The War on Wealth Policy Analysis
Waging War on Wealth with a Post-WWII Style Tax Policy:
Fiscal and Economic Analysis
1
Austin Winkelman for Congress 2026
Introduction and Policy Overview
In this analysis, we evaluate the effects of repealing the 2017 Trump-era tax cuts and implementing a
modernized version of post–World War II U.S. tax policy. During the post-WWII era (1940s–1960s), the U.S.
tax code featured very high progressive rates – top marginal income tax rates above 90% and corporate tax rates
around 50% – alongside a broader tax base. We consider a proposal that emulates that framework, updated for
today’s economy. The key policy assumptions include:
Full repeal of the 2017 Tax Cuts and Jobs Act (TCJA) for individuals and businesses. This restores
pre-2018 tax rates and rules (e.g. the top individual rate returns to 39.6% from 37%, lower brackets
revert to their higher pre-TCJA levels, the standard deduction and child credit revert, the corporate rate
returns at least to 35%, etc.). It also removes TCJA limits like the cap on state and local tax (SALT)
deductions.
A 90% top marginal income tax rate on annual taxable income over $10 million (restoring a high
bracket similar to the 91% top rate in the 1950s). Incomes below $10 million would continue to be taxed
at graduated rates (which, after TCJA repeal, range up to 39.6%). Only the portion of income above $10
million faces the 90% rate.
Taxing capital gains as ordinary income for high earners. Investment income (long-term capital
gains and qualified dividends) currently enjoys a top rate of 20%, but under this plan, for individuals in
the highest brackets, capital gains/dividends would be taxed at the same rates as wages. This eliminates
the preferential treatment of capital income for the wealthy. (In practice, that means wealthy investors
could face up to 90% on gains above the $10M threshold, removing a major avenue of tax avoidance.)
Raising the corporate tax rate to 42%. This is a substantial increase from the current 21% (established
by the TCJA) and even above the pre-2018 rate of 35%. It approaches the historical highs of the 1950s–
60s (when the federal corporate tax rate was 46% and effective rates sometimes exceeded 50% with
certain surcharges). The higher corporate rate today aims to recapture corporate revenues similar to mid-
20th-century levels.
A 1% annual wealth tax on ultra-high net worth. An annual tax of 1% on net household wealth
above $50 million. (For example, a household worth $100M would pay 1% of $50M, i.e. $500,000 per
year.) This is a relatively modest wealth tax (compared to some proposals of 2%–3%) but would
generate new revenue from large fortunes. Strong anti-evasion measures and enforcement funding
would accompany this tax, as in recent wealth tax proposals.
Repeal of recent global tariffs and trade-war duties. All tariffs imposed in the late 2010s (such as
broad tariffs on Chinese imports, steel and aluminum, etc.) are assumed to be removed. This would
return trade policy to a free(er) trade stance, lowering import costs. The effects on trade volumes, GDP,
and prices from tariff elimination are taken into account in the dynamic analysis.
These combined policies represent a dramatic shift toward progressive taxation reminiscent of the mid-20th
century but implemented in a contemporary context. The analysis below details the fiscal impact on the
federal budget (revenue gains and deficit reduction over 15- and 30-year horizons), the distribution of the tax
burden (by income group, corporate sector, and state), and the dynamic economic effects (including growth,
inflation, interest rates, and behavioral responses).
Waging War on Wealth with a Post-WWII Style Tax Policy:
Fiscal and Economic Analysis
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Austin Winkelman for Congress 2026
Impact on Federal Budget: Revenue Gains and Deficit Reduction
Overall Revenue Increase: Replacing the TCJA with this aggressive tax regime would yield a very large
increase in federal revenue. On a static basis (i.e. not yet accounting for macroeconomic feedback), we estimate
on the order of $10–12 trillion in additional revenue over the next 15 years, and roughly $25–30 trillion
over 30 years. This would represent a massive deficit reduction, substantially shrinking the federal debt
trajectory. For context, the Congressional Budget Office (CBO) projected that simply extending the 2017 tax
cuts for another decade (2025–2034) would add about $4.5 trillion to deficits; by not extending and instead
repealing those cuts, that ~$4+ trillion stays in the Treasury. Each major component of the proposal contributes
to the revenue gains, as summarized in Table 1:
Policy Change
Estimated 15-Year
Revenue Gain (2025–
Estimated 30-Year
Revenue Gain (2025–
Repeal of 2017 Tax Cuts (TCJA) – restore individual
rates, standard deduction, etc.
