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Choosing the Nation's Fiscal Future (2010)
National Research Council (NRC)

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. "Appendix E: Revenue Options and Their Implications." Choosing the Nation's Fiscal Future. Washington, DC: The National Academies Press, 2010.

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Choosing the Nation’s Fiscal Future

Appendix E
Revenue Options and Their Implications

This appendix supplements Chapter 8 on revenue options. The Tax Policy Center (TPC) of the Urban Institute and Brookings Institution used specified assumptions provided by the study committee to model both the illustrative current tax and simplified tax structures over a nearly 75-year period. TPC estimated microdynamic taxpayer responses to specific tax changes. In addition, and also under the guidance of the study committee, TPC developed and applied appropriate policy specifications and behavioral assumptions to estimate microdynamic responses to the change in the corporate income tax under the simplified tax structure to estimate the effects of changes in the corporation income tax. Because TPC’s is a micro-simulation model, it took gross domestic product (GDP) as fixed; that is, TPC did not attempt to estimate the macroeconomic effects of tax changes, such as effects on investment and incomes. The results of these simulations are presented below. (For additional details on the analytic methods, see note 26 in Chapter 8.)

We use “current tax structure” as a shorthand for the current overall personal income tax regime of six brackets, an Alternative Minimum Tax (AMT), and many tax expenditures. Over time, and for the three scenarios with higher levels of revenues and spending than the “low” one, the various statutory tax rates and bracket thresholds are adjusted to raise the revenue needed. Because of the deemed maximum rates, the “high” current tax structure scenario must add a value-added tax (VAT). This analysis is summarized in Table 8-1 in Chapter 8 and the discussion that follows it; details are presented in the tables below.

By contrast, we use “simplified tax structure” to mean two tax brackets

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Choosing the Nation’s Fiscal Future Appendix E Revenue Options and Their Implications This appendix supplements Chapter 8 on revenue options. The Tax Policy Center (TPC) of the Urban Institute and Brookings Institution used specified assumptions provided by the study committee to model both the illustrative current tax and simplified tax structures over a nearly 75-year period. TPC estimated microdynamic taxpayer responses to specific tax changes. In addition, and also under the guidance of the study committee, TPC developed and applied appropriate policy specifications and behavioral assumptions to estimate microdynamic responses to the change in the corporate income tax under the simplified tax structure to estimate the effects of changes in the corporation income tax. Because TPC’s is a micro-simulation model, it took gross domestic product (GDP) as fixed; that is, TPC did not attempt to estimate the macroeconomic effects of tax changes, such as effects on investment and incomes. The results of these simulations are presented below. (For additional details on the analytic methods, see note 26 in Chapter 8.) We use “current tax structure” as a shorthand for the current overall personal income tax regime of six brackets, an Alternative Minimum Tax (AMT), and many tax expenditures. Over time, and for the three scenarios with higher levels of revenues and spending than the “low” one, the various statutory tax rates and bracket thresholds are adjusted to raise the revenue needed. Because of the deemed maximum rates, the “high” current tax structure scenario must add a value-added tax (VAT). This analysis is summarized in Table 8-1 in Chapter 8 and the discussion that follows it; details are presented in the tables below. By contrast, we use “simplified tax structure” to mean two tax brackets

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Choosing the Nation’s Fiscal Future and very few tax expenditures. This analysis, too, is summarized in Table 8-1 and the discussion that follows it. Over time and for the four scenarios, the rates, bracket thresholds, and standard deduction are adjusted to the revenue needs. Table E-1 details the implementation of the current tax structure under the four scenarios and for selected years from 2012 through 2080. Because the low revenue scenario retains the rates and other features of the personal income tax under current law, the rates shown in Table E-1(A) are constant over time. Table E-2 similarly details the implementation of the simplified tax structure. Tables E-3 through E-18 project the distributional implications of the revenue options for the federal tax system as a whole, by income quintiles and for the top 10 and 5 percent groups of the income distribution. Tables E-3 through E-10 pertain to the current tax structure for selected years; Tables E-11 through E-18 are for the simplified tax structure for the same years. These tables show average combined federal tax rates, each group’s percentage share of the combined federal tax burden, and percentage changes in after-tax income (again for federal taxes combined) compared to current-law taxation for that year. The combination of federal taxes includes the personal income tax (net of refundable credits); the corporate income tax allocated to individuals; the payroll taxes for Medicare and Social Security levied on both workers (and—as allocated to individuals—on employers); the estate tax similarly allocated; and an allocation of any VAT (Burman et al., 2008c; Rohaly et al., 2005). The average tax rate for the population or any subgroup is the average combined federal tax as a percentage of its average income. Comparing across groups, average tax rates are also indicators of the distribution of the combined tax burden.

