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Income After Redistribution: 2017 vs. 2018 September 27, 2021

Posted by geoff in News.
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The Congressional Budget Office released its analysis of the 2018 household income distribution last month. This was the first year that Trump’s tax breaks took effect. The CBO looked at the base household income, and then compared it to the income after the redistribution process (taxes, welfare, etc.) took place. The bottom line was:

In 2018, average household income after accounting for means-tested transfers and federal taxes was $37,700 among households in the lowest quintile and $243,900 among households in the highest quintile.

Not as large a differential as I would have thought, since Trump’s eeeevil tax cuts were supposed to preferentially help the rich (according to the Left, at least). In fact the ratio of highest/lowest quintile was 6.4 in 2017 and 6.5 in 2018. Insignificant increase.

Here’s what the income redistribution looks like in chart form (chart from the CBO):

The interesting thing about that chart is the middle quintile, which would be the average Joe. You’d think their impact would be neutral, but no – they’re losing ground just like the top two quintiles.

The situation in 2017 was similar – the middle quintile lost $6900 of income through the redistribution process, while in 2018 they lost $6400.

For all the help the tax breaks were supposed to give, the middle quintile saw its total tax bill change from $10.6K to $9.9K – not an impressive number. The federal income tax actually went down by a third, from $2400 to $1600, but the income tax is only a quarter of the total tax bill, which is dominated by Social Security and Medicaid taxes.

In the end, though, it’s clear that the middle quintile was doing better in 2018 than in 2017. The income (after transfers) in 2017 was $70.2K, while in 2018 it grew to $73.1K. That 4% increase outstripped inflation, giving real wage growth.

Comments»

1. lumps - October 10, 2021

Hey, he tried to help us claw some back for a little while. I shudder to see the same graph a couple years from now.


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