The 1 Percent Solution on Tax Revenues

How much would an additional 1 percentage point of real economic growth add to tax revenues?  According to CBO, $2.66 trillion. 

But what about if the current tax rate hikes of 2013 are avoided indefinitely?  That is, what if the top rate remains at 35 percent, and the capital gains/dividends rate remains at 15 percent (along with all the lower bracket policy remaining in place)?

The answer is that there would be enough money such that tax revenues in 2021 would be $5 trillion, nearly a record at 21 percent of economic output and collecting the exact same amount of money as CBO's slow-growth, tax hike baseline.

This is what is meant by higher tax revenues being derived from economic growth, not from tax increases that make all of us poorer.

Posted by Ryan Ellis on Monday, July 11, 2011 3:55 PM EDT

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