September 17, 2004 | WebMemo on Taxes
The House and Senate may soon debate legislation to make permanent the tax cuts enacted in 2001 and 2003. Without action, all of these tax cuts will expire automatically by January 1, 2011. Opponents of the tax cuts have consistently overestimated their cost in revenue.
The Center for Data Analysis at The Heritage Foundation has estimated the six-year (2005-2010) revenue effect of reinstating the top individual income tax rates. The estimated tax increases are:
Below are the
estimated changes in federal individual income tax (after
refundable credits) for reinstating the top bracket and the top two
brackets, on a calendar liability year basis.
|Calendar Liability Year||Increase Top Rate||Increase Top Two Rates|
|2005||$21.7 billion||$25.4 billion|
|Total||$142.7 billion||$163.0 billion|
These are static revenue estimates that do not take into account behavioral effects due to the marginal rate changes. Further, they do not include any macroeconomic effects.
Ralph A. Rector, Ph.D., is Research Fellow and Project Manager in the Center for Data Analysis at The Heritage Foundation.