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Choosing the Nation’s Fiscal Future TABLE E-1 Statutory Tax Rates Under the Current Tax Structure, as Percentages Rate 2012 2020 2030 2040 2050 2060 2070 2080 (A) Low Spending and Revenues Scenario Personal Income Taxa Regular Tax 10 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 15 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 25 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 28 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 33 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 35 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 Capital Gains and Qualified Dividends 15 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 Alternative Minimum Tax 26 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 28 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 VAT (if added; there is no current U.S. VAT)   NA NA NA NA NA NA NA NA (B) Intermediate-1 Spending and Revenues Scenario Personal Income Taxa Regular Tax 10 11.6 12.7 12.4 11.6 10.6 10.3 10.5 10.4 15 17.4 19.1 18.6 17.4 15.9 15.4 15.7 15.7 25 29.1 31.8 31.0 29.0 26.5 25.7 26.1 26.1 28 32.5 35.6 34.7 32.5 29.7 28.8 29.3 29.2 33 38.4 42.0 40.9 38.3 35.0 34.0 34.5 34.5 35 40.7 44.5 43.4 40.6 37.2 36.0 36.6 36.6

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Choosing the Nation’s Fiscal Future Rate 2012 2020 2030 2040 2050 2060 2070 2080 Capital Gains and Qualified Dividends 15 17.4 19.1 18.6 17.4 15.9 15.4 15.7 15.7 Alternative Minimum Tax 26 30.2 33.1 32.2 30.1 27.6 26.8 27.2 27.2 28 32.5 35.6 34.7 32.5 29.7 28.8 29.3 29.2 VAT (if added; there is no current U.S. VAT)   NA NA NA NA NA NA NA NA (C) Intermediate-2 Spending and Revenues Scenario Personal Income Taxa Regular Tax 10 10.9 11.4 11.7 11.9 11.7 11.8 12.1 12.2 15 16.4 17.1 17.6 17.9 17.5 17.7 18.2 18.2 25 27.3 28.5 29.4 29.8 29.2 29.4 30.3 30.4 28 30.5 31.9 32.9 33.3 32.8 33.0 33.9 34.0 33 36.0 37.7 38.8 39.3 38.6 38.8 40.0 40.1 35 38.2 39.9 41.1 41.7 40.9 41.2 42.4 42.5 Capital Gains and Qualified Dividends 15 16.4 17.1 17.6 17.9 17.5 17.7 18.2 18.2 Alternative Minimum Tax 26 28.3 29.7 30.5 31.0 30.4 30.6 31.5 31.6 28 30.5 31.9 32.9 33.3 32.8 33.0 33.9 34.0 VAT (if added; there is no current U.S. VAT)   NA NA NA NA NA NA NA NA

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Choosing the Nation’s Fiscal Future (D) High Spending and Revenues Scenario Personal Income Taxa Regular Tax 10 12.2 14.3 14.3 14.3 14.3 14.3 14.3 14.3 15 18.3 21.4 21.4 21.4 21.4 21.4 21.4 21.4 25 30.5 35.7 35.7 35.7 35.7 35.7 35.7 35.7 28 34.2 40.0 40.0 40.0 40.0 40.0 40.0 40.0 33 40.3 47.1 47.1 47.1 47.1 47.1 47.1 47.1 35 42.8 50.0 50.0 50.0 50.0 50.0 50.0 50.0 Capital Gains and Qualified Dividends 15 18.3 21.4 21.4 21.4 21.4 21.4 21.4 21.4 Alternative Minimum Tax 26 31.8 37.1 37.1 37.1 37.1 37.1 37.1 37.1 28 34.2 40.0 40.0 40.0 40.0 40.0 40.0 40.0 VAT (if added; there is no current U.S. VAT)   NA 0.9 5.2 7.7 8.1 9.7 12.9 14.6 NOTE: NA = not applicable. aCurrent law is in left-most column.

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Choosing the Nation’s Fiscal Future TABLE E-2 Statutory Tax Rates and Other Features Under the Simplified Tax Structure   2012 2020 2030 2040 2050 2060 2070 2080 (A) Low Spending and Revenues Scenario Simplified Personal Income Tax Regular Tax Rates (Percentages) Lower Bracket 10.0 9.4 8.8 8.4 8.1 7.9 7.7 7.5 Upper Bracket 25.0 23.4 22.0 20.9 20.2 19.8 19.2 18.8 Bracket Thresholds (Current Dollars) Lower Bracket 36,550 41,300 51,050 63,450 78,900 98,075 121,925 151,550 Upper Bracket 73,100 82,600 102,100 126,900 157,800 196,150 243,850 303,100 Standard Deduction (Current Dollars)   8,500 9,600 11,900 14,800 18,400 22,850 28,450 35,350   17,000 19,200 23,800 29,600 36,800 45,700 56,900 70,700 Capital Gains and Qualified Dividend Tax Rate (Percentages)   15.0 14.0 13.2 12.6 12.1 11.9 11.5 11.3 VAT (if added; there is no current U.S. VAT)   NA NA NA NA NA NA NA NA (B) Intermediate-1 Spending and Revenues Scenario Simplified Personal Income Tax Regular Tax Rates (Percentages) Lower Bracket 10.0 10.3 9.6 8.7 7.8 7.5 7.5 7.4 Upper Bracket 25.0 25.9 23.9 21.7 19.5 18.8 18.6 18.4 Bracket Thresholds (Current Dollars) Lower Bracket 25,625 28,950 35,775 44,475 55,300 68,750 85,450 106,225 Upper Bracket 51,250 57,900 71,550 88,950 110,600 137,500 170,900 212,450 Standard Deduction (Current Dollars)   5,950 6,750 8,350 10,350 12,900 16,000 19,900 24,750   11,900 13,500 16,700 20,700 25,800 32,000 39,800 49,500