~$6–7 trillion ~$12–15 trillion
90% Top Income Tax Rate (on income > $10M) +
Taxing Capital Gains at Ordinary Rates for high
earners
~$2–3 trillion ~$5–6 trillion
Corporate Tax Rate to 42% (from 21%) ~$5–6 trillion ~$12–18 trillion
1% Wealth Tax (net worth > $50M) ~$1–2 trillion ~$3–4 trillion
Repeal of Tariffs (loss of customs revenue) (–) ~$1 trillion (–) ~$2–3 trillion
Total Additional Revenue – Static ≈ $12 trillion ≈ $30 trillion
Total Additional Revenue – Dynamic (approx.) ≈ $10 trillion ≈ $25 trillion
Table 1: Rough estimates of cumulative revenue increases from each component over 15- and 30-year horizons.
Static figures sum to about $12T (15yr) and $30T (30yr). Dynamic scoring (accounting for economic feedback
and behavioral changes) might reduce the totals by ~15–20%, as shown in the last row. These are in nominal
dollars over the period.
Sources: Joint Committee on Taxation estimates for TCJA extension costs; Penn Wharton Budget Model
analysis for wealth tax revenue; historical corporate tax share of GDP; Tax Foundation and CBO data on tariff
revenue; see text for details and assumptions.
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Austin Winkelman for Congress 2026
Breakdown of the Revenue Estimates
Repealing the Trump Tax Cuts: The TCJA (2017) significantly lowered individual tax rates
(especially for higher incomes) and cut the corporate tax rate from 35% to 21%. Most individual
provisions were set to expire after 2025, but if they were extended, JCT estimates a revenue loss of
~$4.0–4.5 trillion over 10 years. By fully repealing TCJA, we gain back roughly that amount in the
first decade. Over 15 years, that figure grows further (as the economy and income levels expand).
Simply restoring pre-2018 tax law for individuals (top rate back to 39.6%, standard deduction halved,
child credit reduced, etc.) would generate several trillion in new revenue through 2039. For example,
just letting the top individual rate revert to 39.6% (from 37%) for high incomes above ~$600k was
estimated to raise about $20 billion per year. Across all individual provisions, the recouped revenue is
on the order of $6–7 trillion/15 years. This directly reduces deficits (since government outlays are
assumed unaffected).
90% Top Marginal Rate on Income > $10M: Adding a new 90% bracket for ultra-high incomes
will further boost revenue from the very wealthy. However, the taxable base for this rate is relatively
small – only the portion of income above $10 million for each top-earner. According to IRS data, in
2022 there were about ~25,000 households with over $10 million in adjusted gross income (the top
0.01% or so). Collectively, this group reported about $1.05 trillion of income. Under current law, only a
fraction of that income is actually taxed in the top bracket: one analysis found that only 15% of the
$1.05T (about $162 billion) would be subject to the 39.6% rate in effect if the top bracket reverted. The
other ~85% is either taxed at lower rates (the portions under $10M), or receives special treatment (e.g.
capital gains and dividends at only 20%, or 20% pass-through business deduction, etc.). This highlights
why simply raising the top statutory rate can have limited reach – most of the income of the super-rich
is shielded from the top rate under current rules. Our plan addresses that by taxing capital gains at
ordinary rates and eliminating the pass-through deduction for high earners, which broadens the base of
income that would face the 90% rate. In static terms, if even, say, $500 billion of that ultra-high-end
income ends up taxed at 90% instead of the current ~20% effective rate, the additional revenue is
substantial (an extra 70% on that $500B = $350B per year). Realistically, behavioral responses
(discussed later) would shrink that, but it indicates the scale. We project the 90% rate (plus capital gains
reform) could yield on the order of $2–3 trillion over 15 years, and around $5+ trillion over 30 years,
on top of the TCJA repeal. This assumes aggressive enforcement and that high earners do not massively
curtail their economic activity (again, see dynamic section). Notably, historical precedent: in the 1950s
when the top rate was 91%, very few taxpayers actually paid that rate – effective tax rates for the top
0.01% were around 45%, due to avoidance and tax shelters. Our proposal attempts to mitigate that
through base-broadening (fewer loopholes), but it is unlikely the full 90% of every dollar would be
collected.
