From the Tax Foundation

This is showing the effect of different type of taxes on the poorest 20 percent from 1979-2005

Graph from CBO’s March report found via Economix Blog – NYTimes.com

Recently the CBO published a supplement to their Historical Effective Federal Tax Rates: 1979 to 2005 report to include a breakdown of top 1% into smaller percentiles. I took the data for income and created this visualization. It is comparing the minimum income for each percentile to the average income in that percentile.

UPDATED VERSION {Click on the image to take a closer look}

ORIGINAL VERSION {Click on the image to take a closer look}

Data from Congressional Budget Office

[tags]United States, High Income[/tags]

{Click on the image to take a closer look}

Minimum household income:
Lowest Quintile $0
Second Quintile $17,900
Middle Quintile $30,500
Fourth Quintile $45,200
Highest Quintile $67,400
Top 1% $307,500

Data from Congressional Budget Office

[tags]Tax Rates, United States, Income tax, Social Security, Corporate Tax, Excise Tax[/tags]

{Click on the image to take a closer look}

Data from Congressional Budget Office

[tags]United States, Income tax, average income[/tags]

{Click on the image to take a closer look}

Data from Congressional Budget Office

[tags]Tax Rates, United States, Income tax, Social Security[/tags]

Addendum 3/3/08
The large difference between the two graphs is due to the treatment of payroll taxes paid by employers and the corporate income tax. The Pitketty & Saez data assumes these taxes are actually paid by employees and stockholders but the CBO data in the above graph does not include them.

Click on the graph to take a closer look:

Data sources for the income series can be found at:

• Bureau of Labor Statistics (BLS) GDP per Employed Person A good stand-in for worker productivity
  
• Congressional Budget Office (CBO) Average Household Includes non-cash income
  
• Census Average Family Income
• Census Average Household Income
  
• Census Median Family Income
• Census Median Household Income
  
• Saez Average Tax Units with cap gains (Excel file at Emmanuel Saez’s web site)
• Saez Average Tax Units without cap gains (Excel file at Emmanuel Saez’s web site)

Some of the differences in these series is due to the unit of measurement:

1. Family is defined as two or more related people living together
2. Households include families, singles, non-related people living together.
3. Tax units are singles, married filling jointly, head of household.

Also over time, family and household sizes have been getting smaller.

If you see a problem with the graph you can post a comment. I plan to refine this graph over the next few weeks.

Addendum:
10/7/2006 Reformatted some of the labels and fixed the y-axis label

[tags]average income, median income, US income, US income distribution[/tags]

The following outlines the components of income included in the CBO’s analysis:

* Cash income, taxable and tax exempt, including wages, salaries, self-employment income, rents, taxable and nontaxable interest, dividends, realized capital gains, cash transfer payments, and retirement benefits
* Business taxes, including corporate income taxes, the employer’s share of Social Security, Medicare, and federal unemployment insurance payroll taxes (imputed to households, as per the assumptions on tax incidence above)
* Employees contributions to 401(k) retirement plans
* All in-kind benefits (Medicare, Medicaid, employer-paid health insurance premiums, food stamps, school lunches and breakfasts, housing assistance, and energy assistance)

Note that CBO:

* uses the Census Bureau’s fungible value measure for government in-kind transfers;
* does not adjust capital gains for inflation, and does not include unrealized capital gains or imputed rents on owner-occupied housing (see [1], pp. 23–24); and,
* double counts retirement income (see [1], p. 21).

Another post on the CBO report.
I combined the percentile income data for the past 20 years into three groups: bottom 60%, 60-95%, and top 5%.In 2002, if you lived in a household with a total income of:

less than $39,800 per year then you were in the bottom 60%

between $39,800 and $105,300 then you were in the 60-95% range

greater than $105,300 then you were in the top 5%

The first thing I noticed was that in 1997, 1998, 1999, 2000 the total combined income of the top 5% was greater than the combined income of the bottom 60%.

The second thing I saw was the same income drop in 2000 from my earlier graphs (see: Changes in U.S. Total Income and Changes in Household Income by Quintiles). However, you can see that this dramatic decline is concentrated in the top 5%.

But looking at the graph below, it is in fact the top 1% that had the big decline, all of the previous graphs rolled up this change into the top 20% and top 5%. It even effected the total income. So in fact it wasn’t the top 20% that was hit hard by the stock market crash but the top 1%.