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Choosing the Nation’s Fiscal Future Capital Gains and Qualified Dividend Tax Rate (Percentages)   15.0 15.5 14.3 13.0 11.7 11.3 11.2 11.0 VAT (if added; there is no current U.S. VAT)   NA NA NA NA NA NA NA NA (C) Intermediate-2 Spending and Revenues Scenario Simplified Personal Income Tax Regular Tax Rates (Percentages) Lower Bracket 10.0 9.9 9.5 9.3 8.9 8.8 8.8 8.7 Upper Bracket 25.0 24.6 23.9 23.2 22.2 22.0 22.0 21.8 Bracket Thresholds (Current Dollars) Lower Bracket 29,950 33,850 41,825 52,000 64,625 80,350 99,900 124,175 Upper Bracket 59,900 67,700 83,650 104,000 129,250 160,700 199,800 248,350 Standard Deduction (Current Dollars)   6,950 7,900 9,750 12,100 15,050 18,750 23,300 28,950   13,900 15,800 19,500 24,200 30,100 37,500 46,600 57,900 Capital Gains and Qualified Dividend Tax Rate (Percentages)   15.0 14.8 14.3 13.9 13.3 13.2 13.2 13.1 VAT (if added; there is no current U.S. VAT)   NA NA NA NA NA NA NA NA (D) High Spending and Revenues Scenario Simplified Personal Income Tax Regular Tax Rates (Percentages) Lower Bracket 10.0 11.1 10.5 10.2 10.2 10.3 9.7 11.5 Upper Bracket 25.0 27.7 26.3 25.6 25.1 25.7 24.4 28.7 Bracket Thresholds (Current Dollars) Lower Bracket 22,475 25,400 31,400 39,025 48,525 60,325 75,000 93,225 Upper Bracket 44,950 50,800 62,800 78,050 97,050 120,650 150,000 186,450

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Choosing the Nation’s Fiscal Future Standard Deduction (Current Dollars)   5,200 5,900 7,300 9,100 11,300 14,050 17,500 21,750   10,500 11,850 14,650 18,200 22,650 28,150 35,000 43,500 Capital Gains & Qualified Dividend Tax Rate (Percentages)   15.0 16.6 15.8 15.4 15.0 15.4 14.6 17.2 VAT (if added; there is no current U.S. VAT)   NA NA NA NA NA NA NA NA NOTE: NA = not applicable.

