000

All Quintiles 37,700 36,400 37,900 40,500 41,800 43,600 42,300 42,700 44,200 48,200 48,500

Top 10 Percent 123,100 120,700 135,400 152,700 156,000 169,500 159,200 164,300 169,500 206,100 207,200

Top 5 Percent 161,500 159,300 185,100 215,300 214,200 239,800 220,100 227,100 233,100 299,400 301,300

Top 1 Percent 319,600 319,200 401,000 492,800 478,900 570,000 497,200 499,900 548,300 746,300 753,700

SOURCE: Congressional Budget Office.

NOTES: Households are people who share a single housing unit, regardless of the relationships among them.

Comprehensive household income equals 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 employee 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 totals.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 153

Table I-5c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Income (Percent)

Pretax Income

 

Lowest Quintile 7.4 6.9 6.0 6.2 6.1 6.2 6.1 5.8 5.9 5.4 5.4

Second Quintile 13.4 13.1 12.1 12.2 12.3 12.0 12.3 12.1 12.1 11.3 11.3

Middle Quintile 17.3 17.3 16.9 16.6 16.5 16.4 16.6 16.3 15.9 15.2 15.2

Fourth Quintile 21.9 21.9 22.3 21.5 21.8 21.1 21.4 21.5 20.9 19.7 19.7

Highest Quintile 40.2 41.3 42.9 44.0 43.7 45.0 43.8 44.7 45.5 48.7 48.7

All Quintiles 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 26.6 27.0 28.7 30.1 29.8 31.4 29.9 30.7 31.8 35.2 35.2

Top 5 Percent 18.2 18.4 19.8 20.9 21.1 22.5 21.1 21.9 23.1 26.5 26.5

Top 1 Percent 8.3 8.4 9.6 10.6 10.6 11.8 10.4 11.3 11.8 15.2 15.2

After-Tax Income

 

Lowest Quintile 8.5 8.0 6.9 7.0 7.0 7.1 7.0 6.8 7.0 6.4 6.4

Second Quintile 14.4 14.1 13.0 13.0 13.2 12.9 13.2 13.2 13.3 12.4 12.4

Middle Quintile 17.9 17.8 17.3 17.0 17.1 16.9 17.2 17.0 16.7 16.0 16.0

Fourth Quintile 22.0 21.8 22.2 21.4 21.9 21.1 21.4 21.7 21.2 20.0 20.1

Highest Quintile 37.4 38.8 41.0 42.4 41.4 42.8 41.5 41.8 42.2 45.5 45.4

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

Top 10 Percent 24.0 25.0 27.1 28.7 27.8 29.5 28.0 28.1 28.6 32.1 32.1

Top 5 Percent 15.8 16.7 18.5 19.8 19.3 20.9 19.4 19.5 20.1 23.7 23.7

Top 1 Percent 6.7 7.4 8.8 9.9 9.4 10.8 9.4 9.6 9.7 13.1 13.1

Minimum Income (1997 dollars)

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 22,500 21,000 19,500 20,900 21,500 22,300 21,800 21,500 22,500 22,900 22,900

Middle Quintile 38,400 36,300 34,400 36,500 38,100 39,100 38,300 38,400 40,400 41,500 41,500

Fourth Quintile 54,500 52,300 51,300 54,700 56,400 58,100 56,900 58,000 59,700 61,900 61,900

Highest Quintile 76,900 75,100 75,400 80,200 84,500 86,500 84,700 88,200 89,400 93,000 93,000

Top 10 Percent 100,100 98,600 99,200 106,400 112,800 115,500 113,700 117,700 120,500 128,600 128,600

Top 5 Percent 128,500 124,000 128,000 139,400 145,700 151,400 148,900 154,900 159,900 173,500 173,500

Top 1 Percent 239,300 225,800 242,900 275,700 295,400 325,800 310,300 315,400 362,000 461,900 461,900

NOTES: (Continued)

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

a. Income categories are defined by ranking all people by their comprehensive household income. Quintiles, or fifths, of the income distribution contain equal numbers of people.
154 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-6a.

Effective Federal Tax Rates for All Households, by Income Quintile, Based on Comprehensive

Household Income Adjusted Using Federal Poverty Thresholds, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Total Effective Federal Tax Rate

 

Lowest Quintile 8.3 8.5 8.2 9.8 9.0 8.6 8.0 7.8 6.0 5.7 5.3

Second Quintile 14.0 14.3 13.2 14.6 14.3 14.4 14.2 13.6 13.6 13.9 12.8

Middle Quintile 18.1 18.5 17.0 17.7 17.2 17.6 17.4 17.3 17.7 17.6 16.7

Fourth Quintile 21.0 21.7 19.7 20.0 20.0 20.2 20.0 20.2 20.6 20.3 19.8

Highest Quintile 27.7 27.0 23.7 23.6 25.4 25.1 25.1 26.7 28.3 27.7 27.4

All Quintiles 22.3 22.4 20.2 20.6 21.3 21.3 21.1 22.0 22.9 22.8 22.3

Top 10 Percent 29.9 28.4 24.6 24.4 26.8 26.2 26.3 28.4 30.3 29.3 29.0

Top 5 Percent 32.2 29.6 25.3 24.9 27.9 27.0 27.2 30.0 32.2 30.9 30.5

Top 1 Percent 37.3 31.7 26.7 26.1 29.8 28.3 28.8 33.2 36.4 33.3 32.7

Effective Individual Income Tax Rate

Lowest Quintile -0.3 0.3 -0.1 0.3 -0.7 -1.1 -1.8 -2.2 -4.6 -5.1 -5.4

Second Quintile 3.9 4.6 3.6 3.9 3.4 3.5 3.0 2.3 2.1 2.3 1.2

Middle Quintile 7.2 7.9 6.6 6.5 5.7 6.1 5.9 5.4 5.5 5.6 4.7

Fourth Quintile 10.0 10.9 9.0 8.8 8.2 8.4 8.1 7.9 8.0 8.0 7.5

Highest Quintile 15.8 16.6 14.0 13.8 14.5 14.4 14.0 14.6 15.4 16.1 15.7

All Quintiles 11.1 12.0 10.2 10.1 10.2 10.2 9.8 10.0 10.4 11.0 10.5

Top 10 Percent 17.6 18.2 15.5 15.1 16.4 15.9 15.6 16.6 17.5 18.1 17.7

Top 5 Percent 19.4 19.6 16.8 16.3 18.0 17.4 17.1 18.6 19.5 19.9 19.5

Top 1 Percent 22.4 21.8 19.0 18.6 20.7 19.5 19.6 22.3 23.3 22.9 22.3

Effective Social Insurance Tax Rate

Lowest Quintile 5.5 6.0 6.0 6.6 6.7 7.3 7.0 7.0 7.4 7.6 7.6

Second Quintile 7.4 8.0 7.8 8.6 8.7 8.9 9.1 9.0 9.0 9.3 9.3

Middle Quintile 8.2 8.8 8.7 9.2 9.2 9.4 9.5 9.6 9.7 9.7 9.7

Fourth Quintile 8.3 8.9 8.8 9.3 9.4 9.6 9.7 10.1 10.2 10.0 10.0

Highest Quintile 5.6 6.3 6.3 6.5 6.6 6.6 7.4 7.5 7.5 6.7 6.7

All Quintiles 6.8 7.5 7.4 7.8 7.9 8.0 8.4 8.5 8.6 8.1 8.1

Top 10 Percent 4.5 5.1 5.2 5.3 5.5 5.4 6.3 6.3 6.4 5.4 5.4

Top 5 Percent 3.3 3.8 3.9 3.9 4.2 3.9 5.0 5.0 5.1 4.2 4.2

Top 1 Percent 1.4 1.6 1.6 1.6 1.7 1.5 2.3 2.1 2.7 2.2 2.2

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by comprehensive household income.

Households are people who share a single housing unit, regardless of the relationships among them.

