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 |
| 2006 |
22.3 |
25.6 |
| 2007 |
23.4 |
26.9 |
| 2008 |
23.3 |
26.4 |
| 2009 |
25.7 |
29.1 |
| 2010 |
26.4 |
29.6 |
| 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.