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Choosing the Nation’s Fiscal Future TABLE E-3 Current Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2012   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario, Which Is Current Law First Quintile 4.6 0.8 NA Second Quintile 10.3 4.2 NA Third Quintile 16.3 10.9 NA Fourth Quintile 19.1 18.3 NA Fifth Quintile 25.0 65.7 NA All 20.7 100.0 NA Top 10 Percent 26.1 51.6 NA Top 5 Percent 27.0 41.2 NA Intermediate-1 Spending and Revenues Scenario First Quintile 5.1 0.8 −0.5 Second Quintile 11.2 4.1 −1.1 Third Quintile 17.8 10.8 −1.8 Fourth Quintile 21.0 18.2 −2.3 Fifth Quintile 27.8 66.0 −3.7 All 22.9 100.0 −2.8 Top 10 Percent 29.0 51.9 −4.0 Top 5 Percent 30.1 41.5 −4.2 Intermediate-2 Spending and Revenues Scenario First Quintile 5.1 0.9 −0.5 Second Quintile 11.0 4.2 −0.8 Third Quintile 17.3 10.9 −1.3 Fourth Quintile 20.4 18.2 −1.6 Fifth Quintile 26.7 65.7 −2.3 All 22.1 100.0 −1.8 Top 10 Percent 27.9 51.6 −2.4 Top 5 Percent 28.9 41.2 −2.5 High Spending and Revenues Scenario First Quintile 5.2 0.8 −0.6 Second Quintile 11.4 4.1 −1.3 Third Quintile 18.1 10.7 −2.2 Fourth Quintile 21.6 18.1 −3.0 Fifth Quintile 28.7 66.2 −4.9 All 23.6 100.0 −3.6 Top 10 Percent 30.0 52.1 −5.3 Top 5 Percent 31.2 41.7 −5.7 NOTE: NA = not applicable. aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-4 Current Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2020   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario, Which Is Current Law First Quintile 4.9 0.9 NA Second Quintile 9.9 4.0 NA Third Quintile 16.6 10.8 NA Fourth Quintile 19.9 19.2 NA Fifth Quintile 24.7 65.1 NA All 20.8 100.0 NA Top 10 Percent 25.5 50.0 NA Top 5 Percent 26.1 38.8 NA Intermediate-1 Spending and Revenues Scenario First Quintile 6.2 0.9 −1.4 Second Quintile 12.0 4.0 −2.3 Third Quintile 19.9 10.7 −4.0 Fourth Quintile 24.0 19.1 −5.1 Fifth Quintile 30.1 65.3 −7.1 All 25.3 100.0 −5.6 Top 10 Percent 31.1 50.2 −7.5 Top 5 Percent 31.8 39.0 −7.7 Intermediate-2 Spending and Revenues Scenario First Quintile 6.1 0.9 −1.3 Second Quintile 11.6 4.0 −1.8 Third Quintile 19.0 10.8 −2.9 Fourth Quintile 22.7 19.1 −3.5 Fifth Quintile 28.3 65.0 −4.7 All 23.8 100.0 −3.8 Top 10 Percent 29.2 50.0 −4.9 Top 5 Percent 29.8 38.8 −5.1 High Spending and Revenues Scenario First Quintile 6.6 0.9 −1.8 Second Quintile 12.8 3.9 −3.2 Third Quintile 21.3 10.4 −5.6 Fourth Quintile 25.9 18.8 −7.4 Fifth Quintile 33.3 66.0 −11.4 All 27.6 100.0 −8.6 Top 10 Percent 34.6 66.0 −12.2 Top 5 Percent 35.4 39.7 −12.6 NOTE: NA = not applicable. aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-5 Current Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2030   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario, Which Is Current Law First Quintile 5.4 1.0 NA Second Quintile 10.5 4.1 NA Third Quintile 17.3 10.8 NA Fourth Quintile 20.8 19.6 NA Fifth Quintile 25.5 64.5 NA All 21.5 100.0 NA Top 10 Percent 26.4 49.7 NA Top 5 Percent 27.0 38.5 NA Intermediate-1 Spending and Revenues Scenario First Quintile 7.2 1.0 −1.9 Second Quintile 13.1 4.2 −2.9 Third Quintile 21.3 10.9 −4.8 Fourth Quintile 25.5 19.6 −5.9 Fifth Quintile 31.1 64.2 −7.5 All 26.3 100.0 −6.1 Top 10 Percent 32.1 49.4 −7.8 Top 5 Percent 32.7 38.2 −7.9 Intermediate-2 Spending and Revenues Scenario First Quintile 7.3 1.1 −2.0 Second Quintile 13.0 4.2 −2.8 Third Quintile 21.0 10.9 −4.4 Fourth Quintile 25.0 19.6 −5.3 Fifth Quintile 30.4 64.1 −6.5 All 25.8 100.0 −5.4 Top 10 Percent 27.7 49.3 −6.7 Top 5 Percent 28.3 38.1 −6.8 High Spending and Revenues Scenario First Quintile 8.7 1.1 −3.5 Second Quintile 15.0 4.2 −5.1 Third Quintile 24.2 10.7 −8.3 Fourth Quintile 29.0 19.3 −10.3 Fifth Quintile 36.1 64.6 −14.1 All 30.3 100.0 −11.2 Top 10 Percent 37.4 64.6 −14.9 Top 5 Percent 38.2 38.7 −15.3 NOTE: NA = not applicable. aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-8 Current Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2060   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario, Which Is Current Law First Quintile 7.4 1.1 NA Second Quintile 