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Austin Winkelman for Congress 2026
Corporate Tax Rate at 42%: The increase in the corporate income tax from 21% to 42% (a doubling)
is one of the largest sources of revenue. Pre-TCJA, the corporate rate was 35%; going to 42% exceeds
that, approaching the 48% rate that prevailed in the 1950s–60s. Corporate tax receipts have fallen
dramatically as a share of GDP over the past decades – in the 1950s the federal corporate tax yielded
about 5% of GDP in revenue annually, versus around 1% of GDP in recent years. By raising the rate
(and assuming fewer loopholes are available), corporate tax collections could rise closer to their midcentury
levels. For example, the bipartisan Joint Committee on Taxation projected that the TCJA
business tax changes (including the corporate cut to 21%) would reduce revenues by ~$1.5 trillion over
2018–2027. Independent analyses suggest each percentage-point increase in the corporate rate yields
on the order of $100 billion over 10 years (though it’s not linear at extremes). A rough rule: increasing
the rate by 1 point (21%→22%) raises ~$100B/decade; so a 21-point increase (to 42%) could raise
ballpark ~$2.1 trillion per decade before behavioral effects. This is in line with other comparisons – for
instance, the Penn Wharton Budget Model found that raising the corporate rate from 21% to 36%
would raise roughly $5.2 trillion over 10 years on a conventional static basis. Going up to 42% (6
points higher) would add further revenue (potentially ~$6–7 trillion/decade static). For 15 years, we
estimate about $5–6 trillion could be raised, and $12–18 trillion over 30 years (the wide range reflects
uncertainty in profit growth and avoidance behavior). It’s worth noting that many large corporations
currently pay well below the statutory 21% due to deductions and credits. Post-TCJA, the average
effective tax rate for profitable Fortune 500 firms was only ~13%. Our estimate assumes the effective
rate would rise significantly under a 42% statutory rate (perhaps into the 25–30% range on average after
loopholes), which is plausible if reforms accompany the rate hike.
– Corporate Sector Examples: The TCJA’s corporate cut dramatically lowered tax bills for many
companies. For example, Verizon saw its effective tax rate drop from 21% to 8%, saving about $10.7
billion in taxes over 2018–2021. Walmart’s effective rate fell from 31% to 17%, saving about $9.0
billion. AT&T went from 13% to 3%, a savings of $8.2 billion. Reverting to a high corporate rate
would reclaim much of these savings for the Treasury. We anticipate the biggest revenue gains would
come from sectors that benefited most from the rate cut. Industries that had large drops in effective tax
rates – for instance, the electronics/tech sector saw a >20 percentage-point drop (from ~31% to 9%)
after 2017 – would likely contribute heavily to the revenue surge as their tax bills rise. In contrast, some
industries that already exploit many tax breaks might see less change. Notably, motor vehicles, oil &
gas, and utilities had effective tax rates near 0% even before 2017 (through use of credits,
accelerated depreciation, etc.), and thus saw little change post-TCJA. Without closing loopholes, those
particular sectors still might not pay anywhere near 42%. (For example, oil companies often shelter
profits, sometimes even receiving net tax rebates.) Our revenue estimates assume complementary
measures to broaden the corporate tax base, so that highly profitable firms in tech, finance,
pharmaceuticals, etc., cannot easily avoid the higher rate. Overall, the corporate tax hike is a cornerstone
of the deficit reduction, potentially contributing roughly one-third to one-half of the total new revenue
over 30 years.
Waging War on Wealth with a Post-WWII Style Tax Policy:
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Austin Winkelman for Congress 2026
1% Wealth Tax on $50M+: Taxing extreme wealth directly would add a new stream of revenue. While
a 1% rate seems small, the base (ultra-wealthy fortunes) is enormous and highly concentrated. For
example, Senator Elizabeth Warren’s more aggressive wealth tax proposal (2% on $50M+ and 3% on
$1B+) was estimated to raise about $3 trillion over 10 years by economists Saez and Zucman. The
Penn Wharton Budget Model’s analysis of that plan (accounting for some evasion) projected about
$2.1–2.7 trillion over 10 years under conventional scoring. Our 1% flat tax is roughly one-half to onethird
the intensity of Warren’s, so a rough static estimate is around $1–1.5 trillion per decade in
revenue. We assume about $1.2 trillion per 10 years initially, growing in later decades as wealth
accumulates (tempered slightly by the tax itself slowing that accumulation). Over 15 years, that could be
~$1.5–2T; over 30 years, perhaps ~$3–4T. These figures already factor in some level of
avoidance/evasion (for example, wealthy individuals might attempt to undervalue assets or shift
residency abroad). To enforce the tax, increased IRS resources and anti-evasion measures (like those in
Warren’s plan, e.g. a 30% audit rate for the ultra-wealthy and an exit tax on expatriation) are assumed.
