09/11/2024 | News release | Distributed by Public on 09/11/2024 12:09
New policies implemented by the federal government affected transfers and taxes in 2021. The policies largely benefited lower- and middle-income households. But income inequality still increased, mainly because of realized capital gains.
The Congressional Budget Office regularly analyzes household income in the United States. This report presents the distributions of household income, means-tested transfers, and federal taxes in 2021 and explores how they differ from the distributions in 2020 and 2019. (Means-tested transfers are cash payments or in-kind services provided primarily on the basis of income.)
Largely because of the economic disruption caused by the coronavirus pandemic, 2020 and 2021 were unusual years. In response to that disruption, the federal government implemented an unprecedentedly large amount of fiscal stimulus. The policies enacted in response to the pandemic affected household income throughout the distribution-unlike the usual means-tested transfers, which are typically targeted at households toward the bottom of the income distribution.
Those policies altered household income through their effects on wages, employment, transfers, and taxes. Some policies (such as recovery rebate credits) provided direct benefits to households, whereas other policies (such as the pause on federal student loan payments) increased households' resources without providing them with additional income. Still other policies (such as the Paycheck Protection Program) provided financial support to entities such as businesses, nonprofit organizations, and state and local governments. This report focuses on the effects of policies that provided direct benefits to households.
The main findings from CBO's analysis of the distribution of household income in 2021 are these: