TABLE 8-1 Federal Tax Structure and Revenue Levels Under the Committee’s Four Paths

Path

Current Tax Structure

Simplified Tax Structure

Low Spending and Revenue: Revenues remain at 18-20% of GDP through 2050, to about 22% by 2080.

Income taxes remain at roughly 10% of GDP.

Income taxes remain at roughly 10% of GDP; personal income tax reformed with a broader base, lower rates, and two brackets; corporate rate cut to 25%.

Payroll taxes: Medicare remains at 2.9% for both employers and employees with no limit; Social Security tax remains at 12.4% for employers and employees, up to an indexed earnings cap.

Payroll taxes same as at left.

Intermediate-1: Revenues rise to about 23% of GDP by 2050; edge up to about 24% by 2080.

Current income tax cuts expire and all tax rates rise above current law. For example, for 2050, the top personal rate of 35% rises to 37.2%, and the capital gains rate of 15% rises to 15.9%.

Similar individual income tax rates as above, but tax-bracket thresholds and standard deduction adjusted to increase revenue. For example, by 2080 the two rates are 7.4% and 18.4%, and the capital gains rate is 11%.

Medicare payroll tax is doubled. Social Security payroll tax raised in steps to 13.3% in 2060; same cap.

Payroll taxes same as at left.

Intermediate-2: Revenues rise to about 25% of GDP by 2050 and to about 26% by 2080.

Current tax cuts expire and income tax rates rise (more than above). For example, for 2050, the top personal rate rises to 40.9% and to 42.5% by 2080; the capital gains rate rises to 17.5% percent and to 18.2% by 2080.

Somewhat higher individual income tax rates than immediately above; tax brackets and the standard deduction are also adjusted. For example, by 2080 the two rates are 8.7% and 21.8%, and the capital gains rate is 13.1%.

Medicare tax doubled. Current Social Security tax raised in steps to 14.5% in 2075; same cap. Second-tier Social Security payroll tax added for any earnings above cap in current law; rises to 3% in 2060.

Payroll taxes same as at left.

High Spending and Revenue: Revenues rise to about 28% percent of GDP by 2050 and after that date to about 32%.

Current tax cuts expire and income tax rates rise higher than above. For example, for 2050, the top personal rate is 50% and the capital gains rate is 21.4%.

Higher individual tax rates than above; tax brackets and deductions adjusted. For example, by 2080 the two rates are 11.5% and 28.7%, and the capital gains rate is 17.2%.

VAT added around 2020; rate rises to 14.6% by 2080.

Medicare tax doubled. Current Social Security tax raised in steps to 14.7% in 2080; cap raised. Second-tier Social Security tax added for any earnings above raised cap and rises to 5.5% in 2075.

No VAT.

Payroll taxes same as at left.



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