Even with enforcement, actual yield could be lower; PWBM found that including macroeconomic
effects and avoidance could reduce the 10-year take by about 17% (from $2.4T to $2.0T). In our
dynamic projections, we account for a similar discount. Importantly, this wealth tax is highly targeted: it
would affect at most ~0.05% of households (around 100,000 families) – those with net worth over $50M
– and 99.95% of Americans would not pay this tax. Thus, it concentrates revenue collection on the
richest families, aligning with the progressive intent of the post-WWII-style system. The revenue gained
would directly reduce the deficit unless spent; here we assume it’s used for deficit reduction.
Tariff Repeal (Negative Revenue Impact): One component of our plan actually reduces revenue:
eliminating the Trump-era tariffs means the government forgoes the customs duties that were being
collected on imports. However, these tariff revenues are relatively small in the context of the other tax
changes. At their peak, tariffs imposed since 2018 were generating about $5-7 billion per month, or
roughly ~$60–80 billion per year in revenue (paid by importers). Over 10 years that might be ~$0.7
trillion. One analysis by the Tax Foundation found that all the tariffs implemented would have raised
about $2.0 trillion over a decade on a static basis (this presumably includes assumed
continuation/expansion of tariffs), but only $1.4 trillion on a dynamic basis once you account for
economic drag. In our scenario, those tariffs are gone, so we lose that revenue stream – call it on the
order of $100 billion per year at most. Over 15 years, that’s roughly -$1 to -$1.5 trillion less revenue;
over 30 years, perhaps -$2 to -$3T (as shown in Table 1). However, as we detail under dynamic effects,
removing tariffs is expected to boost economic growth and thereby increase other tax revenues (income,
profits), which can partially offset the loss. Additionally, since the tariffs were effectively a tax mostly
borne by U.S. consumers (through higher prices), removing them does put money back in consumers’
pockets, somewhat analogous to a tax cut. We assume here that the net effect of tariff repeal on the
budget is roughly a wash in the long term once macro feedbacks are included (i.e. lost tariff dollars are
replaced by higher income and sales tax receipts from a larger economy).
Waging War on Wealth with a Post-WWII Style Tax Policy:
Fiscal and Economic Analysis
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Austin Winkelman for Congress 2026
Deficit and Debt Effects: Taken together, these policies would markedly reduce the federal deficit each year.
By 2030, annual revenues could be several percentage points of GDP higher than under current law, while
outlays are assumed unchanged. For example, if current-law revenues are ~18% of GDP, this plan might push
them above 22–23% of GDP (comparable to the high revenue years during WWII and the 1950s). Over 15
years, the cumulative deficit reduction (pre-interest) is roughly equal to the revenue gains (around $12T). Over
30 years, if ~$25–30T extra is collected, that is an enormous dent in the national debt. To illustrate, $25 trillion
is about equal to the entire current public debt – effectively, this plan could stabilize or even reduce the debtto-
GDP ratio over time, depending on spending levels. In practice, some of the revenue might be used for new
spending priorities, but for this analysis we assume it’s all saving. One must also consider interest savings:
lower deficits mean the government borrows less, so interest costs on the debt would also be lower than
baseline. This compounds the deficit reduction (a virtuous cycle). By CBO estimates, every $1 of deficit
reduction yields some additional savings in interest – for instance, preventing $4.5T of new deficits (the TCJA
extension cost) avoids hundreds of billions in interest costs over the decade. Thus, the debt trajectory improves
even more when interest is accounted for. Overall, federal debt in 30 years would be vastly lower than under
current policies – potentially tens of trillions lower – improving fiscal sustainability. (Of course, such high
taxation could have other economic side-effects, which we explore below.)
Distributional Effects: Who Pays and Where the Revenue Comes
From
A critical aspect of returning to a post-WWII-style tax system is the highly progressive distribution of the tax
burden. In other words, the bulk of the new revenue will come from those most able to pay – the wealthy
individuals, large corporations (and by extension their shareholders and owners), and the richest estates. We
break down the impacts by income group, by corporate sector, and by geography (state/region):
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Austin Winkelman for Congress 2026
By Individual Income Bracket
High-Income Households (Top 1%, 0.1%, 0.01%): These groups would bear the lion’s share of the tax
increases. Between the 90% marginal rate, the ordinary tax on capital gains/dividends, and the 1% wealth tax,
the ultra-rich are targeted from multiple angles. We estimate that well over 90% of the additional individual
income-tax revenue would come from the top 5% of earners, and a plurality from the top 0.1% alone. In
fact, just the new 90% bracket on $10M+ incomes is almost exclusively a top 0.01% measure. To put numbers
on it: households making over $10M (roughly 0.01% of filers) currently report about $1 trillion in income;
however, due to various breaks, only ~$162 billion of that was subject to the previous top rate. Under our plan,
a far larger portion of their income would be exposed to the top rate (because capital gains and business income
would no longer get special low rates). Thus, the very-rich will pay dramatically more. Effective tax rates for
billionaires and millionaires would rise substantially – potentially into the 50–60%+ range of their total
income, compared to effective rates often in the 20% range today.
