From Harvard Econ Professor, Greg Mankiw
To update one of the tables for the next edition of my favorite textbook, I have been looking at the new CBO report on the distribution of income and taxes. I found the following calculations, based on the numbers in the CBO's Table 7, illuminating.
Because transfer payments are, in effect, the opposite of taxes, it makes sense to look not just at taxes paid, but at taxes paid minus transfers received. For 2009, the most recent year available, here are taxes less transfers as a percentage of market income (income that households earned from their work and savings):
Bottom quintile: -301%
Second quintile: -42%
Middle quintile: -5%
Fourth quintile: 10%
Highest quintile: 22%
Top one percent: 28%
The negative 301% means that a typical family in the bottom quintile receives about $3 in transfer payments for every dollar earned.
Bill Note: The CBO uses all transfers in (including State and Local), but only Federal Taxes paid. Therefore, since State and Local taxes are highly progressive, each quintiile would get progressively more positive as you move up the curve, with the middle class likely moving into a positive percentage, and the top quintile paying even more.
