According to the Congressional Budget Office, effective federal tax rates by quintile in 2021 ran from roughly -26.3 percent for the lowest-income fifth of households to about 24.3 percent for the highest-income fifth, with the top 1 percent paying around 28.9 percent. The middle quintile paid about 10.4 percent. The overall average across all households was 17.6 percent. Those figures come from the CBO’s “Distribution of Household Income” series, and 2021 produced one of the widest gaps between top and bottom in recent decades.1Congressional Budget Office. The Distribution of Household Income in 2021
What the CBO Rates Actually Measure
The CBO sorts every household in the country by income and divides them into five equal groups. For each group, it calculates total federal taxes paid divided by total income. That produces an effective rate, which is what households actually pay after credits, deductions, and all four federal tax types. It is not the same as a statutory bracket rate.
The income figure the CBO uses is broader than what appears on a tax return. It includes wages, business income, capital gains, retirement distributions, Social Security and unemployment benefits, employer-paid health premiums, and noncash benefits like SNAP. Federal taxes here mean individual income taxes, payroll taxes, corporate income taxes (allocated to households based on their ownership of capital), and excise taxes. A negative effective rate means a group received more from refundable credits than it paid in federal taxes.
The Numbers by Quintile
Lowest Quintile: About -26.3 Percent
The bottom 20 percent of households had a deeply negative effective rate in 2021, meaning refundable credits exceeded federal tax liability by a wide margin. The Earned Income Tax Credit and the Child Tax Credit did most of the work. The American Rescue Plan Act, signed in March 2021, temporarily raised the maximum Child Tax Credit from $2,000 per child to $3,600 for children under six and $3,000 for ages six through seventeen, and it made the full credit available to families with little or no earned income for the first time.2Congressional Research Service. The Child Tax Credit: The Impact of the American Rescue Plan Act
Second Quintile: About 0.1 Percent
The second-lowest quintile came out nearly even. Refundable credits still helped these households, but payroll taxes and small income tax liabilities roughly canceled them out. This is the point in the income distribution where credits and obligations meet.
Middle Quintile: About 10.4 Percent
By the middle quintile, individual income and payroll taxes dominate. Social Security and Medicare withholding alone accounts for a substantial share of the federal tax bill at this income level.3Internal Revenue Service. Topic No 751, Social Security and Medicare Withholding Rates Middle-income households rarely qualify for the large refundable credits that push lower quintiles into negative territory.
Fourth Quintile: About 15.6 Percent
The fourth quintile sits just below the all-household average of 17.6 percent. Households here have mostly phased out of standard credits and begin to feel higher marginal income tax brackets.
Highest Quintile: About 24.3 Percent
The top 20 percent paid well above the national average. Within that group, the top 1 percent paid roughly 28.9 percent. Realized capital gains in 2021 hit their highest level in four decades on the back of a strong stock market, and because top earners draw a large share of their income from capital gains and dividends, both their reported income and their tax bills climbed sharply.1Congressional Budget Office. The Distribution of Household Income in 2021
Share of Income Versus Share of Taxes
The concentration of federal tax payments at the top is steep. The CBO found that the highest quintile earned about 57 percent of all before-tax income but paid roughly 79 percent of all federal taxes in 2021. The top 1 percent alone paid close to 30 percent of total federal tax collections.1Congressional Budget Office. The Distribution of Household Income in 2021 The federal tax system is more progressive in practice than its bracket structure alone would suggest.
Why 2021 Is an Outlier
The 2021 figures do not describe a typical year. Two forces stretched the distribution unusually far in opposite directions.
At the bottom, the American Rescue Plan temporarily supercharged refundable credits. The Child Tax Credit expansion roughly doubled the maximum credit for most families and eliminated the earned-income requirement that had previously kept the poorest households from receiving the full amount.2Congressional Research Service. The Child Tax Credit: The Impact of the American Rescue Plan Act The EITC expansion for workers without qualifying children added roughly $16 billion more for 2021. Means-tested transfers also remained close to their 2020 levels.
At the top, capital gains realizations passed $2 trillion, a 40-year high, and the windfall was concentrated among the highest earners. The CBO noted that inequality both before and after taxes and transfers was greater in 2021 than in 2020, largely because of that surge in investment income.1Congressional Budget Office. The Distribution of Household Income in 2021 The 2021 snapshot is the product of that specific combination, not a permanent feature of the code.
How the Different Federal Taxes Land
Each of the four federal tax types the CBO tracks hits the quintiles differently, and the mix is what produces the overall pattern.
Payroll taxes fall on earned income and are capped on the Social Security side, so they take a larger share of income from middle-quintile households than from the top 1 percent, whose income comes heavily from investments not subject to payroll tax.4Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
Individual income taxes are the main progressive engine. Lower quintiles often owe nothing or receive net refunds; the highest quintile pays the bulk, and for the top 1 percent, individual income taxes are by far the largest component of the effective rate.
Corporate income taxes are allocated to households based on their ownership of capital. Because capital ownership is concentrated at the top, corporate taxes add meaningfully to the highest quintile’s rate and barely register lower down.
Excise taxes on fuel, tobacco, alcohol, and similar goods are regressive in practice, because spending on those items represents a larger fraction of income for lower-earning households.
For the bottom three quintiles, payroll and excise taxes dominate. For the top quintile, individual income and corporate taxes drive the rate. That composition shift is why the overall system is more progressive than any single tax type on its own.
What Has Changed Since 2021
Most of the pandemic-era credit expansions expired after 2021. The Child Tax Credit reverted to $2,000 per child with a $1,400 refundable cap and an earned-income phase-in, and the broader EITC expansion for childless workers also lapsed. Effective rates for the lowest quintiles almost certainly moved back toward less-negative territory in the years after.
A larger shift arrived at the end of 2025. Most of the individual income tax provisions in the Tax Cuts and Jobs Act of 2017 were enacted on a temporary basis and were scheduled to expire on December 31, 2025.5Congressional Research Service. Expiring Provisions in the Tax Cuts and Jobs Act (TCJA, PL 115-97) Absent congressional action, the seven TCJA brackets revert to the pre-TCJA structure topping out at 39.6 percent, the roughly doubled standard deduction drops back toward pre-TCJA levels, personal exemptions return, the Child Tax Credit falls to $1,000 per child, and the $10,000 cap on state and local tax deductions lifts. The net effect on effective rates by quintile depends on which provisions were preserved and which were allowed to sunset, and future CBO reports will capture the result.
The 2021 numbers remain the most recent detailed distribution the CBO has published, and they are the right reference point for how federal taxes landed across the income spectrum in that year. They should be read as a snapshot of a specific legislative and market moment rather than a steady-state description of the code.