After-tax income has declined for some demographic groups since 2009
by Ali Meyer • Washington Free Beacon
The CBO uses a comprehensive measure of income, referred to as average household market income, that includes labor income, business income, capital income, capital gains, and retirement income. It combines this with government transfers to calculate before-tax income.
The budget office then subtracts individual income taxes, payroll or social insurance taxes, corporate income taxes and excise taxes to calculate average after-tax income.
When President Obama took office in 2009, average before-tax income for households totaled $95,000 after adjusting for inflation. These individuals paid an average of $16,500 in taxes, and were left with an average of $78,500 in after-tax income. This means the taxes households paid comprised 17.3 percent of their income on average.
In 2013, which is the latest data available, average before-tax income for households totaled $100,300. Households paid $20,100 in taxes on average, bringing their average after-tax income to $80,100. The share of taxes they paid comprised 20.1 percent of their income on average.
“Average federal tax rates and after-tax income in 2013 were affected by several significant changes to federal tax rules that took effect in that year,” the budget office explained. “Those changes affected not only the distribution of taxes but probably also the underlying distribution of income as households responded to the new tax rules.”
The CBO said that in 2013 the new taxes enacted as a result of Obamacare took effect and payroll tax rates reset to higher levels. In 2012, several income tax provisions affecting high-income taxpayers expired. These changes contributed to the rising tax burden shown in the CBO data.
The rising tax burden did not affect all households equally. For instance, non-elderly childless households saw their pre-tax income grow from $87,800 in 2009 to $89,800 in 2013, while their after-tax income shrank from $70,400 in 2009 to $69,900 in 2013. Elderly households and households with children, by contrast, saw their after-tax income increase while Obama took office.
The White House did not respond to requests for comment.