Comprehensive household income equals 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 employee 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 totals.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 155

Table I-6a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Effective Corporate Income Tax Rate

 

Lowest Quintile 1.0 0.6 0.5 0.5 0.5 0.5 0.5 0.6 0.5 0.5 0.5

Second Quintile 1.3 0.7 0.6 0.6 0.8 0.7 0.6 0.7 0.8 0.7 0.7

Middle Quintile 1.6 1.0 0.8 0.9 1.2 1.1 0.9 1.1 1.2 1.1 1.1

Fourth Quintile 1.8 1.2 1.1 1.1 1.4 1.3 1.2 1.3 1.4 1.4 1.4

Highest Quintile 5.5 3.6 2.8 2.8 3.6 3.5 3.1 3.9 4.6 4.4 4.4

All Quintiles 3.4 2.2 1.8 1.8 2.4 2.3 2.0 2.5 2.9 2.9 2.9

Top 10 Percent 7.1 4.5 3.4 3.5 4.4 4.3 3.8 4.9 5.8 5.4 5.4

Top 5 Percent 8.9 5.6 4.2 4.3 5.3 5.3 4.6 6.0 7.2 6.3 6.3

Top 1 Percent 12.9 7.9 5.7 5.6 7.2 6.9 6.5 8.3 10.0 8.0 8.0

Effective Federal Excise Tax Rate

 

Lowest Quintile 2.1 1.6 1.8 2.4 2.5 1.8 2.3 2.4 2.7 2.7 2.7

Second Quintile 1.3 1.1 1.2 1.5 1.5 1.3 1.4 1.6 1.7 1.6 1.6

Middle Quintile 1.1 0.8 0.9 1.1 1.1 1.0 1.1 1.2 1.3 1.1 1.1

Fourth Quintile 0.9 0.7 0.8 0.9 0.9 0.9 0.9 0.9 1.1 0.9 0.9

Highest Quintile 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.5 0.5

All Quintiles 1.0 0.8 0.8 0.9 0.9 0.8 0.9 1.0 1.0 0.9 0.9

Top 10 Percent 0.7 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.4 0.4

Top 5 Percent 0.6 0.5 0.5 0.5 0.4 0.4 0.5 0.5 0.5 0.4 0.4

Top 1 Percent 0.5 0.4 0.4 0.4 0.3 0.3 0.3 0.5 0.3 0.2 0.2

Memorandum:

Federal Poverty

Thresholds, by

Number of Family

Members (Dollars)

One 3,460 4,213 4,658 5,029 5,313 5,797 6,368 6,760 7,125 7,504 n.a.

Two 4,427 5,392 5,960 6,435 6,798 7,419 8,149 8,651 9,118 9,602 n.a.

Three 5,419 6,599 7,295 7,876 8,321 9,080 9,974 10,589 11,160 11,753 n.a.

Four 6,948 8,462 9,354 10,099 10,670 11,643 12,789 13,577 14,310 15,071 n.a.

Five 8,218 10,007 11,063 11,944 12,619 13,770 15,125 16,057 16,924 17,823 n.a.

Six 9,276 11,296 12,488 13,483 14,244 15,544 17,073 18,126 19,104 20,119 n.a.

Seven 10,505 12,793 14,142 15,268 16,131 17,602 19,334 20,526 21,634 22,784 n.a.

Eight 11,692 14,239 15,740 16,994 17,954 19,592 21,520 22,847 24,079 25,359 n.a.

Nine or more 13,968 17,010 18,804 20,302 21,449 23,406 25,709 27,294 28,767 30,296 n.a.

NOTES: (Continued)

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

n.a. = not applicable.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted using federal poverty thresholds—

that is, divided by the federal poverty threshold appropriate for the household’s size. Quintiles, or fifths, of the income distribution contain

equal numbers of people.
156 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-6b.

Shares of Federal Tax Liabilities for All Households, by Income Quintile, Based on Comprehensive

Household Income Adjusted Using Federal Poverty Thresholds, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Total Federal Tax Liabilities

 

Lowest Quintile 1.9 1.8 1.7 2.1 1.9 1.7 1.6 1.5 1.1 1.0 0.9

Second Quintile 6.8 6.7 6.5 7.0 6.7 6.6 6.6 5.9 5.7 5.4 5.1

Middle Quintile 12.6 12.8 12.8 12.9 12.0 12.2 12.5 11.7 11.3 10.6 10.3

Fourth Quintile 20.9 21.6 21.6 21.1 20.5 20.1 20.6 19.9 19.1 18.0 17.9

Highest Quintile 57.7 56.9 57.3 56.8 58.8 59.4 58.7 60.9 62.8 65.0 65.8

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

Top 10 Percent 41.5 40.1 40.5 40.3 42.7 43.4 42.4 44.9 47.4 50.2 50.7

Top 5 Percent 30.3 28.2 28.6 28.7 31.1 32.1 30.6 33.6 36.0 39.3 39.6

Top 1 Percent 15.6 13.1 13.8 14.3 15.9 16.6 15.2 18.1 20.0 23.2 23.3

Share of Individual Income Tax Liabilities

 

Lowest Quintile -0.1 0.1 0 0.1 -0.3 -0.4 -0.8 -0.9 -1.9 -1.8 -2.0

Second Quintile 3.9 4.0 3.5 3.8 3.3 3.3 3.0 2.2 2.0 1.9 1.0

Middle Quintile 10.1 10.2 9.8 9.7 8.4 8.8 9.1 8.1 7.7 7.0 6.2

Fourth Quintile 19.9 20.2 19.5 18.9 17.8 17.4 18.0 17.1 16.3 14.7 14.4

Highest Quintile 66.2 65.5 67.2 67.5 70.7 70.9 70.6 73.5 75.8 78.2 80.4

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

Top 10 Percent 49.2 48.1 50.4 51.0 54.7 55.1 54.3 57.8 60.6 64.1 65.9

Top 5 Percent 36.7 35.0 37.6 38.5 42.1 43.0 41.4 45.7 48.1 52.6 54.0

Top 1 Percent 18.9 16.8 19.5 20.8 23.1 23.9 22.3 26.7 28.3 33.1 33.7

Share of Social Insurance Tax Liabilities

 

Lowest Quintile 4.1 3.9 3.4 3.7 3.7 3.9 3.6 3.4 3.6 3.6 3.6

Second Quintile 11.8 11.2 10.5 10.9 11.0 10.8 10.6 10.1 10.0 10.2 10.2

Middle Quintile 18.8 18.3 18.0 17.8 17.4 17.4 17.0 16.8 16.5 16.7 16.7

Fourth Quintile 26.9 26.8 26.4 26.1 26.3 25.7 25.2 25.7 25.1 25.1 25.1

Highest Quintile 38.2 39.7 41.6 41.3 41.5 42.0 43.5 44.0 44.8 44.4 44.4

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

Top 10 Percent 20.5 21.7 23.3 23.2 23.6 24.0 25.7 25.7 26.8 26.4 26.4

Top 5 Percent 10.2 11.1 11.9 11.8 12.5 12.5 14.2 14.4 15.2 15.3 15.3

Top 1 Percent 2.0 2.0 2.2 2.3 2.4 2.4 3.1 2.9 4.0 4.3 4.3

SOURCE: Congressional Budget Office.

NOTES: Households are people who share a single housing unit, regardless of the relationships among them.

Comprehensive household income equals 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 employee 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 totals.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 157

Table I-6b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Corporate Income Tax Liabilities

 

Lowest Quintile 1.5 1.2 1.1 1.1 1.0 1.0 1.0 1.0 0.7 0.6 0.6

Second Quintile 4.2 3.4 3.2 3.1 3.4 3.2 2.9 2.8 2.5 2.1 2.1

Middle Quintile 7.1 6.8 6.9 7.1 7.4 7.0 7.2 6.5 5.9 5.3 5.3

Fourth Quintile 11.7 12.2 13.2 12.7 13.0 12.2 13.1 11.3 10.3 9.9 9.9

Highest Quintile 75.4 76.2 75.4 75.9 75.1 77.3 75.8 78.4 80.5 82.3 82.3

All Quintiles 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 64.4 64.7 63.4 64.5 63.2 66.7 64.7 67.9 71.3 72.9 72.9

Top 5 Percent 54.5 54.0 53.8 54.9 52.9 58.3 55.4 58.5 62.4 63.9 63.9

Top 1 Percent 35.4 33.0 33.6 34.1 34.1 37.8 36.8 39.6 42.7 44.0 44.0

 

Share of Federal Excise Tax Liabilities

 

Lowest Quintile 11.2 10.4 9.4 11.5 12.1 9.5 11.0 10.3 10.7 12.1 12.1

Second Quintile 14.9 14.8 14.7 16.3 16.1 15.0 15.5 15.4 15.8 16.3 16.3

Middle Quintile 17.3 17.3 17.3 18.0 17.7 18.0 18.4 18.1 18.6 17.6 17.6

Fourth Quintile 21.3 21.1 21.6 20.8 21.3 21.9 21.8 21.1 21.7 20.6 20.6

Highest Quintile 34.8 35.3 36.2 31.7 31.6 33.7 32.5 33.8 32.0 32.5 32.5

All Quintiles 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 21.2 21.6 21.8 19.4 19.0 20.3 19.7 21.3 19.2 19.9 19.9

Top 5 Percent 13.0 13.3 13.5 11.9 11.2 12.6 12.1 13.9 11.6 12.3 12.3

Top 1 Percent 4.9 4.7 4.9 4.3 3.6 4.4 4.3 6.0 4.0 4.1 4.1

Memorandum:

Federal Poverty

Thresholds, by

Number of Family

Members (Dollars)

One 3,460 4,213 4,658 5,029 5,313 5,797 6,368 6,760 7,125 7,504 n.a.