12.8 4.3 NA Third Quintile 19.5 11.3 NA Fourth Quintile 23.0 19.7 NA Fifth Quintile 25.2 63.5 NA All 22.5 100.0 NA Top 10 Percent 25.4 49.9 NA Top 5 Percent 26.0 38.7 NA Intermediate-1 Spending and Revenues Scenario First Quintile 9.3 1.3 −2.0 Second Quintile 15.0 4.5 −2.5 Third Quintile 22.1 11.7 −3.3 Fourth Quintile 25.8 20.1 −3.7 Fifth Quintile 27.2 62.3 −2.6 All 24.8 100.0 −2.9 Top 10 Percent 27.8 48.5 −3.2 Top 5 Percent 28.2 37.3 −3.0 Intermediate-2 Spending and Revenues Scenario First Quintile 9.6 1.2 −2.4 Second Quintile 15.8 4.4 −3.4 Third Quintile 23.7 11.5 −5.2 Fourth Quintile 27.9 19.8 −6.4 Fifth Quintile 30.1 63.1 −6.6 All 27.1 100.0 −8.6 Top 10 Percent 30.6 49.4 −7.0 Top 5 Percent 31.3 38.2 −7.2 High Spending and Revenues Scenario First Quintile 12.5 1.3 −5.6 Second Quintile 19.3 4.4 −7.5 Third Quintile 28.7 11.3 −11.5 Fourth Quintile 33.8 19.6 −14.1 Fifth Quintile 37.0 63.3 −15.8 All 33.2 100.0 −13.8 Top 10 Percent 37.8 63.3 −16.8 Top 5 Percent 39.0 38.5 −16.7 NOTE: NA = not applicable. aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-9 Current Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2070   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario, Which Is Current Law First Quintile 6.9 1.1 NA Second Quintile 13.6 4.3 NA Third Quintile 20.1 11.7 NA Fourth Quintile 23.0 19.9 NA Fifth Quintile 25.2 63.0 NA All 22.7 100.0 NA Top 10 Percent 25.4 49.5 NA Top 5 Percent 25.1 38.0 NA Intermediate-1 Spending and Revenues Scenario First Quintile 8.6 1.2 −1.8 Second Quintile 16.0 4.6 −2.7 Third Quintile 23.0 12.0 −3.6 Fourth Quintile 26.0 20.3 −3.9 Fifth Quintile 27.5 61.9 −3.0 All 25.2 100.0 −3.2 Top 10 Percent 27.5 48.2 −2.8 Top 5 Percent 27.0 36.8 −2.5 Intermediate-2 Spending and Revenues Scenario First Quintile 9.1 1.1 −2.4 Second Quintile 17.2 4.4 −4.1 Third Quintile 25.1 11.8 −6.3 Fourth Quintile 28.6 20.1 −7.3 Fifth Quintile 30.8 62.5 −7.5 All 28.0 100.0 −6.8 Top 10 Percent 31.0 48.9 −7.5 Top 5 Percent 30.5 37.5 −7.2 High Spending and Revenues Scenario First Quintile 12.5 1.3 −6.0 Second Quintile 21.2 4.5 −8.9 Third Quintile 30.5 11.7 −13.0 Fourth Quintile 34.6 19.8 −15.0 Fifth Quintile 37.8 62.6 −16.8 All 34.2 100.0 −14.9 Top 10 Percent 35.2 49.2 −17.0 Top 5 Percent 37.7 37.8 −16.7 NOTE: NA = not applicable. aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-10 Current Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2080   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario, Which Is Current Law First Quintile 6.8 0.9 NA Second Quintile 13.7 4.0 NA Third Quintile 20.7 11.8 NA Fourth Quintile 23.3 20.1 NA Fifth Quintile 25.4 63.2 NA All 23.1 100.0 NA Top 10 Percent 25.6 49.7 NA Top 5 Percent 25.1 38.5 NA Intermediate-1 Spending and Revenues Scenario First Quintile 8.5 1.0 −1.8 Second Quintile 16.2 4.3 −2.9 Third Quintile 23.8 12.1 −3.9 Fourth Quintile 26.4 20.5 −4.1 Fifth Quintile 27.7 62.0 −3.1 All 25.6 100.0 −3.4 Top 10 Percent 27.7 48.4 −2.9 Top 5 Percent 27.0 37.2 −2.5 Intermediate-2 Spending and Revenues Scenario First Quintile 9.0 1.0 −2.3 Second Quintile 17.3 4.1 −4.3 Third Quintile 26.0 11.9 −6.7 Fourth Quintile 29.1 20.3 −7.6 Fifth Quintile 31.2 62.6 −7.8 All 28.5 100.0 −7.1 Top 10 Percent 31.3 49.1 −7.7 Top 5 Percent 30.6 37.9 −7.3 High Spending and Revenues Scenario First Quintile 13.3 1.2 −7.0 Second Quintile 22.2 4.2 −9.9 Third Quintile 32.1 11.8 −14.4 Fourth Quintile 35.9 20.1 −16.4 Fifth Quintile 38.8 62.6 −18.0 All 35.6 100.0 −16.3 Top 10 Percent 39.1 49.2 −18.1 Top 5 Percent 38.3 38.1 −17.6 NOTE: NA = not applicable. aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-11 Simplified Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2012   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario First Quintile 4.5 0.8 0.1 Second Quintile 10.2 4.2 0.1 Third Quintile 15.7 10.6 0.7 Fourth Quintile 18.6 17.9 0.7 Fifth Quintile 25.1 66.4 −0.1 All 20.6 100.0 0.2 Top 10 Percent 26.2 52.2 −0.2 Top 5 Percent 26.9 41.2 0.2 Intermediate-1 Spending and Revenues Scenario First Quintile 5.2 0.9 −0.6 Second Quintile 11.1 4.2 −0.9 