Taxes

To measure tax expenditures, the normal tax structure—the reference tax system—in which they represent special treatment must be defined. This report outlines how the reference tax system used by CBO affects its estimates of tax expenditures.

CBO examined how the benefits from major tax expenditures in the individual income tax and payroll tax systems were distributed among households in different income groups in 2019.

In 2018, average household income after accounting for means-tested transfers and federal taxes was $37,700 among households in the lowest quintile and $243,900 among households in the highest quintile.

CBO provides additional detail about its latest baseline projections, which were published on July 1, 2021. The projected deficit for 2021 is $3.0 trillion, $126 billion less than the deficit recorded last year.

If current laws generally remain unchanged, the federal budget deficit will total $3.0 trillion and federal debt will reach 103 percent of GDP in fiscal year 2021, CBO estimates, and real GDP will grow by 7.4 percent in calendar year 2021.

CBO describes estate and gift taxes, the people who pay them, the types of assets that make up taxable estates, and the model the agency uses to project estate and gift tax revenues in its baseline.

View CBO’s budget infographics to see how much the federal government spent and took in during fiscal year 2020, as well as broader trends in the budget over the past few decades.

This document provides additional information about the baseline budget projections that CBO released on February 11, 2021.

CBO presents its projections of the federal budget for the next 30 years if current laws governing taxes and spending generally did not change. Growth in revenues would be outpaced by growth in spending, leading to rising deficits and debt.

If current laws governing taxes and spending generally remain unchanged, CBO projects, in 2021, the federal budget deficit will total $2.3 trillion, federal debt will reach 102 percent of GDP, and real GDP will grow by 3.7 percent.

CBO periodically issues a compendium of policy options and their effects on the federal budget. This document provides estimates of the budgetary savings from 83 options that would decrease federal spending or increase federal revenues.

In 2017, average household income before accounting for means-tested transfers and federal taxes was $21,300 for the lowest quintile and $309,400 for the highest quintile. After transfers and taxes, those averages were $35,900 and $229,700.

By providing financial support to households, businesses, and state and local governments, federal laws enacted in response to the 2020 coronavirus pandemic will offset part of the deterioration in economic conditions brought about by the pandemic.

The average error for CBO’s budget-year revenue projections is 1.2 percent, indicating the agency has tended to slightly overestimate revenues. For the agency’s sixth-year revenue projections, the average error is greater—5.6 percent.

CBO examines the IRS’s enforcement activities between 2010 and 2018 and analyzes how the decline in those activities reflects the decline in its funding and staff over that period. CBO also estimates how changes to the IRS’s budget could affect federal revenues.

CBO has reduced its projections of corporate income tax receipts for the 2020–2029 period by $127 billion (or about 4 percent). That change from the agency’s August 2019 projections arose from several sources.

CBO examines the tax benefit of having dependents under current law in 2019 and 2026 and analyzes how three policy options that would simplify dependent-related tax provisions would affect that benefit.

This report projects the distributions of household income, means-tested transfers, and federal taxes under current law in 2021 and compares them with the actual distributions in 2016.

CBO examines choices lawmakers would face in establishing a federal tax on the miles traveled by commercial trucks—including choices about the tax base, rate structure, and implementation methods—and illustrates how such a tax might affect the federal budget.

In this report, CBO projects, on the basis of current law, marginal federal tax rates on labor income from 2018 through 2028. So that current trends can be understood in a historical context, the projections are accompanied by rates from 1962.