US household income inequality fell in 2023
A Congressional Budget Office report shows income inequality decreased in 2023, driven by a 5% rise for the lowest quintile and a 9% drop for the top 1%
In 2023, the roughly 134 million households in the United States received a total of about $20 trillion in income. Income inequality decreased last year, whether measured before or after government transfers and taxes. This marks a reversal of a long-running trend of increasing income concentration.
Average income before transfers and taxes rose for households at the bottom of the income distribution in 2023 compared to 2022. Income increased by 5 percent among households in the lowest quintile from 2022 to 2023, ending a period of recent stagnation.
Declines at the top drove broader equality
Income decreased by 9 percent among households in the top 1 percent from 2022 to 2023. The decrease in income among the top 1 percent was largely due to a reduction in realized capital gains. Average income from other sources, on net, remained relatively unchanged among households in the top 1 percent from 2022 to 2023. The decrease in income inequality in 2023 was mainly due to these changes in income before transfers and taxes at the top and bottom of the income distribution.
Transfers and taxes had a stabilizing role
Income was more equally distributed after transfers and taxes than before transfers and taxes in 2023. The extent to which transfers and taxes reduced inequality was similar in 2023 and 2022. Measured as a percentage of income before transfers and taxes, means-tested transfers decreased by 2 percentage points among households in the lowest quintile from 2022 to 2023. The effect of that decrease in means-tested transfers was partially offset by a 1 percentage-point decrease in federal tax rates for households in the same group over the same period.
About the source
The findings come from a Congressional Budget Office report titled 'The Distribution of Household Income, 2023' 2026. The report covers the period from 1979 to 2023. It is a 1.2 MB document, part of a recurring publication series on the distribution of household income and federal taxes. Supplemental data and underlying figures are available in Excel format, with additional data for researchers provided as a zip file. Code for CBO's adjustments for underreporting of means-tested transfers is available on GitHub, and a related 2018 working paper is referenced. The report includes a table builder tool and downloadable data in Excel and ZIP formats for further analysis.