Two 4,427 5,392 5,960 6,435 6,798 7,419 8,149 8,651 9,118 9,602 n.a.

Three 5,419 6,599 7,295 7,876 8,321 9,080 9,974 10,589 11,160 11,753 n.a.

Four 6,948 8,462 9,354 10,099 10,670 11,643 12,789 13,577 14,310 15,071 n.a.

Five 8,218 10,007 11,063 11,944 12,619 13,770 15,125 16,057 16,924 17,823 n.a.

Six 9,276 11,296 12,488 13,483 14,244 15,544 17,073 18,126 19,104 20,119 n.a.

Seven 10,505 12,793 14,142 15,268 16,131 17,602 19,334 20,526 21,634 22,784 n.a.

Eight 11,692 14,239 15,740 16,994 17,954 19,592 21,520 22,847 24,079 25,359 n.a.

Nine or more 13,968 17,010 18,804 20,302 21,449 23,406 25,709 27,294 28,767 30,296 n.a.

NOTES: (Continued)

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

n.a. = not applicable.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted using federal poverty thresholds—

that is, divided by the federal poverty threshold appropriate for the household’s size. Quintiles, or fifths, of the income distribution contain

equal numbers of people.
158 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-6c.

Number of Households, Average Pretax and After-Tax Income, Shares of Pretax and After-Tax

Income, and Income Category Minimums for All Households, by Income Quintile, Based on

Comprehensive Household Income Adjusted Using Federal Poverty Thresholds, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Number of Households (Millions)

Lowest Quintile 17.1 17.2 16.8 17.9 18.8 19.2 19.7 20.0 21.0 21.8 21.8

Second Quintile 15.8 16.3 17.1 17.6 18.2 18.7 18.8 19.3 19.3 19.8 19.8

Middle Quintile 15.0 15.8 16.5 17.2 17.6 18.3 18.9 19.3 19.3 19.8 19.8

Fourth Quintile 15.7 16.4 16.8 17.5 18.1 18.4 19.0 19.2 19.4 20.1 20.1

Highest Quintile 17.2 18.0 18.4 18.7 19.0 19.7 19.9 20.0 20.4 21.1 21.1

All Quintiles 81.4 84.2 86.2 89.5 92.0 94.6 96.7 98.2 99.7 102.9 102.9

Top 10 Percent 8.8 9.3 9.5 9.5 9.7 10.0 10.1 10.1 10.4 10.7 10.7

Top 5 Percent 4.4 4.7 4.8 4.8 4.8 5.1 5.1 5.1 5.2 5.3 5.3

Top 1 Percent 0.9 0.9 0.9 0.9 0.9 0.9 1.0 1.0 1.0 1.0 1.0

Average Income (1997 dollars)

Pretax Income

 

Lowest Quintile 11,900 11,100 10,300 11,100 11,400 11,800 11,400 11,000 11,400 11,400 11,400

Second Quintile 27,100 25,500 23,800 25,600 26,600 27,300 26,900 26,700 28,000 28,700 28,700

Middle Quintile 41,000 38,900 37,800 39,800 41,500 42,400 41,500 41,400 43,200 44,600 44,600

Fourth Quintile 55,600 53,900 54,000 56,900 59,200 60,700 59,400 60,900 62,300 64,500 64,500

Highest Quintile 106,400 104,000 109,000 120,900 127,300 134,700 128,500 135,300 142,400 163,400 163,400

All Quintiles 48,500 47,000 47,500 51,000 53,100 55,400 53,600 54,800 57,300 62,400 62,400

Top 10 Percent 139,600 134,700 143,200 163,200 170,800 185,400 173,900 184,400 196,100 234,400 234,400

Top 5 Percent 190,100 179,000 195,200 226,600 239,400 261,100 243,100 257,600 282,100 348,400 348,400

Top 1 Percent 406,000 390,000 460,900 577,600 591,700 692,000 602,300 650,800 747,400 985,600 985,600

After-Tax Income

 

Lowest Quintile 10,900 10,200 9,400 10,000 10,300 10,800 10,500 10,200 10,800 10,800 10,800

Second Quintile 23,300 21,800 20,700 21,900 22,800 23,400 23,100 23,000 24,200 24,700 25,000

Middle Quintile 33,600 31,700 31,300 32,700 34,300 34,900 34,200 34,300 35,600 36,700 37,100

Fourth Quintile 44,000 42,200 43,400 45,500 47,400 48,500 47,500 48,600 49,500 51,400 51,700

Highest Quintile 76,900 75,900 83,200 92,300 95,000 100,900 96,200 99,200 102,100 118,200 118,700

All Quintiles 37,700 36,400 37,900 40,500 41,800 43,600 42,300 42,700 44,200 48,200 48,500

Top 10 Percent 97,900 96,400 107,900 123,400 125,100 136,900 128,200 132,000 136,600 165,600 166,400

Top 5 Percent 128,900 126,100 145,800 170,200 172,600 190,500 176,900 180,300 191,100 240,800 242,300

Top 1 Percent 254,700 266,400 337,700 426,900 415,100 496,400 429,100 434,800 475,400 657,100 663,500
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 159

Table I-6c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Share of Income (Percent)

Pretax Income

 

Lowest Quintile 5.2 4.8 4.2 4.4 4.4 4.3 4.3 4.1 4.2 3.9 3.9

Second Quintile 10.8 10.5 9.9 9.8 9.9 9.7 9.7 9.5 9.5 8.8 8.8

Middle Quintile 15.6 15.5 15.2 15.0 14.9 14.8 15.1 14.9 14.6 13.8 13.8

Fourth Quintile 22.1 22.3 22.1 21.8 21.9 21.3 21.7 21.7 21.1 20.2 20.2

Highest Quintile 46.4 47.3 48.8 49.5 49.4 50.5 49.3 50.2 50.9 53.6 53.6

All Quintiles 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 31.0 31.7 33.2 34.1 34.0 35.4 34.0 34.8 35.8 39.0 39.0

Top 5 Percent 21.0 21.4 22.8 23.8 23.7 25.3 23.8 24.7 25.5 29.0 29.0

Top 1 Percent 9.4 9.3 10.5 11.3 11.3 12.5 11.2 12.0 12.6 15.9 15.9

After-Tax Income

 

Lowest Quintile 6.1 5.7 4.8 4.9 5.0 5.0 5.0 4.9 5.1 4.7 4.7

Second Quintile 12.0 11.6 10.8 10.6 10.8 10.6 10.6 10.6 10.6 9.9 9.9

Middle Quintile 16.5 16.3 15.8 15.5 15.7 15.5 15.8 15.8 15.6 14.7 14.8

Fourth Quintile 22.5 22.5 22.3 22.0 22.3 21.6 22.0 22.2 21.8 20.8 20.8

Highest Quintile 43.2 44.5 46.7 47.6 46.8 48.1 46.8 47.2 47.3 50.2 50.1

All Quintiles 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 28.0 29.2 31.3 32.5 31.6 33.2 31.8 31.9 32.4 35.7 35.6

Top 5 Percent 18.3 19.4 21.3 22.5 21.7 23.5 21.9 22.1 22.4 26.0 26.0

Top 1 Percent 7.6 8.2 9.6 10.5 10.1 11.4 10.1 10.2 10.4 13.7 13.7

Minimum Adjusted Income as a Multiple of the Appropriate Poverty Threshold

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 1.78 1.67 1.55 1.68 1.74 1.82 1.76 1.73 1.82 1.87 1.87

Middle Quintile 2.89 2.76 2.69 2.86 3.01 3.08 3.04 3.04 3.17 3.24 3.24

Fourth Quintile 4.04 3.93 3.93 4.18 4.36 4.49 4.43 4.46 4.61 4.77 4.77

Highest Quintile 5.79 5.71 5.82 6.19 6.52 6.65 6.53 6.70 6.85 7.17 7.17

Top 10 Percent 7.51 7.49 7.66 8.27 8.61 8.88 8.73 9.00 9.34 9.96 9.96

Top 5 Percent 9.56 9.59 9.90 10.83 11.23 11.71 11.52 11.67 12.37 13.37 13.37

Top 1 Percent 18.42 18.59 19.52 22.54 23.67 26.46 24.65 25.99 27.98 33.24 33.24
160 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-6c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law 

Memorandum:

Federal Poverty

Thresholds, by

Number of Family

Members (Dollars)

One 3,460 4,213 4,658 5,029 5,313 5,797 6,368 6,760 7,125 7,504 n.a.

