Tax and fiscal policy will loom large in the next president’s domestic policy agenda. Nearly all of the tax cuts enacted since 2001 expire at the end of 2010 and the individual alternative minimum tax (AMT) threatens to ensnare tens of millions of Americans. While a permanent fix palatable to both political parties has proven elusive, both candidates have proposed major tax changes. This report describes how we performed our modeling and analysis, outlines the major tax proposals, and discusses the implications of their policies for the revenue raised, taxpayer economic activity, and the distribution of the tax burden.

Overall, the federal tax system is highly progressive. On average, households with higher incomes pay taxes that are a larger share of their income. The tax cuts passed since 2001 have reduced progressivity with the notable exception of the 2008 stimulus package. Almost all provisions of the tax cuts are set to expire by the end of 2010. Barring legislative action, effective tax rates will rise across the income spectrum in 2011 with the largest increases in the upper income classes. This paper summarizes the Tax Policy Center’s latest estimates of the distribution of federal taxes for 2008 through 2011.

Overall, the federal tax system is highly progressive. On average, households with higher incomes pay taxes that are a larger share of their income. The tax cuts passed since 2001 have reduced progressivity with the notable exception of the 2008 stimulus package. Almost all provisions of the tax cuts are set to expire by the end of 2010. Barring legislative action, effective tax rates will rise across the income spectrum in 2011 with the largest increases in the upper income classes. This paper summarizes the Tax Policy Center’s latest estimates of the distribution of federal taxes for 2008 through 2011.