Summary: We estimate the budgetary, economic and distributional effects of eliminating all Schedule-A itemized deductions. The policy would be enacted on January 1st, 2021.
Table 1. Conventional Budget Estimate, FY2021-2030
Billions of Dollars, Change from Current-Law Baseline
| Policy | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2021-2030 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Eliminate all itemized deductions | 67 | 93 | 122 | 153 | 186 | 222 | 260 | 302 | 346 | 394 | 2,146 |
Table 2. Dynamic Macroeconomic Effects
Percent Change from Baseline
| Year | GDP | Capital stock | Labor income | Hours worked | Consumption |
|---|---|---|---|---|---|
| 2030 | 0.1% | 0.7% | 0.1% | -0.2% | -0.1% |
| 2040 | 0.8% | 2.4% | 0.8% | 0.0% | 0.0% |
| 2050 | 2.3% | 6.5% | 2.3% | 0.3% | 0.4% |
Note: Consistent with empirical evidence, the projections above assume that the U.S. economy is 40 percent open and 60 percent closed. Specifically, 40 percent of new government debt is purchased by foreigners.
Table 3. Distribution of Policy Change by Annual Income Categories, Relative to Current-Law Baseline
| Income group | Average tax change | Share with a tax increase | Percent change in after tax income | Share of tax change | Share of federal taxes paid | Change in share of federal taxes paid |
|---|---|---|---|---|---|---|
| Bottom quintile | $0 | 1% | 0.0% | 0% | 0% | 0.0% |
| Second quintile | $10 | 2% | 0.0% | 1% | 1% | 0.0% |
| Middle quintile | $80 | 8% | -0.2% | 4% | 8% | -0.1% |
| Fourth quintile | $295 | 17% | -0.4% | 11% | 17% | -0.2% |
| 80-90% | $625 | 29% | -0.5% | 10% | 14% | -0.1% |
| 90-95% | $1,345 | 44% | -0.7% | 10% | 11% | 0.0% |
| 95-99% | $2,930 | 55% | -1.0% | 17% | 18% | 0.0% |
| 99-99.9% | $12,760 | 68% | -1.5% | 17% | 15% | 0.0% |
| Top 0.1% | $204,015 | 78% | -2.8% | 31% | 17% | 0.5% |