Two 4,427 5,392 5,960 6,435 6,798 7,419 8,149 8,651 9,118 9,602 n.a.

Three 5,419 6,599 7,295 7,876 8,321 9,080 9,974 10,589 11,160 11,753 n.a.

Four 6,948 8,462 9,354 10,099 10,670 11,643 12,789 13,577 14,310 15,071 n.a.

Five 8,218 10,007 11,063 11,944 12,619 13,770 15,125 16,057 16,924 17,823 n.a.

Six 9,276 11,296 12,488 13,483 14,244 15,544 17,073 18,126 19,104 20,119 n.a.

Seven 10,505 12,793 14,142 15,268 16,131 17,602 19,334 20,526 21,634 22,784 n.a.

Eight 11,692 14,239 15,740 16,994 17,954 19,592 21,520 22,847 24,079 25,359 n.a.

Nine or more 13,968 17,010 18,804 20,302 21,449 23,406 25,709 27,294 28,767 30,296 n.a.

SOURCE: Congressional Budget Office.

NOTES: Households are people who share a single housing unit, regardless of the relationships among them.

Comprehensive household income equals 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 employee 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 totals.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

n.a. = not applicable.

a. Income categories are defined by ranking all people by their comprehensive household income adjusted using federal poverty thresholds—

that is, divided by the federal poverty threshold appropriate for the household’s size. Quintiles, or fifths, of the income distribution contain

equal numbers of people.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 161

Table I-7a.

Effective Federal Tax Rates for All Families, by Income Quintile, Based on Family Cash Income

Plus Taxes Paid by Businesses, Adjusted Using Federal Poverty Thresholds, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Total Effective Federal Tax Rate

Lowest Quintile 8.6 8.5 8.4 10.2 9.5 8.7 8.0 7.8 5.2 5.1 4.9

Second Quintile 14.9 15.1 14.0 15.6 15.3 15.4 15.1 14.3 14.6 14.6 13.3

Middle Quintile 19.1 19.6 18.0 18.8 18.5 19.0 18.9 19.1 19.8 19.6 18.6

Fourth Quintile 22.0 22.8 20.8 21.3 21.3 21.6 21.6 22.1 22.7 22.4 21.8

Highest Quintile 28.5 27.8 24.4 24.5 26.4 26.2 26.3 28.1 29.9 29.0 28.7

All Quintiles 23.4 23.5 21.2 21.8 22.6 22.8 22.6 23.8 24.9 24.6 24.0

Top 10 Percent 30.6 29.0 25.2 25.1 27.6 27.1 27.3 29.6 31.6 30.4 30.0

Top 5 Percent 32.7 30.1 25.8 25.5 28.6 27.8 28.0 30.9 33.2 31.6 31.2

Top 1 Percent 37.5 31.9 27.1 26.3 30.2 28.5 29.2 33.5 36.7 33.6 33.0

Effective Individual Income Tax Rate

 

Lowest Quintile -0.8 -0.2 -0.6 -0.2 -1.3 -1.9 -2.9 -3.4 -6.8 -7.1 -7.3

Second Quintile 3.9 4.6 3.5 3.9 3.2 3.3 2.7 1.7 1.5 1.6 0.3

Middle Quintile 7.5 8.2 6.8 6.8 6.1 6.5 6.3 5.9 6.1 6.2 5.2

Fourth Quintile 10.4 11.3 9.5 9.3 8.7 8.9 8.7 8.5 8.7 8.8 8.2

Highest Quintile 16.3 17.1 14.5 14.3 15.1 15.0 14.7 15.4 16.3 16.8 16.4

All Quintiles 11.6 12.6 10.7 10.7 10.8 10.9 10.5 10.8 11.3 11.8 11.3

Top 10 Percent 18.0 18.7 15.9 15.6 16.9 16.5 16.3 17.3 18.3 18.7 18.3

Top 5 Percent 19.7 20.0 17.1 16.8 18.5 17.9 17.6 19.1 20.1 20.4 19.9

Top 1 Percent 22.6 22.0 19.3 18.7 20.9 19.6 19.9 22.6 23.6 23.1 22.5

Effective Social Insurance Tax Rate

 

Lowest Quintile 5.7 6.1 6.2 6.8 7.1 7.8 7.5 7.4 7.8 8.1 8.1

Second Quintile 8.0 8.6 8.5 9.3 9.5 9.7 9.9 9.8 10.0 10.1 10.1

Middle Quintile 8.8 9.4 9.3 9.9 10.0 10.3 10.3 10.7 10.9 10.9 10.9

Fourth Quintile 8.7 9.4 9.4 10.0 10.2 10.5 10.7 11.2 11.4 11.2 11.2

Highest Quintile 5.8 6.4 6.5 6.7 6.9 7.0 7.8 7.9 8.0 7.1 7.1

All Quintiles 7.2 7.8 7.8 8.2 8.4 8.5 9.0 9.2 9.3 8.7 8.7

Top 10 Percent 4.6 5.2 5.4 5.4 5.7 5.6 6.6 6.6 6.7 5.7 5.7

Top 5 Percent 3.3 3.9 4.0 3.9 4.2 4.1 5.2 5.1 5.2 4.4 4.4

Top 1 Percent 1.4 1.6 1.6 1.6 1.7 1.5 2.3 2.1 2.8 2.2 2.2

SOURCE: Congressional Budget Office.

NOTES: Effective tax rates are calculated by dividing tax liabilities by family cash income plus taxes paid by businesses, adjusted using federal

poverty thresholds.

Families are people related by blood, marriage, or adoption who live together.

Family 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. Taxes paid by businesses include corporate income taxes

and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Families with negative

income are excluded from the lowest income category but are included in totals.
162 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-7a.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Effective Corporate Income Tax Rate

 

Lowest Quintile 1.1 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4

Second Quintile 1.5 0.8 0.6 0.7 1.0 0.9 0.7 0.9 1.0 0.9 0.9

Middle Quintile 1.6 1.0 0.9 0.9 1.3 1.2 1.1 1.2 1.3 1.3 1.3

Fourth Quintile 1.9 1.2 1.1 1.1 1.5 1.4 1.2 1.4 1.5 1.5 1.5

Highest Quintile 5.7 3.7 2.8 2.9 3.8 3.6 3.2 4.1 4.9 4.6 4.6

All Quintiles 3.6 2.3 1.9 1.9 2.5 2.4 2.1 2.7 3.2 3.1 3.1

Top 10 Percent 7.2 4.6 3.5 3.6 4.6 4.5 3.9 5.1 6.0 5.6 5.6

Top 5 Percent 9.1 5.7 4.2 4.3 5.5 5.4 4.8 6.2 7.4 6.5 6.5

Top 1 Percent 13.0 8.0 5.7 5.6 7.3 7.0 6.7 8.4 10.0 8.1 8.1

Effective Federal Excise Tax Rate

 

Lowest Quintile 2.6 2.0 2.3 3.1 3.2 2.3 3.0 3.2 3.6 3.7 3.7

Second Quintile 1.5 1.2 1.4 1.7 1.7 1.5 1.7 1.9 2.1 2.0 2.0

Middle Quintile 1.2 0.9 1.0 1.2 1.1 1.1 1.2 1.3 1.5 1.2 1.2

Fourth Quintile 1.0 0.7 0.8 0.9 0.9 0.9 1.0 1.0 1.2 1.0 1.0

Highest Quintile 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.6 0.6

All Quintiles 1.0 0.8 0.9 1.0 0.9 0.9 1.0 1.1 1.1 0.9 0.9

Top 10 Percent 0.7 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.5 0.5

Top 5 Percent 0.6 0.5 0.5 0.5 0.4 0.4 0.5 0.6 0.5 0.4 0.4

Top 1 Percent 0.5 0.4 0.4 0.4 0.3 0.3 0.3 0.5 0.3 0.2 0.2

Memorandum:

Federal Poverty

Thresholds, by

Number of Family

Members (Dollars)

One 3,460 4,213 4,658 5,029 5,313 5,797 6,368 6,760 7,125 7,504 n.a.

Two 4,427 5,392 5,960 6,435 6,798 7,419 8,149 8,651 9,118 9,602 n.a.

Three 5,419 6,599 7,295 7,876 8,321 9,080 9,974 10,589 11,160 11,753 n.a.

Four 6,948 8,462 9,354 10,099 10,670 11,643 12,789 13,577 14,310 15,071 n.a.

Five 8,218 10,007 11,063 11,944 12,619 13,770 15,125 16,057 16,924 17,823 n.a.

Six 9,276 11,296 12,488 13,483 14,244 15,544 17,073 18,126 19,104 20,119 n.a.

