Summary: We estimate the budgetary and economic effects of increasing the top rate on long-term capital gains and qualified dividends from 20 percent to 24.2 percent. The policy would be enacted on January 1st, 2021.
Table 1. Conventional and Dynamic Budget Estimate, FY2021-2030
Billions of Dollars, Change from Current-Law Baseline
| Policy | Conventional | Dynamic | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2021-2025 | 2021-2030 | 2021-2025 | 2021-2030 | |
| Increase tax rates on capital gains & dividends | 4.7 | 6.3 | 6.4 | 6.5 | 6.8 | 6.4 | 6.8 | 7.2 | 7.4 | 7.8 | 30.7 | 66.3 | 14.0 | 59.3 |
Table 2. Dynamic Macroeconomic Effects
Percent Change from Baseline
| Year | GDP | Capital stock | Labor income | Weeks worked |
|---|---|---|---|---|
| 2030 | 0.0% | 0.1% | 0.0% | 0.0% |
| 2040 | 0.0% | 0.1% | 0.0% | 0.0% |
| 2050 | 0.1% | 0.3% | 0.1% | 0.0% |
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.