Income Distribution and Taxes in 2014
In 2014, household income was unevenly distributed: Households at the top of the income distribution received significantly more income than households at the bottom of the distribution. According to the Congressional Budget Office’s estimates:
- Average income among households in the lowest quintile (or fifth) of the income distribution was about $19,000 (see Summary Figure 1).
- Average income among households in the highest quintile was about $281,000.
Furthermore, within the highest quintile, income was highly skewed toward the very top of the distribution: Average income among households in the bottom half of the highest quintile (the 81st to 90th percentiles) was about $151,000; average income among the 1.2 million households in the top 1 percent of the distribution was about $1.8 million.
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According to the agency’s estimates, average household income before transfers and taxes was almost 60 percent higher in 2014 than it was in 1979 in real (inflation adjusted) terms—an average growth rate of 1.3 percent per year. That growth, however, was not the same across the income spectrum. Income growth among households in the bottom 80 percent of the income distribution was less than half that overall growth rate—26 percent for households in the lowest quintile and 28 percent for households in the middle three quintiles. Meanwhile, among households in the highest quintile, average income in 2014 was 95 percent higher than it was in 1979. Because of those differences in cumulative growth rates, income inequality was greater in 2014 than it was in 1979 (see Summary Figure 2).
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Average federal tax rates—which are calculated by dividing total federal taxes in an income group by total income before transfers and taxes in that income group—generally rise with income.29 In 2014, households in the bottom fifth of the income distribution paid about 2 percent of their income in federal taxes, households in the middle quintile paid 14 percent, and households in the highest quintile paid about 27 percent (see Figure 5). Average tax rates within the top quintile continued to increase as income rose: Households in the top 1 percent of the before-tax income distribution had an average federal tax rate of about 34 percent.
