Federal Taxes, 2011 in US – Average tax rates by quintile goes from 11 percent to 23 percent CBO finds

In 2011, according to CBO’s estimates, average household market income—a comprehensive income measure that consists of labor income, business income, capital income (including capital gains), and retirement income—was approximately $81,000. Government transfers, which include benefits from programs such as Social Security, Medicare, and unemployment insurance, averaged approximately $13,000 per household. The sum of those two amounts, which equals before-tax income, was about $94,000, on average. Federal taxes as examined in this report comprise four separate sources: individual income taxes, payroll (or social insurance) taxes, corporate income taxes, and excise taxes. Taken together, those taxes were about $17,000 per household, on average, in 2011. Thus, average household income after taxes was about $77,000, and the average federal tax rate (federal taxes divided by before-tax income) was 17.6 percent.

How Were Income and Federal Taxes Distributed in 2011?

Before-tax income was unevenly distributed across households in 2011. Average before-tax income among households in the lowest one-fifth (or quintile) of the distribution of before-tax income was approximately $25,000 in 2011, CBO estimates (see table below). Among households in the middle income quintile, average before-tax income was about $66,000. Relative to those two income groups, households in the highest income quintile had average before-tax income that was much higher—approximately $246,000.

Overall, federal taxes are progressive, meaning that average tax rates generally rise as income increases. Households in the lowest income quintile paid about $500 in federal taxes in 2011, on average, which amounted to an average federal tax rate of about 2 percent, CBO estimates. Households in the middle quintile paid about $7,000 in federal taxes, and households in the highest quintile paid about $58,000 in federal taxes, which results in average federal tax rates of approximately 11 percent and 23 percent, respectively.

As a result of the progressive federal tax structure, households in the highest quintile of before-tax income paid a greater share of federal taxes in 2011 than they received in before-tax income, while households in each of the other quintiles paid a smaller share of federal taxes than they received in before-tax income (see figure below). Households in the highest income quintile received a little more than half of total before-tax income and paid more than two-thirds of all federal taxes in 2011. In contrast, households in the lowest income quintile received approximately 5 percent of total before-tax income in 2011 and paid less than 1 percent of all federal taxes, CBO estimates.

The progressive federal tax structure also results in a distribution of after-tax income that is slightly more even than that of before-tax income. Households in the lowest income quintile received approximately 6 percent of after-tax income in 2011, compared with 5 percent of before-tax income, and households in the highest income quintile received about 48 percent of after-tax income, compared with 52 percent of before-tax income, CBO estimates.

Chosen excerpts by Job Market Monitor. Read the whole story at The Distribution of Household Income and Federal Taxes, 2011 | Congressional Budget Office.