It’s important to note that historically, even when statutory rates were 70%–90%, the effective tax rate paid by
top earners was much lower. For example, in the late 1950s when the top marginal rate was 91%, the top
0.01% of taxpayers paid on average about 45% of their income in federal taxes. This gap was due to tax
avoidance opportunities and exclusions. Our plan, by taxing capital gains at 90% for high incomes and adding a
wealth tax, tries to reduce that gap. If successful, the effective tax rate on those earning $10M+ could approach
the statutory 90% on the margin. Realistically, many wealthy individuals will employ strategies to not realize
income above $10M (for instance, taking more stock options and fewer cash salaries, deferring asset sales, etc.).
Even so, the combination of the wealth tax (which taxes unrealized wealth growth at 1% annually) and ordinary
treatment of capital gains means the rich cannot escape forever – if they hold assets, the wealth tax collects
some revenue each year, and if they sell assets, the 90% rate applies at that moment. Thus, in the long run the
top 0.01% would contribute a vastly increased share of federal revenue.
For slightly broader high-income groups: the top 1% of households (roughly those above ~$800,000 annual
income) would also pay more, though those with incomes below $10M don’t hit the 90% bracket. They would
still be affected by the repeal of the TCJA (restoring the 39.6% bracket on ~$600k+ incomes, removing certain
deductions) and by the higher tax on capital gains if they have investment income. Many in the $1M–$10M
income range also likely have net worth above $50M (especially at the upper end), so they could owe the 1%
wealth tax too. We anticipate the top 1% will fund a major portion of the individual income tax increase
(probably the majority of it when combined with the top 0.1%). The upper-middle class and middle class
would see relatively smaller changes. For instance, middle-income taxpayers would mainly see the TCJA tax
cuts expire – e.g. the 22% bracket reverting to 25%, the child tax credit shrinking, etc. This does mean a tax
increase relative to current law, but those provisions were scheduled to expire in 2025 anyway. The bottom
50% of households would see minimal direct tax change – many pay little federal income tax now and that
would remain so. We do not assume any changes to payroll taxes in this scenario, so the working class isn’t
directly hit aside from any indirect economic shifts.
Waging War on Wealth with a Post-WWII Style Tax Policy:
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Austin Winkelman for Congress 2026
To illustrate distribution: one analysis found that over 60% of the TCJA’s tax cuts in 2025 accrue to the top
20% of households, and over one-third to the top 1%. By reversing the TCJA, those gains are taken away
largely from the top. And by raising new taxes at the top, we tilt the system much more progressive than it was
even pre-2017. In fact, under this plan the tax code would likely become the most progressive in modern
U.S. history, with record-high average tax rates on millionaires. Lower and middle-income families would
mainly return to the Clinton/Bush/Obama-era tax levels (slightly higher than 2018-2024, but nowhere near the
burdens on the rich).
Another perspective: income inequality would be expected to decrease as a result of these taxes. High earners
would retain a much smaller share of their gross income after tax. Empirical research supports this outcome –
periods of higher top marginal rates have seen compressed after-tax income distributions. In our case, a 90%
rate is almost confiscatory on the margin, which effectively caps how much of each extra dollar above $10M
one can keep (only 10 cents). This acts to curb extreme accumulations of income (and wealth, via the wealth
tax) over time. While exact distributional tables would require a microsimulation model, qualitatively the top
0.1% and top 1% would shoulder the vast majority of the new taxes, the next 4% (95th–99th percentile,
roughly $200k–$800k incomes) would pay a moderate amount more (mostly via the end of the TCJA cuts and
some indirect corporate tax incidence), and the bottom ~95% of households would pay little change in income
taxes (with some paying slightly more than today due to lost TCJA cuts, but no new surtaxes). Notably, if the
wealthy attempt to shift income back into corporations to avoid the 90% individual rate (a known historical
behavior), the higher 42% corporate tax ensures that income is still taxed heavily somewhere, and when profits
eventually flow to shareholders, they’d face dividend taxes at ordinary rates. Thus, most avenues lead to
additional tax payment at some point.
