The recent recession has had a substantial impact on income, the amount of taxes owed, and average tax rates. Average before-tax income for all households fell 12 percent from 2007 to 2009 in real (inflation-adjusted) terms, and the overall average federal tax rate of 17.4 percent in 2009 was the lowest in the 1979–2009 period. The changes in average income and tax rates differed markedly across the income distribution.Interestingly, this data suggests that income inequality declined slightly between 2007 and 2009. In 2007, the top 1% controlled 18.7% of the nation's before-tax income; by 2009, it controlled only 13.4% of the national income. However, this income measure does not take into account increasing asset prices. So, if someone's stock holdings increase $30,000 in value over a year, that increase in value is not counted as income unless that stock is sold.
Moreover, the shares of income calculations include federal transfers---including Medicaid, SNAP, unemployment payments, and other federal benefits.