Shares of Before-Tax Household Income

Description: 

Shares of aggregate before-tax household income that go to each quintile of the household income distribution and to the top 1 percent.

Methodological Notes: 

The CBO’s estimates are based on Internal Revenue Service data from individual income tax returns.

Before-tax income is the sum of market income and government transfers.  Market income includes labor income, business income, capital gains, capital income other than capital gains, income received in retirement for past services, and other sources of income.  Government transfers are cash payments from Social Security, unemployment insurance, Supplemental Security Income, Temporary Assistance for Needy Families (and its predecessor, Aid to Families with Dependent Children), veterans’ programs, workers’ compensation, and state and local government assistance programs. They also include the value of in-kind benefits, such as Supplemental Nutrition Assistance Program vouchers (formerly known as food stamps), school lunches and breakfasts, housing assistance, energy assistance, and benefits provided by Medicare, Medicaid, and the Children’s Health Insurance Program. (The value of health insurance is measured on the basis of the Census Bureau’s estimates of the average cost to the government of providing such insurance.)

Income categories are defined by ranking all people by income, adjusted for household size—that is, divided by the square root of the number of people in a household, which consists of the people who share a housing unit, regardless of their relationships. Quintiles, or fifths, contain equal numbers of people, as do percentiles, or hundredths. If a household has negative income (that is, if its business or investment losses are larger than other income) it is excluded from the lowest income category but included in totals.