Following up on last month's post, The U.S. Tax System Is Getting Even More Progressive:  Tax Foundation, New CBO Report Shows Pandemic Response Sharply Reduced Inequality, Increased Progressivity in 2020:

The pandemic led to one of the largest fiscal responses in U.S. history, impacting households across the income distribution. A new report from the Congressional Budget Office (CBO) [The Distribution of Household Income in 2020] finds that these temporary policies, along with other fixtures of our tax and transfer system, reduced income inequality in 2020 by more than any other year since 1979 when the CBO began measuring household income. The analysis also shows that the federal tax system is markedly progressive, even when excluding the most recent pandemic policies, echoing our own research on this topic [America’s Progressive Tax and Transfer System: Federal, State, and Local Tax and Transfer Distributions] and other recent academic evidence [Gerald Auten & David Splinter, Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends]. …

On net, [pandemic] policies made the federal tax code more redistributive and reduced income inequality to a 14-year low. The bottom quintile saw the largest gains in income after taxes and transfers compared to 2019, rising by about 15 percent. Since 1979, the bottom quintile’s income has increased by 126 percent.

High-income households continue to pay a large share of federal taxes, including individual income taxes, payroll taxes, corporate taxes, and excise taxes. In 2020, the top quintile earned about 56 percent of all income, but paid 81 percent of federal taxes—12 percentage points more than in 2019, despite earning about the same share of income. The top 1 percent of households alone paid 31 percent of all federal taxes.