Third Quintile 17.8 11.1 −1.8 Fourth Quintile 20.9 18.7 −2.2 Fifth Quintile 26.5 65.1 −2.1 All 22.2 100.0 −1.9 Top 10 Percent 27.2 50.2 −1.4 Top 5 Percent 27.5 39.1 −0.6 Intermediate-2 Spending and Revenues Scenario First Quintile 4.9 0.9 −0.3 Second Quintile 10.7 4.2 −0.5 Third Quintile 16.8 10.8 −0.6 Fourth Quintile 19.8 18.2 −0.8 Fifth Quintile 26.0 65.8 −1.3 All 21.5 100.0 −1.0 Top 10 Percent 26.8 51.1 −0.9 Top 5 Percent 27.3 40.0 −0.3 High Spending and Revenues Scenario First Quintile 5.4 0.9 −0.8 Second Quintile 11.5 4.2 −1.3 Third Quintile 18.6 11.3 −2.8 Fourth Quintile 21.9 19.0 −3.5 Fifth Quintile 27.0 64.4 −2.6 All 22.8 100.0 −2.6 Top 10 Percent 27.5 49.4 −1.8 Top 5 Percent 27.7 38.3 −0.8 aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-12 Simplified Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2020   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario First Quintile 5.2 0.9 −0.3 Second Quintile 10.7 4.3 −0.8 Third Quintile 16.3 10.7 0.4 Fourth Quintile 19.6 19.1 0.4 Fifth Quintile 24.3 64.8 0.5 All 20.6 100.0 0.3 Top 10 Percent 24.9 49.4 0.8 Top 5 Percent 25.1 37.8 1.3 Intermediate-1 Spending and Revenues Scenario First Quintile 7.2 1.1 −2.4 Second Quintile 13.3 4.4 −3.7 Third Quintile 20.9 11.4 −5.1 Fourth Quintile 24.9 20.2 −6.2 Fifth Quintile 28.4 62.8 −4.8 All 24.7 100.0 −4.9 Top 10 Percent 28.5 47.0 −4.0 Top 5 Percent 28.4 35.5 −3.1 Intermediate-2 Spending and Revenues Scenario First Quintile 6.7 1.0 −1.9 Second Quintile 12.5 4.4 −2.9 Third Quintile 19.4 11.1 −3.3 Fourth Quintile 23.0 19.7 −3.8 Fifth Quintile 27.2 63.6 −3.3 All 23.5 100.0 −3.3 Top 10 Percent 27.6 48.0 −2.7 Top 5 Percent 27.6 36.4 −2.0 High Spending and Revenues Scenario First Quintile 7.6 1.0 −2.8 Second Quintile 14.3 4.4 −4.8 Third Quintile 22.5 11.4 −7.1 Fourth Quintile 26.9 20.3 −8.7 Fifth Quintile 30.6 62.8 −7.8 All 26.7 100.0 −7.4 Top 10 Percent 30.8 47.0 −7.0 Top 5 Percent 30.6 35.5 −6.1 aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-13 Simplified Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2030.   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario First Quintile 6.2 1.1 −0.9 Second Quintile 11.5 4.6 −1.2 Third Quintile 17.4 11.0 −0.1 Fourth Quintile 20.8 19.9 0.0 Fifth Quintile 24.7 63.4 1.1 All 21.2 100.0 0.4 Top 10 Percent 25.1 48.1 1.7 Top 5 Percent 25.3 36.7 2.3 Intermediate-1 Spending and Revenues Scenario First Quintile 8.8 1.3 −3.7 Second Quintile 15.1 4.9 −5.1 Third Quintile 22.6 11.8 −6.4 Fourth Quintile 26.6 20.9 −7.3 Fifth Quintile 28.8 60.9 −4.4 All 25.7 100.0 −5.3 Top 10 Percent 28.8 45.4 −3.3 Top 5 Percent 28.6 34.2 −2.2 Intermediate-2 Spending and Revenues Scenario First Quintile 9.0 1.4 −3.9 Second Quintile 15.1 5.0 −5.1 Third Quintile 22.0 11.7 −5.7 Fourth Quintile 25.6 20.5 −6.1 Fifth Quintile 28.6 61.4 −4.1 All 25.3 100.0 −4.8 Top 10 Percent 28.7 46.1 −3.2 Top 5 Percent 28.7 34.9 −2.3 High Spending and Revenues Scenario First Quintile 9.8 1.3 −4.7 Second Quintile 17.0 5.1 −7.3 Third Quintile 24.9 11.9 −9.1 Fourth Quintile 28.8 20.8 −10.1 Fifth Quintile 31.4 60.9 −7.9 All 28.1 100.0 −8.4 Top 10 Percent 31.6 45.6 −7.0 Top 5 Percent 31.4 34.4 −6.0 aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-14 Simplified Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2040   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario First Quintile 7.6 1.3 −1.7 Second Quintile 12.6 4.8 −1.6 Third Quintile 18.3 11.0 −0.6 Fourth Quintile 22.1 20.1 −0.4 Fifth Quintile 24.0 62.7 1.7 All 21.4 100.0 0.5 Top 10 Percent 24.1 47.8 2.4 Top 5 Percent 24.0 36.5 2.8 Intermediate-1 Spending and Revenues Scenario First Quintile 10.2 1.5 −4.5 Second Quintile 16.4 5.3 −6.0 Third Quintile 23.3 11.9 −6.6 Fourth Quintile 27.3 21.1 −7.0 Fifth Quintile 27.1 60.1 −2.4 All 25.2 100.0 −4.3 Top 10 Percent 26.6 45.0 −1.1 Top 5 Percent 26.2 33.9 −0.1 Intermediate-2 Spending and Revenues Scenario First Quintile 10.1 1.5 −4.4 Second Quintile 16.0 5.1 −5.5 Third Quintile 23.0 11.5 −6.3 Fourth Quintile 27.4 20.7 −7.1 Fifth Quintile 28.2 61.2 −3.9 All 25.8 100.0 −5.1 Top 