Income/Poverty – Fast Facts

All health care fast facts are from the non-partisan Congressional Budget Office (CBO) and Center for Medicare and Medicaid Services (CMS). Although they represent some of their most recent reports on this subject, they do not represent all of their reports on this subject. Occasionally minor word adjustments may have been made for clarity or to reflect the updated nature of the statement. As always, verify and view statements in their full context as often as possible.

CBO information ending in 1997 tax returns suggests that the share of income going to the top of the distribution and the share of individual income taxes those households pay both continued to rise rapidly in 1998 and 1999.
The distribution of income among households grew substantially more unequal during the 1979-1997 period.   Verify here
The increasing inequality within the income distribution led to similar shifts in the distribution of tax liabilities. Households in the highest income quintile paid 65 percent of the four largest federal taxes in 1997, up from 57 percent 18 years earlier. In contrast, households in the bottom three quintiles paid roughly 17 percent of those taxes.  Verify here
Higher effective rates for social insurance taxes and lower effective rates for the individual income tax meant that payroll taxes exceeded income taxes for many more households in 1997 than in 1979, even though income tax revenues were much larger than payroll tax revenues in both years. In 1979, 56 percent of households with earnings paid more payroll tax than income tax. By 1997, that percentage had climbed to 79 percent. Because high-income households paid more than twice as much income tax as payroll tax, however, total income taxes exceeded payroll taxes–by about 60 percent in 1979 and by more than a third in 1997.   Verify here
Overall, the effective rate for the individual income tax first declined and then rose, returning to the same level in 1997 as it was in 1979. Households with the lowest income saw their rate drop the most–by more than 4 percentage points. Other quintiles also faced lower rates at the end of the period, except for the top quintile, for which rapidly rising income led to a slightly higher effective income tax rate.   Verify here
“…the total effective federal tax rate can rise between any two years, even if effective rates for households in every income quintile fall.  If income grows more rapidly for higher-income households facing higher tax rates, the total effective rate rises, even if tax rates do not change for income subgroups. Verify here
The distribution of income among households grew substantially more unequal during the 1979-1997 period.  Verify here
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Public Law 104-193) makes major changes in federal welfare programs.  The welfare reform legislation requires that a large and increasing percentage of welfare recipients participate in work or training programs.  Verify here
Income mobility has many causes, perhaps the most important of which relate to life-cycle movements. Most workers advance over their careers and see their earnings rise until they near retirement. That natural progression alone generates upward movement through the income distribution. At the same time, other events such as spells of unemployment, leaving the labor force temporarily to rear children, and retirement can move people down the distribution. Changes in living arrangements can also have different effects. Marriage can move people up the distribution whereas divorce can move them down; a child who leaves her parents’ home may drop into a lower quintile while her parents move up.  Verify here
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