Preliminary Revenue Estimates and Distributional Analysis of the Tax Provisions in the Bipartisan Tax Fairness and Simplification Act of 2010

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Abstract

The Bipartisan Tax Fairness and Simplification Act of 2010 ("Wyden-Gregg," introduced as S. 3018) is a broad reform of the federal income tax system. Some provisions would also expand the Social Security payroll tax base. This paper presents the Tax Policy Center's estimates of the revenue and distributional effects of the income and payroll tax provisions in Wyden-Gregg.

Introduction

Compared with a baseline that assumes all of the 2001 and 2003 tax cuts are extended and that the 2009 AMT exemption level is maintained and indexed, the Tax Policy Center estimates that Wyden-Gregg would

• Be roughly revenue-neutral over the next decade, with an increase in individual income and payroll tax revenues offsetting a decline in corporate tax revenues.
• Make the federal tax system more progressive, with after-tax incomes declining on average for the top 20 percent of tax units and increasing on average for the other 80 percent of tax units.

These estimates are all static, in that they do not incorporate potential behavioral responses to the tax changes. On balance, such responses would likely reduce revenues under the proposal.

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