Lower Individual Income Tax Rates by 10 Percent Across the Board

This option reduces all seven marginal income tax rates by 10 percent. The top marginal income tax rate falls from 37 percent to 33.3 percent, and the bottom rate from 10 percent to 9 percent. This would lower marginal tax rates on labor income across the board, increasing incentives to work. Pass-through business income would also face lower marginal tax rates, reducing the cost of capital and expanding investment incentives.

On a conventional basis, this option would increase the primary deficit by $3,610.2 billion over the budget window. Long-run GDP would rise by 1.3 percent and long-run GNP by 0.9 percent. On a dynamic basis, the primary deficit would increase by $2,489.5 billion from 2027 through 2036, $1,120.7 billion less than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be higher than baseline, reaching 194.4 percent by 2056.

On average, in 2036, taxpayers would see increases in their after-tax incomes of 1.9 percent. The top quintile of taxpayers would experience a 2.3 percent increase, whereas the bottom quintile would experience a less than 0.05 percent increase. On a long-run dynamic basis, taxpayers would see a 2.9 percent increase on average.