The Bipartisan Tax Fairness and Simplification Act of 2010 (”Wyden-Gregg,” introduced as S. 3018) is a broad reform of the federal income tax system. Some provisions would also expand the Social Security payroll tax base. This paper presents the Tax Policy Center’s estimates of the revenue and distributional effects of the income and payroll tax provisions in Wyden-Gregg.

In 2010, 45 percent of tax returns will either remit no federal income tax or receive a net tax refund. But this figure overstates the share of taxpayers who would be unaffected by higher income tax rates. Raising all rates by 1 percent would hold only 34 percent of tax returns harmless; others would either pay higher taxes or receive smaller net rebates.

Unless Congress changes the law, the federal estate tax
will disappear on January 1, 2010. For the first time since
the 1916 inception of the tax, the estate of anyone dying
in 2010 will go to heirs tax free, a result of the 2001 tax
law that phased out the estate tax over 10 years. But that
law itself expires in 2011 and the estate tax will revert to
pre-2001 law.