10 Percent 28.0 46.1 −2.9 Top 5 Percent 27.7 35.0 −2.1 High Spending and Revenues Scenario First Quintile 11.3 1.5 −5.7 Second Quintile 18.9 5.3 −8.7 Third Quintile 26.5 11.8 −10.6 Fourth Quintile 30.9 20.8 −11.7 Fifth Quintile 31.4 60.6 −8.3 All 29.0 100.0 −9.2 Top 10 Percent 31.2 45.7 −7.2 Top 5 Percent 30.8 34.7 −6.4 aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-15 Simplified Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2050   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario First Quintile 8.8 1.5 −2.0 Second Quintile 13.6 4.9 −2.0 Third Quintile 19.1 11.2 −1.0 Fourth Quintile 23.0 20.3 −0.8 Fifth Quintile 23.4 62.1 2.1 All 21.6 100.0 0.6 Top 10 Percent 23.3 47.6 2.8 Top 5 Percent 23.0 36.5 3.1 Intermediate-1 Spending and Revenues Scenario First Quintile 11.5 1.7 −4.8 Second Quintile 17.4 5.6 −6.3 Third Quintile 23.3 12.2 −6.2 Fourth Quintile 26.9 21.2 −5.9 Fifth Quintile 25.1 59.2 −0.1 All 24.2 100.0 −2.8 Top 10 Percent 24.5 44.6 1.2 Top 5 Percent 23.8 33.7 2.0 Intermediate-2 Spending and Revenues Scenario First Quintile 11.5 1.6 −4.9 Second Quintile 17.3 5.2 −6.2 Third Quintile 23.7 11.7 −6.7 Fourth Quintile 28.0 20.8 −7.2 Fifth Quintile 27.2 60.5 −2.9 All 25.6 100.0 −4.6 Top 10 Percent 26.8 46.0 −1.8 Top 5 Percent 26.2 35.1 −1.2 High Spending and Revenues Scenario First Quintile 12.7 1.6 −6.2 Second Quintile 20.3 5.5 −9.6 Third Quintile 27.2 11.9 −11.0 Fourth Quintile 31.3 20.6 −11.6 Fifth Quintile 30.6 60.4 −7.5 All 28.9 100.0 −8.9 Top 10 Percent 30.3 46.1 −6.5 Top 5 Percent 29.8 35.2 −6.0 aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-16 Simplified Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2060   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario First Quintile 9.6 1.5 −2.4 Second Quintile 14.7 5.0 −2.2 Third Quintile 20.5 12.2 −1.3 Fourth Quintile 23.7 20.7 −0.9 Fifth Quintile 23.4 60.5 2.4 All 22.0 100.0 0.7 Top 10 Percent 23.2 46.5 3.1 Top 5 Percent 22.8 35.7 3.3 Intermediate-1 Spending and Revenues Scenario First Quintile 12.1 1.7 −5.1 Second Quintile 18.4 5.7 −6.4 Third Quintile 24.3 13.2 −6.0 Fourth Quintile 27.0 21.5 −5.3 Fifth Quintile 24.6 57.8 0.8 All 24.2 100.0 −2.1 Top 10 Percent 23.9 43.6 2.1 Top 5 Percent 23.1 33.0 2.8 Intermediate-2 Spending and Revenues Scenario First Quintile 12.4 1.6 −5.4 Second Quintile 18.7 5.3 −6.8 Third Quintile 25.5 12.6 −7.5 Fourth Quintile 28.9 20.9 −7.7 Fifth Quintile 27.9 59.6 −3.7 All 26.6 100.0 −5.3 Top 10 Percent 27.5 45.7 −2.8 Top 5 Percent 27.0 35.0 −2.3 High Spending and Revenues Scenario First Quintile 14.3 1.6 −7.5 Second Quintile 22.5 5.5 −11.1 Third Quintile 29.8 12.8 −12.8 Fourth Quintile 33.1 20.9 −13.1 Fifth Quintile 31.7 59.0 −8.6 All 30.5 100.0 −10.2 Top 10 Percent 31.2 45.2 −7.6 Top 5 Percent 30.5 34.7 −7.1 aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-17 Simplified Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2070   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario First Quintile 9.3 1.5 −2.6 Second Quintile 15.5 5.1 −2.2 Third Quintile 21.4 12.7 −1.6 Fourth Quintile 23.7 21.1 −0.9 Fifth Quintile 23.3 59.6 2.6 All 22.1 100.0 0.8 Top 10 Percent 22.9 45.7 3.4 Top 5 Percent 22.4 34.9 3.5 Intermediate-1 Spending and Revenues Scenario First Quintile 11.8 1.7 −5.3 Second Quintile 19.4 5.7 −6.7 Third Quintile 25.4 13.6 −6.6 Fourth Quintile 27.1 21.7 −5.3 Fifth Quintile 24.8 57.3 0.6 All 24.5 100.0 −2.4 Top 10 Percent 24.0 43.2 1.9 Top 5 Percent 23.3 32.6 2.5 Intermediate-2 Spending and Revenues Scenario First Quintile 12.4 1.6 −5.9 Second Quintile 20.3 5.4 −7.7 Third Quintile 27.2 13.2 −8.9 Fourth Quintile 29.5 21.4 −8.5 Fifth Quintile 27.9 58.3 −3.6 All 27.1 100.0 −5.7 Top 10 Percent 27.3 44.4 −2.5 Top 5 Percent 26.6 33.7 −2.0 High Spending and Revenues Scenario First Quintile 13.9 1.6 −7.5 Second Quintile 23.1 5.6 −11.0 Third Quintile 30.2 13.3 −12.7 Fourth Quintile 32.3 21.2 −12.1 Fifth Quintile 30.8 58.3 −7.5 All 29.9 100.0 −9.4 Top 10 Percent 30.3 44.6 −6.5 Top 5 Percent 29.7 34.0 −6.1 aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.

