What Are the Trends in Household Income and Income Inequality from 1979-2019?

From the CBO. Excerpts:

"According to CBO’s estimates, between 1979 and 2019, average household income before transfers and taxes grew more among households at the top of the income distribution than among those at the bottom. Among households in the highest quintile, average real income (that is, income adjusted to remove the effects of inflation) in 2019 was 114 percent higher than it was in 1979. In contrast, among households in the lowest quintile, average income before transfers and taxes was 45 percent greater in 2019 than in 1979, and among households in the middle three quintiles, it was 43 percent greater in 2019 than in 1979 (see Figure S-1, lower panel). Because of those differences in cumulative growth rates, income inequality was greater in 2019 than it was in 1979.

From 1979 to 2019, among households in the lowest income quintile, cumulative growth in income after transfers and taxes was greater than cumulative growth in income before transfers and taxes—94 percent versus 45 percent. That faster growth is attributable both to an increase in spending on Medicaid and CHIP and to a reduction in federal taxes—the latter largely the result of increased refundable tax credits provided through the individual income tax.

Among households in the middle three income quintiles (the 21st to 80th percentiles), the expansion of means-tested transfers and generally declining average federal tax rates had a similar effect. Specifically, cumulative growth in income after transfers and taxes was larger for those groups than it was before transfers and taxes—59 percent versus 43 percent.

In the highest quintile, cumulative growth in income after transfers and taxes was also greater than growth in income before transfers and taxes—123 percent versus 114 percent. Households in the top 1 percent of the income distribution experienced the largest cumulative growth in income after transfers and taxes. In 2019, real income after transfers and taxes for that income group was 262 percent greater than it was in 1979, CBO estimates.

Overall, transfer programs and the tax system reduced income inequality by more in 2019 than they did in 1979. Consequently, inequality of income after transfers and taxes increased by less than inequality of income before transfers and taxes."