CBO,The Distribution of Household Income in 2021
Average federal tax rates for households in the lowest quintile, which were already negative in 2020, fell by an additional 6 percentage points in 2021. (A tax rate can be negative because of refundable tax credits, which can result in net payments from the federal government that offset other taxes paid by those households.)14 That decrease was mainly attributable to the recovery rebate credit and the expanded child tax credit. Had it not been for those credits, the tax rate for the lowest quintile would have been 23 percentage points higher, at about zero.
Average federal tax rates remained constant in 2021 for households in the middle three quintiles and increased by about 1 percentage point for households in the highest quintile. Households in those income groups received smaller benefits from the expansion of the child tax credit.
The figures confirm that federal taxes really are progressive. The higher the income group, the higher the effective federal tax rate.
Trends in the Distribution of Household Income From 1979 to 2021