By Corporate Sector and Business Type
On the business side, the burden of the corporate tax increase would fall differently across industries. Post-
TCJA, some industries effectively paid very low tax rates. As mentioned, industries like utilities, oil & gas,
and automakers had so many tax breaks (credits, accelerated depreciation, etc.) that their effective tax rates
were near zero both before and after 2017. Unless tax expenditure reforms accompany the rate hike, these
particular sectors might continue to pay low effective rates. For instance, many utility companies pass through
tax savings to customers and have tax credits; oil companies can use depletion allowances, etc. In contrast,
highly profitable tech and financial companies generally paid closer to the full 21% (or at least in the teens)
after TCJA, so they would likely end up paying closer to the new 42%.
Looking at data from 2018–2021: the overall effective federal tax rate for 296 big profitable U.S. corporations
was about 12.8% on $2.75 trillion of profits. If those same profits were taxed at 42% with no changes in
loopholes, taxes would triple (from ~$351B to ~$1.15T for that period). Of course, companies would respond –
some might invest less or try to shift profits abroad (transfer pricing, etc.). But assuming measures against
profit-shifting are strengthened (perhaps via a tougher minimum tax or international tax coordination), many
sectors would contribute significantly more. Notably:
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Austin Winkelman for Congress 2026
The technology sector (particularly hardware/electronics) was a big winner from TCJA, dropping to
single-digit effective rates. Under a 42% regime, one would expect companies like Apple, Google, etc.,
to pay much higher taxes (unless they find new avoidance strategies). For example, Facebook (Meta)
paid around 18% effective tax post-TCJA on booming profits, versus ~28% before. If that jumped to,
say, 30% or more effective, Meta alone would pay billions more annually.
Finance and banking: The financial sector had a moderate tax cut (their effective rate dropped from
~18% to ~12.5% on average). Big banks and financial firms would likely see their tax bills roughly
double in effective terms. However, financial firms can sometimes more easily shift income into noncorporate
entities or overseas, so enforcement would be key.
Retail and pharmaceuticals: Retailers (like Walmart, Target) historically paid near full statutory rates
and got a sizable cut to ~16% effective. They would return to paying something closer to 40%.
Pharmaceutical companies often have intellectual property profit shifted to low-tax jurisdictions; a
crackdown on that would be needed or else they might avoid the full brunt.
Pass-through businesses (partnerships, S-corps, etc.): Under TCJA, pass-throughs got a 20% income
deduction (199A) which effectively cut their top rate to ~29.6%. Our plan would repeal that deduction
(as part of TCJA repeal). So large pass-through entities (law firms, hedge funds, etc. that are not Ccorps)
would see their taxes go up as well – their income above $10M could face 90%. Some may
choose to convert to C-corporations to take advantage of the (relatively lower) 42% rate instead of 90%
personal, but then dividends out to owners would be taxed at 90%. Either way, the business income is
taxed heavily. The distribution between corporate and individual tax revenues might shift depending on
organizational form preferences, but the government’s total take remains high.
In summary, most sectors of the economy would contribute more under the higher corporate rate, but
especially those currently paying substantial taxes (tech, communications, healthcare, finance, retail). Sectors
that historically paid little (due to targeted tax breaks) would need those breaks curtailed to yield more revenue.
It’s likely that as part of a “post-WWII style” reform, many corporate tax expenditures would indeed be
revisited – akin to broadening the base as was done in the 1986 Tax Reform (but that time rates were lowered;
here we raise them). If base-broadening occurs (closing loopholes), it complements the high rates by preventing
avoidance. Our revenue estimates assumed a reasonably broad base at the higher rate.
Business Behavioral Note: Facing a 42% tax, corporations might respond in various ways. They could attempt
to shift profits abroad to lower-tax countries. This plan would likely reintroduce strong anti-inversion rules and
perhaps a global minimum tax to counter that (not detailed here, but could be part of “modernizing” the post-
WWII policy for a globalized economy). Companies might lobby for more deductions; policymakers might
allow some (e.g., accelerated depreciation might or might not be kept). All these factors influence which sectors
ultimately pay the most. However, in aggregate, the business sector would unquestionably send much more
revenue to Washington than under current law – roughly doubling the federal corporate tax take as a share of
GDP, from ~1% to perhaps ~2–3% of GDP, reversing a long decline.