Seven 10,505 12,793 14,142 15,268 16,131 17,602 19,334 20,526 21,634 22,784 n.a.

Eight 11,692 14,239 15,740 16,994 17,954 19,592 21,520 22,847 24,079 25,359 n.a.

Nine or more 13,968 17,010 18,804 20,302 21,449 23,406 25,709 27,294 28,767 30,296 n.a.

NOTES: (Continued)

Individual income taxes are distributed directly to families paying those taxes. Payroll taxes are distributed to families paying those

taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to families according to their

consumption of the taxed good or service. Corporate income taxes are distributed to families according to their share of capital

income.

n.a. = not applicable.

a. Income categories are defined by ranking all people by their family cash income plus taxes paid by businesses adjusted using federal

poverty thresholds—that is, divided by the federal poverty threshold appropriate for the family’s size. Quintiles, or fifths, of the income

distribution contain equal numbers of people.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 163

Table I-7b.

Shares of Federal Tax Liabilities for All Families, by Income Quintile, Based on Family Cash Income

Plus Taxes Paid by Businesses, Adjusted Using Federal Poverty Thresholds, 1979-1997 (In percent)

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Total Federal Tax Liabilities

Lowest Quintile 1.7 1.5 1.4 1.8 1.6 1.4 1.3 1.1 0.7 0.7 0.7

Second Quintile 6.6 6.4 6.1 6.7 6.3 6.2 6.1 5.3 5.1 4.8 4.5

Middle Quintile 12.6 12.7 12.7 12.7 12.0 12.0 12.3 11.6 11.2 10.6 10.3

Fourth Quintile 20.8 21.7 21.7 21.3 20.5 20.2 20.7 20.1 19.2 18.2 18.1

Highest Quintile 58.3 57.6 58.0 57.4 59.5 60.1 59.6 61.9 63.7 65.7 66.5

All Quintiles 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 41.9 40.5 41.0 40.8 43.3 43.9 43.1 45.7 48.0 50.6 51.2

Top 5 Percent 30.6 28.6 29.0 29.1 31.5 32.5 31.2 34.1 36.4 39.4 39.8

Top 1 Percent 15.9 13.4 14.0 14.5 16.2 16.8 15.6 18.4 20.2 23.4 23.5

Share of Individual Income Tax Liabilities

 

Lowest Quintile -0.3 -0.1 -0.2 -0.1 -0.4 -0.6 -1.0 -1.1 -2.1 -1.9 -2.1

Second Quintile 3.5 3.6 3.0 3.4 2.8 2.8 2.4 1.4 1.1 1.1 0.2

Middle Quintile 10.0 10.0 9.5 9.4 8.3 8.6 8.8 7.9 7.6 7.0 6.1

Fourth Quintile 19.8 20.2 19.5 19.0 17.6 17.3 18.0 17.0 16.2 14.8 14.4

Highest Quintile 67.0 66.2 68.1 68.3 71.7 71.9 71.8 74.8 77.0 79.0 81.3

All Quintiles 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 49.8 48.7 51.1 51.7 55.6 56.0 55.3 58.8 61.5 64.6 66.5

Top 5 Percent 37.1 35.5 38.1 39.1 42.8 43.7 42.2 46.4 48.7 52.8 54.3

Top 1 Percent 19.3 17.2 19.8 21.1 23.6 24.1 22.9 27.2 28.8 33.4 34.1

Share of Social Insurance Tax Liabilities

Lowest Quintile 3.6 3.3 2.8 3.1 3.2 3.3 3.0 2.7 2.9 3.0 3.0

Second Quintile 11.6 10.9 10.1 10.6 10.5 10.5 10.1 9.3 9.4 9.4 9.4

Middle Quintile 19.0 18.4 17.8 17.7 17.5 17.3 16.9 16.8 16.4 16.7 16.7

Fourth Quintile 27.0 27.1 26.7 26.5 26.6 26.1 25.8 26.2 25.7 25.6 25.6

Highest Quintile 38.7 40.2 42.3 41.9 42.1 42.7 44.2 45.0 45.7 45.3 45.3

All Quintiles 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 20.7 21.9 23.7 23.4 23.9 24.3 26.1 26.3 27.2 26.7 26.7

Top 5 Percent 10.2 11.1 12.1 12.0 12.6 12.7 14.5 14.5 15.3 15.4 15.4

Top 1 Percent 1.9 2.0 2.3 2.4 2.5 2.4 3.1 3.0 4.1 4.3 4.3

SOURCE: Congressional Budget Office.

NOTES: Families are people related by blood, marriage, or adoption who live together.

Family 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. Taxes paid by businesses include corporate income taxes

and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Families with negative

income are excluded from the lowest income category but are included in totals.
164 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-7b.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Corporate Income Tax Liabilities

Lowest Quintile 1.3 1.0 0.9 0.9 0.8 0.8 0.8 0.7 0.6 0.4 0.4

Second Quintile 4.2 3.6 3.2 3.3 3.6 3.3 3.0 3.0 2.7 2.4 2.4

Middle Quintile 7.0 6.7 6.9 7.0 7.3 6.9 7.3 6.4 5.9 5.4 5.4

Fourth Quintile 11.6 11.9 13.0 12.4 12.6 11.8 12.2 10.8 9.7 9.4 9.4

Highest Quintile 75.7 76.6 75.7 76.3 75.7 77.8 76.6 79.0 81.0 82.7 82.7

All Quintiles 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 65.0 65.2 63.8 65.1 64.0 67.3 65.6 68.8 71.9 73.7 73.7

Top 5 Percent 55.4 54.6 54.0 55.4 53.9 59.0 56.3 59.6 63.4 64.3 64.3

Top 1 Percent 36.0 33.7 33.7 34.9 34.8 38.5 37.9 40.2 43.0 44.7 44.7

 

Share of Federal Excise Tax Liabilities

 

Lowest Quintile 11.5 10.6 9.5 12.0 12.5 9.3 11.0 10.2 10.8 12.5 12.5

Second Quintile 14.9 14.7 14.9 16.2 16.3 15.5 15.8 15.9 16.3 16.8 16.8

Middle Quintile 17.4 17.4 17.2 17.7 17.5 17.8 18.3 18.0 18.3 17.5 17.5

Fourth Quintile 21.0 21.1 21.3 20.7 21.1 21.7 21.6 20.8 21.5 20.1 20.1

Highest Quintile 34.7 35.1 36.2 31.5 31.4 33.7 32.5 33.8 32.1 32.4 32.4

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

Top 10 Percent 21.1 21.6 21.9 19.4 19.0 20.2 19.7 21.3 19.3 20.0 20.0

Top 5 Percent 13.0 13.3 13.5 12.0 11.2 12.6 12.1 13.9 11.8 12.3 12.3

Top 1 Percent 4.9 4.8 5.0 4.4 3.7 4.5 4.4 6.1 4.0 4.2 4.2

Memorandum:

Federal Poverty

Thresholds, by

Number of Family

Members (Dollars)

One 3,460 4,213 4,658 5,029 5,313 5,797 6,368 6,760 7,125 7,504 n.a.

Two 4,427 5,392 5,960 6,435 6,798 7,419 8,149 8,651 9,118 9,602 n.a.

Three 5,419 6,599 7,295 7,876 8,321 9,080 9,974 10,589 11,160 11,753 n.a.

Four 6,948 8,462 9,354 10,099 10,670 11,643 12,789 13,577 14,310 15,071 n.a.

Five 8,218 10,007 11,063 11,944 12,619 13,770 15,125 16,057 16,924 17,823 n.a.

Six 9,276 11,296 12,488 13,483 14,244 15,544 17,073 18,126 19,104 20,119 n.a.

Seven 10,505 12,793 14,142 15,268 16,131 17,602 19,334 20,526 21,634 22,784 n.a.

Eight 11,692 14,239 15,740 16,994 17,954 19,592 21,520 22,847 24,079 25,359 n.a.

Nine or more 13,968 17,010 18,804 20,302 21,449 23,406 25,709 27,294 28,767 30,296 n.a.

NOTES: (Continued)

Individual income taxes are distributed directly to families paying those taxes. Payroll taxes are distributed to families paying those

taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to families according to their

consumption of the taxed good or service. Corporate income taxes are distributed to families according to their share of capital

income.

n.a. = not applicable.

a. Income categories are defined by ranking all people by their family cash income plus taxes paid by businesses, adjusted using federal

poverty thresholds—that is, divided by the federal poverty threshold appropriate for the family’s size. Quintiles, or fifths, of the income

distribution contain equal numbers of people.
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 165

Table I-7c.

