NCPA - National Center for Policy Analysis

Income Gap, Yes. But Also An Income-Tax Gap

May 31, 2001

Wealthy Americans made greater income advances over the last two decades than did poorer households. But the wealthy shouldered a considerably larger share of the nation's tax burden than did their poorer fellow citizens, according to a new report from the Congressional Budget Office.

Here are a few highlights:

  • The share of pretax income going to the top 20 percent of households rose to 53.2 percent in 1997 from 45.9 percent in 1979.
  • For the bottom 20 percent, the share of income fell to 4 percent in 1997 from 5.3 percent in 1979.
  • But the top 20 percent of households paid 64.7 percent of taxes in 1997, up from 57.1 percent in 1979.
  • The share of tax payments of the bottom 20 percent of households declined to 1 percent in 1997 from 1.9 percent in 1979.

The poorest households benefited from changes in tax policy that reduced their tax bills -- and in many cases provided larger cash payments to working families through the earned-income tax credit.

Aftertax income among the poorest 20 percent rose to $10,800 in 1997 from $10,400 in 1991. The figure was $10,900 in 1979.

The share of taxes for the middle 60 percent and the bottom 20 percent fell -- in part because of the 1993 tax increase on upper-income people.

Source: Richard W. Stevenson, "Study Details Income Gap Between Rich and the Poor," New York Times, May 31, 2001.

 

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