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By State and Region
The geographic distribution of the revenue gains will mirror where high incomes and wealth are concentrated.
Generally, coastal high-income states and large population centers will contribute the most, simply
because that’s where most rich Americans and profitable corporations reside or do business. A few points:
States with many wealthy residents: For example, California, New York, Connecticut, New Jersey,
Massachusetts, Illinois – these are states with high concentrations of millionaires and billionaires. They
will see a significant uptick in federal taxes paid. California alone has a large share of the nation’s high
earners (tech entrepreneurs, entertainment industry, etc.), and New York has a concentration of financial
industry high-earners. Even though California and New York’s wealthy had some of their federal tax cut
benefits blunted by the SALT deduction cap (which made their effective TCJA cut smaller), under our
plan the SALT cap is removed, but that is overshadowed by the much higher federal rates. To illustrate:
under a recent GOP tax proposal, the richest 1% in California would have gotten a federal tax cut
averaging “only” ~$35,000, whereas in Texas the top 1% stood to gain over $114,000 on average. That
disparity was largely because Californians lost more deduction (SALT) and thus couldn’t fully enjoy the
lower rates. In our plan, Californians get the SALT deduction back (which slightly helps them), but a
90% federal rate will far outweigh any deduction benefits. So wealthy Californians and New Yorkers
will pay much more than they do today – but relative to some no-income-tax states, their increase might
be slightly less on a percentage basis because they were already paying somewhat higher effective
federal tax under TCJA (due to SALT cap).
States with no income tax or traditionally low-tax states (Texas, Florida, Wyoming, South Dakota,
Nevada, etc.): Paradoxically, the TCJA and its extensions tend to favor wealthy individuals in no-tax
states, because the SALT cap didn’t affect them (they had little/no state income tax to deduct anyway).
For instance, the top 1% in Wyoming, South Dakota, and Texas were projected to get enormous average
tax cuts (over $100k per household) from the recent Senate tax bill. In our reversal scenario, those
states’ wealthy will lose those big cuts and then some – they will now pay the 90% rate on their high
incomes. Texas and Florida, having many rich residents (and many corporate headquarters in Texas),
would likely see some of the largest absolute increases in federal taxes paid. For example, Texas has a
lot of high-income oil executives, athletes with big contracts, etc., who benefited from lower federal
rates and no state tax; now, their federal rate could skyrocket to 90%. The federal tax increase per
affluent Texan would be huge (six or seven figures for many individuals). Wyoming and South Dakota
have few people overall but a disproportionate number of ultra-wealthy (often ranching or trust fund
wealth) – those would face the wealth tax and any income above $10M at 90%. An important
consideration: some of these no-tax states actually intentionally attract wealth (South Dakota is known
for trust shelters). A federal wealth tax would pierce that advantage, ensuring that simply being in a notax
state doesn’t avoid federal tax.
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Inequality between states: States vary in their income distributions. States like New York and
California have many of the top 0.1% but also large low-income populations. The rich in those
states will pay a lot more federally, but the middle class there won’t be as affected (beyond losing the
TCJA cut). States like Wyoming or South Dakota have few people, but the ones who are rich there will
pay a lot more – however, in absolute dollars it’s still smaller total revenue due to small population.
Texas and Florida are interesting: large populations and many wealthy – they will likely become some
of the largest net contributors under this tax regime. Florida, for instance, is home to many billionaires
(often retirees or finance people who moved for tax reasons); a 1% wealth tax and high income tax will
extract a lot from them, or could even prompt some to leave the country (a risk we note in dynamic
section).
Federal revenue by state: Currently, states like New York, California, New Jersey, Massachusetts
consistently pay more in federal taxes than they receive in spending (so-called donor states), partly
because of higher incomes. This pattern would intensify. High-income “blue” states will send even more
money to D.C. via these taxes. States with lower incomes (often “red” states) might not see much
increase among their general population, only among the handful of rich residents. For example,
Mississippi or West Virginia have very few millionaires; most of their population would just see minor
changes. Thus, the geographic revenue concentration will map onto the geographic concentration of
wealth.
