Combination 10:

Increase Standard Deduction by 25 Percent and Raise Top Rate to 50 Percent

Topline Estimates

Gross Domestic Product (GDP)
-1.2%
Gross National Product (GNP)
-1.3%
Full-Time Equivalent Jobs
-819K
Wage Rate
-0.6%
Capital Stock
-2.0%
Conventional Primary Deficit Change (10‑Yr)
-$243.9B
Dynamic Primary Deficit Change (10‑Yr)
+$807.6B
Dynamic Total Deficit Change (10‑Yr)
+$943.9B

Source: Tax Foundation General Equilibrium Model.

This option combination increases the value of the standard deduction for all filers by 25 percent and raises the top ordinary individual tax rate from 37 percent to 50 percent. The standard deduction is adjusted for inflation annually.

A higher standard deduction pushes some taxpayers into lower marginal tax brackets, reducing marginal tax rates on income. At the same time, some taxpayers are induced to switch from itemizing their deductions to taking the standard deduction, increasing marginal tax rates on certain types of activity, including charitable giving and housing.

Raising the top marginal tax rate from 37 percent to 50 percent increases the tax burden on labor income and on pass-through business income, reducing incentives to work and invest. On net, the combination increases marginal tax rates on work and investment, leading to a reduction in long-run economic output.

On a conventional basis, this option would reduce the primary deficit by $243.9 billion over the budget window. Long-run GDP would fall by 1.2 percent, while long-run GNP would fall by 1.3 percent. On a dynamic basis, the primary deficit would increase by $807.6 billion from 2027 through 2036, $1,051.5 billion more than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be higher than baseline, reaching 185.7 percent by 2056.

On average, taxpayers would see a decline in their after-tax incomes of 0.2 percent in 2027 on a conventional basis, 0.1 percent by 2036, and 1.1 percent in the long run on a dynamic basis. Conventionally, average after-tax incomes rise for taxpayers below the top 1 percent, while the top 1 percent sees a decrease in after-tax incomes due to the higher top ordinary tax rate. On a dynamic basis, taxpayers in the bottom and top 20 percent see a net decrease in after-tax incomes.

Modeled Results

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About the Authors

Erica York Tax Foundation
Expert

Erica York

Vice President of Federal Tax Policy

Erica York is Vice President of Federal Tax Policy with Tax Foundation’s Center for Federal Tax Policy. Her analysis has been featured in The Wall Street Journal, The Washington Post, Politico, and other national and international media outlets.

Garrett Watson Tax Foundation
Expert

Garrett Watson

Director of Policy Analysis

Garrett Watson is Director of Policy Analysis at the Tax Foundation, where he conducts research on federal and state tax policy. His work has been featured in The Washington Post, The Atlantic, Politico, the Associated Press and other major outlets.

Huaqun Li Tax Foundation
Expert

Huaqun Li

Senior Economist, Director of Modeling Projects

Dr. Huaqun Li is Senior Economist, Director of Modeling Projects at the Tax Foundation. She focuses on developing and maintaining the Foundation’s Taxes and Growth Model, which models the budgetary and economic effects of changes to federal tax policy.

William McBride or Will McBride Tax Foundation
Expert

William McBride

Chief Economist & Stephen J. Entin Fellow in Economics

Dr. William McBride is the Chief Economist & Stephen J. Entin Fellow in Economics at the Tax Foundation, where he oversees major research projects primarily related to reforming the federal tax code, advancing sound tax policy, and improving the federal government’s fiscal outlook.

Alex Durante Tax Foundation
Expert

Alex Durante

Senior Economist

Alex Durante is a Senior Economist at the Tax Foundation, working on federal tax policy and model development. Alex worked as a research assistant at the Federal Reserve Board and served as a staff economist on the Council of Economic Advisers.

Alex Muresianu Tax Foundation
Expert

Alex Muresianu

Senior Policy Analyst

Alex Muresianu is a Senior Policy Analyst at the Tax Foundation, focused on federal tax policy. Previously working on the federal team as an intern in the summer of 2018 and as a research assistant in summer 2020. He attended Tufts University, graduating with a degree in economics and minors in finance and political science.

Peter Van Ness Tax Foundation

Peter Van Ness

Research Software Developer

Peter Van Ness is a Research Software Developer at the Tax Foundation working on federal tax policy and model development. Peter previously worked as a research assistant at another think tank and as a data analyst at a consulting firm.

Aleksei Shilov Tax Foundation Research Software Developer

Aleksei Shilov

Research Software Developer

Aleksei Shilov is a Research Software developer at the Tax Foundation working on economic model development and federal tax policy. Aleksei joined the Tax Foundation as an intern in January 2025. He holds a B.S. in computer science and a minor in economics from Northeastern University and is currently based in Boston, MA.

Daniel Bunn Tax Foundation President & CEO
Expert

Daniel Bunn

President and CEO

Daniel Bunn is President and CEO of the Tax Foundation. Daniel has been with the organization since 2018 and, prior to becoming President, successfully built its Center for Global Tax Policy, expanding the Tax Foundation’s reach and impact around the world. Prior to joining the Tax Foundation, Daniel worked in the United States Senate at the Joint Economic Committee.