Summary: On June 14th 2022, Senator Chuck Grassley (R-IA) introduced legislation (text, summary) that would make five changes to the tax code starting in tax year 2022:

  1. Expand the 0 percent capital gains bracket. The proposal expands the taxable income range over which capital gains are taxed at 0 percent from $41,675 ($83,350 married) to $89,075 ($178,150).
  2. Raise the Net Investment Income Tax (NIIT) threshold. The proposal raises the NIIT threshold for married filers from $250,000 to $400,000, keeping the threshold for single filers at $200,000. The threshold would be indexed to inflation going forward.
  3. Create an exclusion for interest income. The proposal allows single filers to exclude up to $300 ($600 married) of interest income from gross income.
  4. Expand the Saver’s Credit. The “Saver’s Credit” is a nonrefundable credit that matches up to 50 percent of retirement contributions of certain filers. Under the proposal, the maximum credit value is increased from $1,000 to $1,250 ($2,000 to $2,500 married) and the phaseout range is expanded such that the maximum qualifying AGI rises from $34,000 to $42,500 ($68,000 to $85,000) with a more gradual phaseout rate.
  5. Extend the limitation on the deduction for state and local taxes (SALT). The proposal extends the sunset date for the $10,000 cap on SALT deductions from end-of-year 2025 to 2028.

Table 1 contains conventional revenue estimates. We estimate the proposal would raise a net $122 billion over the budget window (2023-2032). The tax cut provisions considered alone would cost $278 billion. Tables 2 and 3 display projected distributional effects in tax years 2023 and 2026, respectively.

Table 1. Revenue Estimates, FY 2023-2032

Billions of Dollars, Change from Current-Law Baseline

Provision 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Budget window
Create an exclusion for interest income -3.4 -2.0 -2.0 -2.2 -2.3 -2.4 -2.4 -2.5 -2.5 -2.6 -24.3
Expand the 0 percent capital gains bracket -25.5 -15.3 -15.8 -17.2 -18.1 -18.4 -18.7 -19.2 -20.0 -20.3 -188.5
Raise the NIIT threshold -4.8 -3.4 -3.8 -4.0 -4.5 -4.9 -5.3 -5.7 -6.2 -6.6 -49.3
Expand the Saver’s Credit -3.0 -1.6 -1.6 -1.6 -1.6 -1.5 -1.5 -1.4 -1.3 -1.3 -16.4
Extend the limitation on the deduction for SALT 0.0 0.0 0.0 97.5 131.6 139.1 32.5 0.0 0.0 0.0 400.7
Total -36.7 -22.3 -23.2 72.5 105.1 112.0 4.6 -28.9 -30.1 -30.7 122.2

Table 2. Distributional Estimates, Tax Year 2023

Income group Average tax change Share with tax cut Average tax cut Share with tax increase Average tax increase Percent change in after-tax income Share of tax change Change in share of federal taxes paid
Bottom quintile $0 0.4% -$25 0.0% $0 0.0% 0.0% 0.0%
Second quintile -$20 13.0% -$155 0.0% $0 0.1% 3.2% 0.0%
Middle quintile -$55 23.7% -$230 0.0% $0 0.1% 8.6% 0.0%
Fourth quintile -$140 32.2% -$435 0.0% $0 0.2% 19.4% 0.0%
80-90% -$420 49.5% -$850 0.0% $0 0.3% 24.4% -0.1%
90-95% -$690 63.4% -$1,090 0.0% $0 0.3% 19.3% 0.0%
95-99% -$980 75.9% -$1,290 0.0% $0 0.3% 21.2% 0.0%
99-99.9% -$660 87.9% -$750 0.0% $0 0.1% 3.2% 0.1%
Top 0.1% -$935 96.7% -$965 0.0% $0 0.0% 0.5% 0.1%

Table 3. Distributional Estimates, Tax Year 2026

Income group Average tax change Share with tax cut Average tax cut Share with tax increase Average tax increase Percent change in after-tax income Share of tax change Change in share of federal taxes paid
Bottom quintile $0 0.4% -$25 0.0% $150 0.0% 0.0% 0.0%
Second quintile -$15 13.0% -$145 0.4% $465 0.1% -0.7% -0.1%
Middle quintile -$30 22.8% -$225 2.8% $675 0.1% -1.2% -0.3%
Fourth quintile $15 26.7% -$480 16.7% $850 0.0% 0.4% -0.4%
80-90% $480 25.3% -$1,270 49.9% $1,605 -0.3% 6.5% -0.2%
90-95% $1,085 25.7% -$2,500 64.0% $2,705 -0.5% 7.1% -0.1%
95-99% $2,125 27.7% -$3,125 65.4% $4,565 -0.6% 10.9% -0.1%
99-99.9% $33,385 15.4% -$3,300 82.4% $41,130 -3.3% 38.4% 0.6%
Top 0.1% $283,120 13.1% -$3,705 85.7% $331,060 -3.3% 38.6% 0.6%