Number of Families, Average Pretax and After-Tax Income, Shares of Pretax and After-Tax Income,

and Income Category Minimums for All Families, by Income Quintile, Based on Family Cash Income

Plus Taxes Paid by Businesses, Adjusted Using Federal Poverty Thresholds, 1979-1997

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Number of Families (Millions)

Lowest Quintile 18.2 18.3 18.0 19.3 20.3 20.5 21.0 21.6 22.7 23.9 23.9

Second Quintile 16.7 17.2 18.1 18.6 19.5 20.5 20.8 21.3 21.7 22.2 22.2

Middle Quintile 16.0 16.6 17.6 18.3 19.0 19.6 20.4 21.2 21.1 21.7 21.7

Fourth Quintile 16.5 17.4 17.8 18.7 19.3 19.9 20.5 20.8 21.1 21.8 21.8

Highest Quintile 18.2 19.1 19.6 20.0 20.3 21.1 21.4 21.7 22.1 22.9 22.9

All Quintiles 86.1 89.3 91.8 95.7 98.7 102.1 104.7 107.2 109.1 112.9 112.9

Top 10 Percent 9.3 9.8 10.1 10.2 10.4 10.6 10.9 11.0 11.2 11.5 11.5

Top 5 Percent 4.6 5.0 5.1 5.1 5.2 5.4 5.4 5.5 5.6 5.7 5.7

Top 1 Percent 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.1 1.1

Average Income (1997 dollars)

Pretax Income

 

Lowest Quintile 9,300 8,600 7,800 8,500 8,500 8,800 8,200 7,600 7,900 7,900 7,900

Second Quintile 23,300 21,800 20,000 21,600 22,000 22,000 21,300 20,500 21,100 21,700 21,700

Middle Quintile 36,300 34,800 33,100 34,600 35,500 36,000 34,800 33,800 35,000 36,300 36,300

Fourth Quintile 50,600 48,700 48,400 50,200 51,900 52,300 51,100 51,300 52,100 54,100 54,100

Highest Quintile 98,700 96,400 100,300 110,000 115,200 121,600 115,400 119,500 125,700 144,100 144,100

All Quintiles 43,700 42,300 42,400 45,100 46,500 48,100 46,200 46,300 48,000 52,500 52,500

Top 10 Percent 130,700 125,900 132,800 150,300 155,900 170,400 158,300 166,100 176,900 211,100 211,100

Top 5 Percent 179,500 168,600 183,100 210,200 220,100 243,100 224,800 237,000 256,800 319,800 319,800

Top 1 Percent 390,400 368,700 439,100 532,300 553,200 654,600 567,300 616,400 692,100 916,300 916,300

After-Tax Income

 

Lowest Quintile 8,500 7,900 7,100 7,600 7,700 8,000 7,600 7,000 7,500 7,500 7,500

Second Quintile 19,800 18,500 17,200 18,200 18,600 18,600 18,100 17,500 18,000 18,600 18,800

Middle Quintile 29,400 28,000 27,100 28,100 28,900 29,100 28,200 27,300 28,100 29,200 29,500

Fourth Quintile 39,500 37,600 38,400 39,500 40,900 41,000 40,100 40,000 40,300 42,000 42,300

Highest Quintile 70,500 69,600 75,800 83,100 84,800 89,800 85,100 85,900 88,200 102,300 102,800

All Quintiles 33,500 32,400 33,400 35,300 36,000 37,200 35,700 35,200 36,000 39,600 39,900

Top 10 Percent 90,800 89,400 99,300 112,500 112,800 124,200 115,100 116,900 121,000 147,000 147,700

Top 5 Percent 120,800 117,900 135,800 156,600 157,200 175,600 161,800 163,700 171,500 218,800 220,200

Top 1 Percent 243,900 250,900 320,300 392,300 386,300 468,000 401,800 409,600 438,200 608,000 613,900
166 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table I-7c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Share of Income (Percent)

Pretax Income

Lowest Quintile 4.5 4.2 3.6 3.8 3.7 3.7 3.6 3.3 3.4 3.2 3.2

Second Quintile 10.3 9.9 9.3 9.3 9.3 9.2 9.2 8.8 8.7 8.1 8.1

Middle Quintile 15.4 15.3 14.9 14.7 14.6 14.4 14.7 14.4 14.1 13.3 13.3

Fourth Quintile 22.2 22.4 22.1 21.8 21.8 21.2 21.7 21.6 21.0 19.9 19.9

Highest Quintile 47.8 48.7 50.4 51.0 51.0 52.2 51.2 52.4 53.2 55.7 55.7

All Quintiles 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 32.1 32.8 34.5 35.3 35.4 36.9 35.7 36.7 37.9 41.0 41.0

Top 5 Percent 21.9 22.4 23.8 24.9 25.0 26.6 25.2 26.3 27.3 30.7 30.7

Top 1 Percent 9.9 9.9 11.0 12.0 12.1 13.4 12.1 13.0 13.7 17.1 17.1

After-Tax Income

Lowest Quintile 5.4 5.0 4.2 4.4 4.4 4.3 4.2 4.0 4.3 4.0 4.0

Second Quintile 11.5 11.0 10.2 10.0 10.2 10.1 10.0 9.9 9.9 9.2 9.3

Middle Quintile 16.3 16.1 15.5 15.2 15.4 15.1 15.4 15.3 15.0 14.2 14.3

Fourth Quintile 22.6 22.6 22.3 21.9 22.2 21.5 22.0 22.1 21.6 20.5 20.5

Highest Quintile 44.6 45.9 48.4 49.2 48.5 49.9 48.7 49.4 49.6 52.4 52.3

All Quintiles 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 29.1 30.5 32.7 33.8 33.1 34.8 33.6 33.9 34.5 37.8 37.7

Top 5 Percent 19.2 20.4 22.4 23.7 23.0 24.9 23.4 23.8 24.3 27.8 27.8

Top 1 Percent 8.1 8.8 10.2 11.3 11.0 12.4 11.1 11.4 11.6 15.0 15.1

Minimum Adjusted Income as a Multiple of the Appropriate Poverty Threshold

Lowest Quintile 0 0 0 0 0 0 0 0 0 0 0

Second Quintile 1.52 1.41 1.29 1.41 1.45 1.48 1.42 1.35 1.40 1.44 1.44

Middle Quintile 2.62 2.51 2.38 2.56 2.65 2.69 2.62 2.54 2.63 2.72 2.72

Fourth Quintile 3.75 3.65 3.60 3.80 3.93 4.01 3.95 3.89 3.98 4.16 4.16

Highest Quintile 5.44 5.37 5.44 5.70 5.97 6.07 5.92 5.99 6.07 6.37 6.37

Top 10 Percent 7.11 7.10 7.22 7.70 8.00 8.20 8.02 8.13 8.44 9.00 9.00

Top 5 Percent 9.12 9.13 9.46 10.16 10.45 10.90 10.71 10.79 11.31 12.28 12.28

Top 1 Percent 17.96 18.06 19.13 21.07 22.31 25.05 23.33 24.66 26.39 31.12 31.12
APPENDIX I DISTRIBUTIONAL ESTIMATES USING ALTERNATIVE MEASURES OF INCOME, 1979-1997 167

Table I-7c.

Continued

1997

Income Categorya 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Memorandum:

Federal Poverty

Thresholds, by

Number of Family

Members (Dollars)

One 3,460 4,213 4,658 5,029 5,313 5,797 6,368 6,760 7,125 7,504 n.a.

Two 4,427 5,392 5,960 6,435 6,798 7,419 8,149 8,651 9,118 9,602 n.a.

Three 5,419 6,599 7,295 7,876 8,321 9,080 9,974 10,589 11,160 11,753 n.a.

Four 6,948 8,462 9,354 10,099 10,670 11,643 12,789 13,577 14,310 15,071 n.a.

Five 8,218 10,007 11,063 11,944 12,619 13,770 15,125 16,057 16,924 17,823 n.a.

Six 9,276 11,296 12,488 13,483 14,244 15,544 17,073 18,126 19,104 20,119 n.a.

Seven 10,505 12,793 14,142 15,268 16,131 17,602 19,334 20,526 21,634 22,784 n.a.

Eight 11,692 14,239 15,740 16,994 17,954 19,592 21,520 22,847 24,079 25,359 n.a.

Nine or more 13,968 17,010 18,804 20,302 21,449 23,406 25,709 27,294 28,767 30,296 n.a.

SOURCE: Congressional Budget Office.

NOTES: Families are people related by blood, marriage, or adoption who live together.

