Variation in Effective Tax Rates

The expansion of refundable tax credits and the proliferation of specialized tax breaks means that households with similar incomes can face wildly different effective federal tax rates. For example, among middle-income households, the median effective income tax rate is 3 percent, but 10 percent of those households face effective rates exceeding 9 percent and another 10 percent receive a net government subsidy greater than 4 percent of their cash income.