Key Points

• The Keep Your Pay Act (KYPA) would more than double the standard deduction, expand and make fully refundable the Child Tax Credit, and expand the Earned Income Tax Credit for childless workers.

• We estimate that these three provisions would reduce federal revenue by $6.4 trillion over the 10-year budget window.

• Households in the lowest quintile see the largest percentage increase in after-tax income, but households in the upper two quintiles benefit most in absolute terms.

• Increasing the top ordinary tax rates to 41 percent and 43 percent respectively would offset $1.4 trillion of this, leaving about $5.0 trillion in decreased revenues. Households at the bottom and middle of the distribution are generally unaffected, while the highest-income taxpayers experience a net tax increase after incorporating this provision.

---

Background

The Keep Your Pay Act (KYPA), proposed by Senator Cory Booker (D-NJ), would more than double the standard deduction, expand the Child Tax Credit, and increase the Earned Income Tax Credit for childless workers.

Standard Deduction

Under current law, the standard deduction for 2026 is approximately $16,100 for single filers, $24,150 for heads of household, and $32,200 for married couples filing jointly. KYPA would more than double the standard deduction for all filing statuses beginning in 2026 and index the value for inflation thereafter (Table 1). In practice, taxpayers with income below the applicable standard deduction value owe nothing in federal income taxes.

Child Tax Credit

Under current law for 2026, the Child Tax Credit provides up to $2,200 per qualifying child under age 17. The credit is partially refundable up to $1,700 per child and phases out beginning at $200,000 for single filers and $400,000 for married couples filing jointly.

KYPA would expand the CTC through provisions based on the American Family Act. The expanded CTC would provide $4,320 per child under 6 and $3,600 per child aged 6–17, with an additional $2,400 bonus in the year a child is born. The credit would be fully refundable, and would phase out in stages: the expanded credit amounts phase down to $2,000 per child beginning at $112,500 for single filers and $150,000 for married couples filing jointly. The base $2,000 credit phases out beginning at $300,000 for single filers and $400,000 for married couples filing jointly. All amounts are indexed for inflation beginning after 2026.

Earned Income Tax Credit for Childless Workers

Under current law for 2026, the EITC for workers without qualifying children is available to individuals aged 25 through 64. The maximum credit is approximately $664, with a phase-in rate of 7.65 percent and a phase-out rate of 7.65 percent.

KYPA would expand the EITC for childless workers through provisions based on the Tax Cut for Workers Act. Major changes include: the minimum age would be lowered to 19, and the maximum age limit would be removed. The phase-in and phase-out rates would double from 7.65 percent to 15.3 percent, and the earned income and phase-out amounts would increase, raising the maximum credit to approximately $1,500. All amounts are indexed for inflation beginning after 2026.

---

Revenue Effects

Table 4 presents the estimated revenue effects of the three KYPA provisions over the 10-year budget window. We estimate that the provisions would reduce federal revenue by $6.4 trillion over the ten year budget window beginning in 2026. The increased standard deduction accounts for the vast majority of the cost at $5,105 billion. The expanded Child Tax Credit adds $1,262 billion in costs, reflecting both higher credit amounts and a shift to full refundability, while the EITC expansion for childless workers would cost $64 billion.

---

Distributional Effects

Table 5 presents the conventional distributional effects of the three KYPA provisions in 2026. Households in the lowest quintile see the largest percentage increase in after-tax income, driven primarily by the expanded refundable credits. Benefits as a share of income decline steadily at higher income levels, but it is households in the upper two quintiles that benefit most in absolute terms. Because the credits phase out at higher income levels, it is the expanded standard deduction that drives the benefits for these high-income taxpayers.

---

Possible Revenue Offsets

Senator Booker has stated that the revenue losses above will be offset by “raising the corporate tax rate, strengthening the corporate tax rules, increasing taxes on stock buybacks, tightening limits on executive compensation deductions, and other measures” but has not provided any information about these proposals. The senator described in a tweet an additional provision that would raise the top two ordinary income tax rates. The 35 percent bracket would increase to 41 percent and the 37 percent bracket would increase to 43 percent. This section presents the estimated revenue and distributional effects of the full KYPA package inclusive of the rate increase. We will update our estimates as more information about the proposal becomes available.

We estimate that the ordinary rate increase provision would raise about $1.4 trillion over the 10 year budget window, offsetting some of the budget cost of the other provisions but leaving about $5.0 trillion in decreased revenues.

Table 7 presents the distributional effects of the full KYPA package including the top ordinary rate increase. For households below the 90th percentile, the distributional effects are essentially unchanged from Table 5, as the rate increase applies only to income in the top two brackets. Households in the 95th–99th percentile still receive a small net tax cut, while those in the 99th–99.9th percentile face a net tax increase averaging $30,305 (-1.8 percent of group income). The top 0.1 percent by income experience the largest tax increase, averaging $379,290 per household (-2.9 percent of group income).

---

This analysis was produced by Brendan Novak under the direction of Alex Arnon.