Family 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. Taxes paid by businesses include corporate income taxes

and the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes. Families with negative

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

Individual income taxes are distributed directly to families paying those taxes. Payroll taxes are distributed to families paying those

taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to families according to their

consumption of the taxed good or service. Corporate income taxes are distributed to families according to their share of capital

income.

n.a. = not applicable.

a. Income categories are defined by ranking all people by their family cash income plus taxes paid by businesses, adjusted using federal

poverty thresholds—that is, divided by the federal poverty threshold appropriate for the family’s size. Quintiles, or fifths, of the income

distribution contain equal numbers of people.

Appendix J

Tax Liabilities and Income Based

on Tax-Return Data, by Category

of Adjusted Gross Income, 1995-1999
170 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table J-1.

Federal Individual Income Tax Liabilities and Income Based on Tax-Return Data, 

by Adjusted Gross Income, 1995-1999

AGI Category 1995 1996 1997 1998 1999

Effective Federal Individual Income Tax Rate (Percent)

$0 to $10,000 -5.8 -6.2 -6.1 -6.1 -5.9

$10,000 to $20,000 0.3 0.2 -0.2 -0.6 -0.5

$20,000 to $30,000 7.0 6.9 6.9 6.1 6.1

$30,000 to $50,000 9.9 10.0 10.0 9.3 9.3

$50,000 to $75,000 11.6 11.7 11.7 11.1 11.1

$75,000 to $100,000 14.0 14.2 14.1 13.6 13.7

$100,000 to $150,000 16.8 16.8 16.7 16.5 16.5

$150,000 to $200,000 19.6 19.7 19.5 19.2 19.3

$200,000 and Over 28.1 28.0 27.0 26.2 27.0

All Categories 13.5 14.0 14.2 14.0 14.6

Total Adjusted Gross Income

In Millions of 1999 Dollars

$0 to $10,000 131,405 132,762 131,959 130,208 133,948

$10,000 to $20,000 347,439 355,918 356,442 359,537 358,384

$20,000 to $30,000 436,670 435,543 439,948 452,306 454,715

$30,000 to $50,000 856,877 872,678 894,171 902,664 912,629

$50,000 to $75,000 905,141 925,149 946,310 990,686 1,013,866

$75,000 to $100,000 554,029 555,159 595,221 637,447 673,044

$100,000 to $150,000 468,955 496,403 543,200 609,880 643,215

$150,000 to $200,000 195,009 210,094 239,307 258,437 290,683

$200,000 and Over 744,746 890,748 1,067,823 1,248,838 1,401,713

All Categories 4,579,856 4,816,522 5,158,839 5,535,590 5,813,856

As a Percentage of Total AGI

$0 to $10,000 2.8 2.7 2.5 2.3 2.3

$10,000 to $20,000 7.5 7.3 6.8 6.4 6.1

$20,000 to $30,000 9.4 8.9 8.4 8.1 7.7

$30,000 to $50,000 18.5 17.9 17.1 16.1 15.5

$50,000 to $75,000 19.5 19.0 18.1 17.7 17.2

$75,000 to $100,000 11.9 11.4 11.4 11.4 11.4

$100,000 to $150,000 10.1 10.2 10.4 10.9 10.9

$150,000 to $200,000 4.2 4.3 4.6 4.6 4.9

$200,000 and Over 16.0 18.3 20.5 22.3 23.8

All Categories 100.0 100.0 100.0 100.0 100.0
APPENDIX J TAX LIABILITIES AND INCOME BASED ON TAX-RETURN DATA 171

Table J-1.

Continued

AGI Category 1995 1996 1997 1998 1999

Total Individual Income Tax Liabilities

In Millions of 1999 Dollars

$0 to $10,000 (7,612) (8,266) (7,994) (7,996) (7,849)

$10,000 to $20,000 1,123 682 (680) (2,137) (1,630)

$20,000 to $30,000 30,719 30,107 30,501 27,540 27,651

$30,000 to $50,000 85,091 87,562 89,021 84,283 84,597

$50,000 to $75,000 105,272 108,422 110,873 110,145 112,804

$75,000 to $100,000 77,824 79,105 84,210 86,647 92,024

$100,000 to $150,000 78,744 83,425 90,587 100,574 106,303

$150,000 to $200,000 38,192 41,437 46,576 49,506 56,205

$200,000 and Over 208,994 249,622 288,360 327,368 378,704

All Categories 618,341 672,138 731,483 775,949 848,845

As a Percentage of Total Individual Income Tax Liabilities

$0 to $10,000 -1.2 -1.2 -1.1 -1.0 -0.9

$10,000 to $20,000 0.2 0.1 -0.1 -0.3 -0.2

$20,000 to $30,000 5.0 4.5 4.2 3.5 3.3

$30,000 to $50,000 13.8 13.0 12.2 10.9 10.0

$50,000 to $75,000 17.0 16.1 15.2 14.2 13.3

$75,000 to $100,000 12.6 11.8 11.5 11.2 10.8

$100,000 to $150,000 12.7 12.4 12.4 13.0 12.5

$150,000 to $200,000 6.2 6.2 6.4 6.4 6.6

$200,000 and Over 33.8 37.1 39.4 42.2 44.6

All Categories 100.0 100.0 100.0 100.0 100.0

Number of Tax Returns (Thousands)

$0 to $10,000 26,435 26,950 26,439 25,832 26,560

$10,000 to $20,000 23,486 23,962 24,061 24,189 24,105

$20,000 to $30,000 17,706 17,617 17,819 18,336 18,392

$30,000 to $50,000 21,912 22,285 22,894 23,088 23,357

$50,000 to $75,000 14,822 15,124 15,518 16,209 16,585

$75,000 to $100,000 6,452 6,462 6,957 7,441 7,840

$100,000 to $150,000 3,939 4,187 4,573 5,119 5,388

$150,000 to $200,000 1,139 1,228 1,397 1,507 1,697

$200,000 and Over 1,488 1,690 1,931 2,172 2,420

All Categories 118,221 120,353 122,422 124,771 127,668

SOURCE: Congressional Budget Office based on data from the Internal Revenue Service’s Statistics of Income (1995 through 1998) and its

master file (1999).

NOTE: Returns with negative AGI are excluded from the lowest income category but are included in totals.

Appendix K

Estimates of Total Effective Tax Rates

Using Alternative Measures of Income
174 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table K-1.

Total Effective Federal Tax Rates, by Income Quintile, Using Alternative Measures

of Income, 1979-1997 (In percent)

1997

Income Measure 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

All Quintiles

Family Cash Income 25.2 25.1 22.5 23.2 24.2 24.3 24.2 25.6 27.0 26.5 25.9

Household Cash Income 25.2 25.1 22.5 23.2 24.2 24.4 24.2 25.7 27.0 26.5 25.9

Household Cash Income Plus

Taxes Paid by Businesses and

Employee Contributions to 401(k)

Retirement Plans 23.4 23.5 21.2 21.7 22.5 22.6 22.4 23.6 24.6 24.3 23.7

Household Cash Income Plus Taxes

Paid by Businesses, Employee

Contributions to 401(k) Retirement

Plans, and Nonhealth In-Kind Benefits 23.3 23.4 21.1 21.5 22.4 22.4 22.3 23.4 24.5 24.2 23.6

Comprehensive Household Income 22.3 22.4 20.2 20.6 21.3 21.3 21.1 22.0 22.9 22.8 22.3

Adjusted Comprehensive Household Income

Based on federal poverty thresholdsa 22.3 22.4 20.2 20.6 21.3 21.3 21.1 22.0 22.9 22.8 22.3

Based on household sizeb 22.3 22.4 20.2 20.6 21.3 21.3 21.1 22.0 22.9 22.8 22.3

Historic CBO Measure 23.4 23.5 21.2 21.8 22.6 22.8 22.6 23.8 24.9 24.6 24.0

Lowest Quintile

Family Cash Income 11.2 10.2 9.9 11.6 11.8 11.3 11.1 10.2 9.3 9.4 9.3

Household Cash Income 11.4 10.5 10.0 11.8 11.7 11.5 11.2 10.6 9.8 9.8 9.6

Household Cash Income Plus

Taxes Paid by Businesses and

Employee Contributions to 401(k)

Retirement Plans 10.4 9.7 9.2 11.1 10.8 10.4 10.3 9.6 8.8 8.9 8.8

Household Cash Income Plus Taxes

Paid by Businesses, Employee

Contributions to 401(k) Retirement

Plans, and Nonhealth In-Kind Benefits 10.2 9.6 8.9 10.6 10.3 10.1 9.8 9.5 8.7 8.6 8.5

