Assessing the Effects of Keeping Top Individual Income Tax Rates Low

The TCJA cut income taxes on top earners from 39.6% to 37%, among other changes. This brief assesses the macroeconomic impact of making the TCJA tax cut on top earners permanent compared to letting it expire and compared to raising it. IMPA’s assessment shows that permanent extension of the TCJA tax cut on top earners would sacrifice significant revenue while providing no macroeconomic benefits and increasing income inequality. In contrast, an increase in the top marginal tax rate to 44% would yield substantial revenue gains with no discernible costs in terms of GDP, private investment, or wages.