Raise Individual Income Tax Rates by 10 Percent Across the Board

This option increases all seven marginal income tax rates by 10 percent. The top marginal income tax rate rises from 37 percent to 40.7 percent, and the bottom rate from 10 percent to 11 percent. Marginal income tax rates on labor would rise, reducing incentives to work. Marginal income tax rates on pass-through businesses would also rise, increasing the cost of capital and reducing incentives to invest.

On a conventional basis, this option would decrease the primary deficit by $3,158.1 billion over the budget window. Long-run GDP would fall by 1.3 percent, and long-run GNP by 1.0 percent. On a dynamic basis, the primary deficit would decrease by $1,888.2 billion from 2027 through 2036, $1,269.9 billion less than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be lower than baseline, reaching 162.5 percent by 2056.

On average, in 2036, taxpayers would see decreases in their after-tax incomes of 1.6 percent. The top quintile of taxpayers would experience a 2.1 percent decrease, whereas the bottom quintile would experience a slight decrease. On a long-run dynamic basis, taxpayers would see a 2.6 percent decrease on average.