Congressional Budget Office November 16, 2017 Trends in the Distribution of Household Income University of Michigan’s 65th Annual Economic Outlook Conference Ann Arbor, MI Kevin Perese Tax Analysis Division As developmental work for analysis for the Congress, the information in this presentation is preliminary and is being circulated to stimulate discussion and critical commentary.
Thirty Years of Distributional Analyses 1 CONGRESSIONAL BUDGET OFFICE
Distribution of Income, 2013 * 2 CONGRESSIONAL BUDGET OFFICE
Distribution of Income, 2013 * 3 CONGRESSIONAL BUDGET OFFICE
Distribution of Income, 2013 * 4 CONGRESSIONAL BUDGET OFFICE
Distribution of Income, 2013 * 5 CONGRESSIONAL BUDGET OFFICE
Components of Household Income Income Before Transfers and Taxes Market Income: Income from labor, business, capital (including capital gains), and other nongovernmental income sources Social Insurance Benefits: Benefits from Social Security, Medicare, and unemployment insurance Means-Tested Transfers Transfers from Medicaid, SNAP, SSI, housing assistance programs, and other assistance programs Federal Taxes Individual income taxes, payroll taxes, corporate income taxes, and excise taxes 6 CONGRESSIONAL BUDGET OFFICE
Overview Data Sources IRS’s Statistics of Income and Census Bureau’s Current Population Survey Unit of Analysis Households Time Period 1979 to 2013 7 CONGRESSIONAL BUDGET OFFICE
Income Before Transfers and Taxes, 2013 8 CONGRESSIONAL BUDGET OFFICE
Income Before Transfers and Taxes, 2013 9 CONGRESSIONAL BUDGET OFFICE
Distribution of Income, 2013 10 CONGRESSIONAL BUDGET OFFICE
Average Means-Tested Transfer Rates, 2013 11 CONGRESSIONAL BUDGET OFFICE
Average Means-Tested Transfer Rates, 2013 * * * * * * 12 CONGRESSIONAL BUDGET OFFICE
Distribution of Income, 2013 * 13 CONGRESSIONAL BUDGET OFFICE
Average Federal Tax Rates, 2013 14 CONGRESSIONAL BUDGET OFFICE
Average Federal Tax Rates, 2013 15 CONGRESSIONAL BUDGET OFFICE
Average Federal Tax Rates, 2013 16 CONGRESSIONAL BUDGET OFFICE
Average Federal Tax Rates, 2013 17 CONGRESSIONAL BUDGET OFFICE
Distribution of Income, 2013 * 18 CONGRESSIONAL BUDGET OFFICE
Income After Transfers and Taxes, 2013 19 CONGRESSIONAL BUDGET OFFICE
Income After Transfers and Taxes, 2013 20 CONGRESSIONAL BUDGET OFFICE
Trends, 1979 to 2013 21 CONGRESSIONAL BUDGET OFFICE
Cumulative Growth in Income Before Transfers and Taxes, 1979 to 2013 22 CONGRESSIONAL BUDGET OFFICE
Cumulative Growth in Income Before Transfers and Taxes, 1979 to 2013 23 CONGRESSIONAL BUDGET OFFICE
Gini Coefficients, 1979 to 2013 24 CONGRESSIONAL BUDGET OFFICE
Gini Coefficients, 1979 to 2013 25 CONGRESSIONAL BUDGET OFFICE
Average Means-Tested Transfer Rates, 1979 to 2013 26 CONGRESSIONAL BUDGET OFFICE
Average Means-Tested Transfer Rates, 1979 to 2013 27 CONGRESSIONAL BUDGET OFFICE
Average Means-Tested Transfer Rates, Lowest Quintile, 1979 to 2013 28 CONGRESSIONAL BUDGET OFFICE
Average Federal Tax Rates, 1979 to 2013 29 CONGRESSIONAL BUDGET OFFICE
Average Federal Tax Rates, 1979 to 2013 30 CONGRESSIONAL BUDGET OFFICE
Average Refundable Tax Credit Rates, 1979 to 2013 31 CONGRESSIONAL BUDGET OFFICE
2013 Tax Law Changes 32 CONGRESSIONAL BUDGET OFFICE
2013 Tax Law Changes American Taxpayer Relief Act (2012) Top marginal tax rate increased from 35 percent to 39.6 percent; long- term capital gains rate increased from 15 percent to 20 percent Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act (2010) Temporary reduction in payroll tax rates (from 6.2 percent to 4.2 percent) expired at end of 2012 Affordable Care Act (2010) Additional Medicare payroll tax of 0.9 percentage points imposed for high-earning taxpayers; 3.8 percent surtax on net investment income imposed for high-income taxpayers 33 CONGRESSIONAL BUDGET OFFICE
Cumulative Growth in Income After Transfers and Taxes, 1979 to 2013 34 CONGRESSIONAL BUDGET OFFICE
Cumulative Growth in Income After Transfers and Taxes, 1979 to 2013 35 CONGRESSIONAL BUDGET OFFICE
Gini Coefficients, 1979 to 2013 36 CONGRESSIONAL BUDGET OFFICE
Gini Coefficients, 1979 to 2013 37 CONGRESSIONAL BUDGET OFFICE
What Happened in 2014? 38 CONGRESSIONAL BUDGET OFFICE
Affordable Care Act, 2014 Medicaid Expansion Outlays 39 CONGRESSIONAL BUDGET OFFICE
Affordable Care Act, 2014 Medicaid Expansion Cost-sharing Reductions Outlays 40 CONGRESSIONAL BUDGET OFFICE
Affordable Care Act, 2014 Medicaid Expansion Cost-sharing Reductions Outlays Premium Tax Credits 41 CONGRESSIONAL BUDGET OFFICE
Affordable Care Act, 2014 Medicaid Expansion Cost-sharing Reductions Outlays Premium Tax Credits Premium Tax Credits Revenues 42 CONGRESSIONAL BUDGET OFFICE
Affordable Care Act, 2014 Medicaid Expansion Cost-sharing Reductions Outlays Premium Tax Credits Premium Tax Credits Individual Mandate Revenues 43 CONGRESSIONAL BUDGET OFFICE
Affordable Care Act, 2014 Medicaid Expansion Cost-sharing Reductions Outlays Premium Tax Credits Premium Tax Credits Individual Mandate Revenues Health Insurance Excise Tax 44 CONGRESSIONAL BUDGET OFFICE
Affordable Care Act, 2014 Medicaid Expansion (+) Outlays Cost-sharing Reductions (+) Premium Tax Credits (+) Individual Mandate (-) Revenues Health Insurance Excise Tax (-) 45 CONGRESSIONAL BUDGET OFFICE
Affordable Care Act, 2014 Medicaid Expansion (+) Outlays Cost-sharing Reductions (+) Premium Tax Credits (+) Individual Mandate (-) Revenues (Enacted 2014) Health Insurance Excise Tax (-) Net Investment Income Tax (-) Revenues Additional Medicare Tax (-) (Enacted 2013) 46 CONGRESSIONAL BUDGET OFFICE
Affordable Care Act, 2014 38.4 Medicaid Expansion (+) 3.0 Cost-sharing Reductions (+) 14.7 Premium Tax Credits (+) 1.7 Individual Mandate (-) Health Insurance Excise Tax (-) 8.6 Net Investment Income Tax (-) 22.5 Additional Medicare Tax (-) 6.9 Net Effect $16.4 (billion) 47 CONGRESSIONAL BUDGET OFFICE
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