Combination 4:

Raise Taxes on the Wealthy and Corporations

Topline Estimates

Gross Domestic Product (GDP)
-1.7%
Gross National Product (GNP)
-1.5%
Full-Time Equivalent Jobs
-1.1M
Wage Rate
-0.9%
Capital Stock
-2.7%
Conventional Primary Deficit Change (10‑Yr)
-$3,390.6B
Dynamic Primary Deficit Change (10‑Yr)
-$1,954.3B
Dynamic Total Deficit Change (10‑Yr)
-$2,390.9B

Source: Tax Foundation General Equilibrium Model.

This option combination raises taxes on high-income households and corporations by increasing the corporate income tax rate to 28 percent, the top individual income tax rate to 50 percent, and the top tax rate on long-term capital gains and qualified dividends to 30 percent.

These rate hikes would increase marginal tax rates on labor, investment, and saving, reducing hours worked, capital investment, and saving. Reductions in hours worked and capital investment would reduce long-run GDP, while reductions in saving would further reduce long-run GNP. The additional revenue from the higher tax rates would decrease the budget deficit, reducing interest payments, which would offset some of the decline in GNP.

On a conventional basis, this option would decrease the primary deficit by $3,390.6 billion over the budget window. Long-run GDP would fall by 1.7 percent, while long-run GNP would fall by 1.5 percent. On a dynamic basis, the primary deficit would decrease by $1,954.3 billion from 2027 through 2036, $1,436.3 billion less than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be lower than current law baseline, reaching 164.4 percent by 2056.

On average, taxpayers would see a decrease in their after-tax incomes of 1.6 percent in 2027 on a conventional basis, 1.7 percent by 2036, and 3.0 percent in the long run on a dynamic basis. The most pronounced after-tax decreases occur in the top 1 percent of taxpayers, but taxpayers across the income spectrum would be negatively affected on both a conventional and dynamic basis.

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.