Comprehensive Household Income 10.0 9.6 8.9 10.4 10.2 10.0 9.8 9.6 8.6 8.6 8.4

Adjusted Comprehensive Household Income

Based on federal poverty thresholdsa 8.3 8.5 8.2 9.8 9.0 8.6 8.0 7.8 6.0 5.7 5.3

Based on household sizeb 8.1 8.3 8.1 9.7 8.9 8.5 7.9 7.6 6.0 5.6 5.3

Historic CBO Measure 8.6 8.5 8.4 10.2 9.5 8.7 8.0 7.8 5.2 5.1 4.9

Second Quintile

Family Cash Income 18.3 18.2 16.3 18.0 17.5 17.9 17.5 17.4 17.5 17.2 16.5

Household Cash Income 18.5 18.4 16.6 18.2 17.8 18.1 17.8 17.9 18.1 18.1 17.4

Household Cash Income Plus

Taxes Paid by Businesses and

Employee Contributions to 401(k)

Retirement Plans 17.3 17.3 15.6 17.0 16.6 16.8 16.5 16.4 16.6 16.5 15.8

Household Cash Income Plus Taxes

Paid by Businesses, Employee

Contributions to 401(k) Retirement

Plans, and Nonhealth In-Kind Benefits 17.2 17.1 15.5 16.8 16.5 16.7 16.4 16.2 16.4 16.4 15.7

Comprehensive Household Income 16.1 16.1 14.5 15.8 15.3 15.4 15.3 14.8 15.0 15.0 14.4

Adjusted Comprehensive Household Income

Based on federal poverty thresholdsa 14.0 14.3 13.2 14.6 14.3 14.4 14.2 13.6 13.6 13.9 12.8

Based on household sizeb 14.0 14.2 13.0 14.5 14.3 14.3 14.2 13.5 13.6 13.9 12.8

Historic CBO Measure 14.9 15.1 14.0 15.6 15.3 15.4 15.1 14.3 14.6 14.6 13.3
APPENDIX K ESTIMATES OF TOTAL EFFECTIVE TAX RATES USING ALTERNATIVE INCOME MEASURES 175

Table K-1.

Continued

1997

Income Measure 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Middle Quintile

Family Cash Income 22.5 22.6 20.4 21.1 21.4 21.6 21.3 21.7 22.5 22.3 21.5

Household Cash Income 22.6 22.7 20.5 21.2 21.4 21.9 21.6 22.0 22.8 22.6 21.7

Household Cash Income Plus

Taxes Paid by Businesses and

Employee Contributions to 401(k)

Retirement Plans 21.0 21.4 19.4 19.8 19.9 20.4 20.0 20.4 20.9 20.6 19.8

Household Cash Income Plus Taxes

Paid by Businesses, Employee

Contributions to 401(k) Retirement

Plans, and Nonhealth In-Kind Benefits 20.9 21.3 19.3 19.8 19.9 20.3 20.0 20.3 20.8 20.6 19.8

Comprehensive Household Income 19.9 20.2 18.2 18.7 18.5 18.9 18.4 18.5 18.9 18.8 18.1

Adjusted Comprehensive Household Income

Based on federal poverty thresholdsa 18.1 18.5 17.0 17.7 17.2 17.6 17.4 17.3 17.7 17.6 16.7

Based on household sizeb 18.2 18.7 17.1 17.7 17.3 17.6 17.3 17.3 17.6 17.5 16.7

Historic CBO Measure 19.1 19.6 18.0 18.8 18.5 19.0 18.9 19.1 19.8 19.6 18.6

Fourth Quintile

Family Cash Income 24.6 25.4 23.1 23.6 23.7 24.1 24.1 24.7 25.6 25.3 24.5

Household Cash Income 24.7 25.4 23.2 23.7 23.9 24.3 24.2 24.9 25.7 25.3 24.5

Household Cash Income Plus

Taxes Paid by Businesses and

Employee Contributions to 401(k)

Retirement Plans 23.0 23.9 21.8 22.1 22.1 22.4 22.5 22.9 23.5 23.0 22.3

Household Cash Income Plus Taxes

Paid by Businesses, Employee

Contributions to 401(k) Retirement

Plans, and Nonhealth In-Kind Benefits 23.0 23.8 21.7 22.1 22.1 22.4 22.5 22.8 23.5 23.0 22.3

Comprehensive Household Income 22.0 22.9 20.7 21.1 21.0 21.2 21.1 21.2 21.8 21.5 20.8

Adjusted Comprehensive Household Income

Based on federal poverty thresholdsa 21.0 21.7 19.7 20.0 20.0 20.2 20.0 20.2 20.6 20.3 19.8

Based on household sizeb 21.2 21.9 19.9 20.2 20.0 20.3 20.2 20.4 20.8 20.5 20.0

Historic CBO Measure 22.0 22.8 20.8 21.3 21.3 21.6 21.6 22.1 22.7 22.4 21.8

Highest Quintile

Family Cash Income 30.9 29.6 25.9 26.0 28.4 28.0 28.2 30.6 32.8 31.5 31.0

Household Cash Income 30.9 29.6 25.8 25.9 28.3 28.0 28.1 30.6 32.8 31.5 31.1

Household Cash Income Plus

Taxes Paid by Businesses and

Employee Contributions to 401(k)

Retirement Plans 28.5 27.7 24.4 24.3 26.2 25.9 26.0 28.0 29.7 28.8 28.4

Household Cash Income Plus Taxes

Paid by Businesses, Employee

Contributions to 401(k) Retirement

Plans, and Nonhealth In-Kind Benefits 28.5 27.7 24.4 24.3 26.2 25.9 26.0 28.0 29.7 28.8 28.4

Comprehensive Household Income 27.7 27.0 23.7 23.6 25.5 25.1 25.2 27.0 28.5 27.9 27.5

Adjusted Comprehensive Household Income

Based on federal poverty thresholdsa 27.7 27.0 23.7 23.6 25.4 25.1 25.1 26.7 28.3 27.7 27.4

Based on household sizeb 27.8 27.1 23.7 23.7 25.4 25.1 25.2 26.8 28.3 27.7 27.4

Historic CBO Measure 28.5 27.8 24.4 24.5 26.4 26.2 26.3 28.1 29.9 29.0 28.7
176 EFFECTIVE FEDERAL TAX RATES, 1979-1997 October 2001

Table K-1.

Continued

1997

Income Measure 1979 1981 1983 1985 1987 1989 1991 1993 1995

Under

1997

Law

Under

2000

Law

Memorandum:

Federal Poverty Thresholds, by Number

of Family Members (Dollars)

One 3,460 4,213 4,658 5,029 5,313 5,797 6,368 6,760 7,125 7,504 n.a.

Two 4,427 5,392 5,960 6,435 6,798 7,419 8,149 8,651 9,118 9,602 n.a.

Three 5,419 6,599 7,295 7,876 8,321 9,080 9,974 10,589 11,160 11,753 n.a.

Four 6,948 8,462 9,354 10,099 10,670 11,643 12,789 13,577 14,310 15,071 n.a.

Five 8,218 10,007 11,063 11,944 12,619 13,770 15,125 16,057 16,924 17,823 n.a.

Six 9,276 11,296 12,488 13,483 14,244 15,544 17,073 18,126 19,104 20,119 n.a.

Seven 10,505 12,793 14,142 15,268 16,131 17,602 19,334 20,526 21,634 22,784 n.a.

Eight 11,692 14,239 15,740 16,994 17,954 19,592 21,520 22,847 24,079 25,359 n.a.

Nine or more 13,968 17,010 18,804 20,302 21,449 23,406 25,709 27,294 28,767 30,296 n.a.

SOURCE: Congressional Budget Office.

NOTES: Families are people related by blood, marriage, or adoption who live together. Households are people who share a single housing

unit, regardless of the relationships among them.

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. Families or households with negative income are excluded from the

lowest income category but are included in totals.

Taxes paid by businesses include corporate income taxes and the employer’s share of Social Security, Medicare, and federal

unemployment insurance payroll taxes.

Nonhealth in-kind benefits include food stamps, school lunches and breakfasts, housing assistance, and energy assistance.

Comprehensive household income equals pretax cash income plus income from other sources. Pretax cash income is the sum of

cash income plus taxes paid by businesses and employee contributions to 401(k) retirement plans. Other sources of income include

health-related in-kind benefits (Medicare, Medicaid, and employer-paid health insurance premiums) and nonhealth in-kind benefits.

The historic CBO measure equals family cash income plus taxes paid by businesses, divided by the federal poverty threshold

appropriate for the family’s size.

Individual income taxes are distributed directly to households paying those taxes. Payroll taxes are distributed to households paying

those taxes directly or paying them indirectly through their employers. Federal excise taxes are distributed to households according

to their consumption of the taxed good or service. Corporate income taxes are distributed to households according to their share of

capital income.

n.a. = not applicable.

a. For purposes of ranking, the income for each household is divided by the federal poverty threshold appropriate for the household’s size.

b. For purposes of ranking, the income for each household is divided by the square root of the household’s size.

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