Policy Documents

Distribution of Household Income and Federal Taxes, 2010

Congressional Budget Office –
December 4, 2013

The increase in the nation’s economic activity in 2010 affected households’ income, federal tax liabilities, and federal tax rates. In this report, the Congressional Budget Office (CBO) presents its estimates of the distribution of household income and federal taxes in 2010, and it compares those estimates with estimates for the preceding three decades. The report also discusses the effects of changes in tax rules on the distribution of federal taxes in 2013.

The average federal tax rate for all households in 2010— that is, tax liabilities divided by income (including government transfer payments) before taxes—was 18.1 percent. To examine the effect of taxes on households with different amounts of income, CBO divided the nation’s households into five groups of equal size, arrayed by before-tax income. In 2010, the federal tax rate for the bottom quintile of the income distribution was 1.5 percent and that for the top quintile was 24.0 percent. The top 1 percent of all households in the United States had an average federal tax rate of 29.4 percent in 2010.

Higher-income households pay much more in federal taxes than do their lower-income counterparts: They have a much greater share of the nation’s before-tax income, and they pay a much larger proportion of that income in taxes.