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1 Scott A. Hodge, Latest CBO Report on Incomes and Taxes Shows That the Federal Fiscal System Is Very Progressive 1 (2021)

handle is hein.taxfoundation/lcbori0001 and id is 1 raw text is: Latest CBO Report on Incomes and Taxes Shows that the Federal Fiscal System is Very Progressive FISCAL FACT No. 742 Jan. 2021 Scott A. Hodge President Key Findings The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and global levels. We are a 501(c)(3) nonprofit organization. ©2021 Tax Foundation Distributed under Creative Commons CC-BY-NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org President Joe Biden has proposed an ambitious agenda that would make the federal fiscal system more progressive, and the huge budget deficits caused by the numerous COVID-19 relief packages could heighten the call for more tax revenues. What is needed are benchmark facts to guide these debates. A recent study by the Congressional Budget Office fills this void with data showing that the current fiscal system-both taxes and direct spending benefits-is already very progressive and redistributive. In 2017, the federal fiscal system lifted the incomes of households in the lowest quintile by 126 percent, in the second quintile by 46 percent, and in the middle quintile by 10 percent while reducing the incomes of households in the highest quintile by 23 percent and in the top 1 percent by 31 percent. In 2017, households in the lowest quintile received $67.67 in direct federal benefits for every $1 of taxes paid vs. $1.60 for middle-quintile households, while households in the highest quintile received $0.15, and $0.02 for the top 1 percent. In the aggregate, fiscal policy increased the incomes of households in the bottom three quintiles by more than $1 trillion in 2017 and reduced the incomes of households in the highest quintile by more than $1.7 trillion, of which $728 billion came from households in the top 1 percent. Indeed, 2017 was the most progressive year in four decades if judged by how much in inflation-adjusted dollars the fiscal system reduced top incomes and increased low incomes.

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