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Understanding middle-class tax cuts

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  • Alex Brill

    (American Enterprise Institute)

Abstract

Middle-class tax relief has widespread support across the political spectrum, but the consequences of different strategies for achieving this goal are not well understood. Using a new modeling suite incubated by AEI's Open Source Policy Center, this paper evaluates stylized versions of middle-class tax relief options with respect to the average effective marginal tax rate (EMTR) on labor income, the number of taxpayers claiming the standard deduction, the number of taxpayers receiving tax relief, and the macroeconomic effects. The analysis finds that either doubling the standard deduction or expanding the brackets for the 10 or 15 percent tax rates results in lower EMTRs for taxpayers in the middle class, but that these policies have quite different effects both within the middle class and across the aggregate economy.

Suggested Citation

  • Alex Brill, 2016. "Understanding middle-class tax cuts," AEI Economic Perspectives, American Enterprise Institute, April.
    • Handle: RePEc:aei:journl:y:2016:id:881479
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    References listed on IDEAS

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    3. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-572, June.
    4. Jason DeBacker & Richard W. Evans & Kerk L. Phillips, 2015. "Macroeconomic effects of a 10% cut in statutory marginal income tax rates on ordinary income," AEI Economics Working Papers 867069, American Enterprise Institute.
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