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Choosing the Nation’s Fiscal Future TABLE E-18 Simplified Tax Structure: Average Tax Rates and Tax Distribution for Virtually All Federal Taxes Combined, 2080   Average Tax Rate (percentage) Percentage Share of Tax Burden Percentage Change in After-Tax Incomea Low Spending and Revenues Scenario First Quintile 9.2 1.3 −2.6 Second Quintile 15.7 4.7 −2.3 Third Quintile 22.0 12.9 −1.7 Fourth Quintile 24.0 21.3 −1.0 Fifth Quintile 23.4 59.8 2.7 All 22.4 100.0 0.8 Top 10 Percent 23.0 45.8 3.5 Top 5 Percent 22.4 35.3 3.6 Intermediate-1 Spending and Revenues Scenario First Quintile 11.8 1.5 −5.4 Second Quintile 19.6 5.3 −6.9 Third Quintile 26.0 13.7 −6.7 Fourth Quintile 27.5 21.9 −5.4 Fifth Quintile 25.0 57.5 0.5 All 24.9 100.0 −2.4 Top 10 Percent 24.2 43.5 1.9 Top 5 Percent 23.2 33.0 2.5 Intermediate-2 Spending and Revenues Scenario First Quintile 12.3 1.4 −5.9 Second Quintile 20.6 5.0 −8.0 Third Quintile 28.0 13.3 −9.3 Fourth Quintile 30.0 21.6 −8.8 Fifth Quintile 28.2 58.6 −3.8 All 27.6 100.0 −5.9 Top 10 Percent 27.5 44.6 −2.6 Top 5 Percent 26.6 34.1 −2.0 High Spending and Revenues Scenario First Quintile 15.4 1.4 −9.2 Second Quintile 26.2 5.1 −14.5 Third Quintile 35.0 13.3 −18.1 Fourth Quintile 37.2 21.4 −18.1 Fifth Quintile 35.4 58.8 −13.5 All 34.6 100.0 −15.0 Top 10 Percent 34.8 45.1 −12.3 Top 5 Percent 33.9 34.7 −11.7 aCompared with the after-tax income under current law. “Minus” means that after-tax income is reduced.