Lower the Top Marginal Individual Income Tax Rate to 35 Percent

The current top marginal income tax rate is 37 percent. In 2026, it applies to income above $626,351 for single filers and $751,601 for joint filers. This option permanently reduces the top rate to 35 percent, lowering marginal tax rates on labor income, pass-through business income, and other types of income earned by high-income taxpayers. Lowering marginal tax rates on pass-through business income decreases the cost of capital, increasing incentives to invest.

On a conventional basis, this option would increase the primary deficit by $625.3 billion over the budget window. Long-run GDP would rise by 0.2 percent, and long-run GNP by 0.1 percent. On a dynamic basis, the primary deficit would increase by $452.2 billion from 2027 through 2036, $173.1 billion less than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be higher than baseline, reaching 179.1 percent by 2056.

On average, in 2036, taxpayers would see increases in their after-tax incomes of 0.3 percent. The top quintile of taxpayers would experience a 0.4 percent increase, whereas the bottom quintile would experience a 0.0 percent increase. On a long-run dynamic basis, taxpayers would see a 0.5 percent increase on average.