To quantify some extremes: According to analysis by ITEP, the richest 1% in Wyoming would have received a
$134,000 tax cut in 2026 under TCJA extension – highest in the nation. In our scenario, instead of a $134k cut,
that average household might see a several-hundred-thousand-dollar increase (because their federal tax rate
goes way up). Meanwhile, the richest 1% in California were looking at about a $35,000 tax cut on average (one
of the smallest, due to SALT); under our plan, they might see an increase perhaps in the mid six-figures on
average (since many California top 1% are actually in the top 0.1% nationally). New York similarly had around
a ~$52k average cut for the 1%; that would swing to a large increase. The state-by-state breakdown of
revenue would likely show the largest dollar contributions from the biggest, richest states: California and New
York could each account for a significant portion of the individual income and wealth tax receipts (owing to
their many high-net-worth individuals). Texas and Florida would also contribute heavily on the individual side
(Florida has no state tax but many wealthy retirees and businesspeople; Texas as discussed). On the corporate
side, revenue is sourced to where companies operate, which is nationwide, but profits might be attributed to
certain headquarters. States like Delaware (legal incorp) might formally show corporate tax payments, but
economically it’s nationwide.
In summary, wealthier states and urban areas would fund most of the increase, aligning with the overall
progressive structure. From an equity perspective, this is intentional: it is a transfer from high-income regions to
the federal government (which presumably uses it to pay down debt or fund programs benefiting all states).
Politically, this might be contentious (states with many rich might claim over-burden), but historically, during
WWII and after, high-income states paid a lot more and it was accepted as necessary for the national interest.
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Dynamic Economic Effects (Dynamic Scoring)
We now turn to dynamic scoring – how the proposed tax changes and tariff repeal would impact the broader
economy, and in turn feed back into revenues and deficits. Dynamic effects include changes in GDP growth,
inflation, interest rates, investment, labor supply, etc., due to the policy. We incorporate potential
macroeconomic and behavioral responses:
GDP Growth and Overall Economic Activity
On one hand, substantially higher tax rates on capital and high earners could dampen private investment and
work incentives, which would tend to reduce economic output relative to baseline (a negative supply-side
effect). On the other hand, deficit reduction and tariff elimination could boost growth by lowering interest costs,
reducing trade barriers, and improving resource allocation efficiency. The net effect is a mix of these forces:
Capital Stock and Investment: Taxing corporate profits at 42% and high individual incomes (which
include a lot of business profits from partnerships, etc.) at 90% means the after-tax return on
investment drops for those investors. Standard economic theory suggests this will lead to somewhat
lower investment in the private sector – businesses might undertake fewer projects, or wealthy investors
might save less (since more of the return is taxed away). A wealth tax also directly makes holding
capital more expensive on an ongoing basis. The Penn Wharton model of Warren’s wealth tax, for
example, projected that by 2050 it would reduce the capital stock by about 3.1% and GDP by 1.2%
versus baseline. Our plan goes further in some respects (higher income and corporate taxes), so one
might expect a larger long-run GDP impact if looking in isolation. There’s a concept of a “revenuemaximizing
tax rate” (the top of the Laffer Curve) – estimates put that around 60–70% for top income
taxes under current conditions. Pushing the rate to 90% might exceed the optimal and actually yield
less additional work effort or even lower reported income to tax. However, because we also broaden the
base and add enforcement, we mitigate avoidance and thus can push the rate higher than otherwise. Still,
we should expect some shrinkage in the tax base due to behavioral changes – e.g., some
entrepreneurs might scale down knowing marginal returns are taxed 90%, or more income gets funneled
into untaxable forms (perhaps fringe benefits, or moved offshore illegally).
Labor Supply and Productivity: Will high earners work significantly less if most of their extra income
goes to taxes? This is debated. Historical evidence from periods of high tax rates does not show a clear
drop in overall economic growth or productivity. A study by Romer & Romer examining periods
between the World Wars (with high tax rates) found “higher marginal rates had no significant effect
on productivity [growth] … nor a significant slowing of capital investment or labor force
growth.”. Similarly, the postwar U.S. economy of the 1950s and 60s grew robustly despite top tax rates
of 70–91%. This suggests that the economy can function well with high taxes on the rich, perhaps
because those taxes affect only a small number of people and those people’s core economic decisions
(e.g. whether to launch a business or invent something) are not solely driven by tax rates. On the other
hand, some economists caution that extremely high rates could discourage innovation – the argument is
that the potential for large personal financial reward is a motivator for entrepreneurs and inventors, and a
90% tax on success might reduce that incentive. While hard to quantify, it’s a potential dynamic cost
(less “creative” risk-taking leading to major innovations).
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GDP Impact Estimates: Putting numbers to it, we can draw from analogous scenarios:
o The Tax Foundation has analyzed the effect of big tax changes and tariffs. They estimate that
making the TCJA permanent (i.e. keeping lower rates) would eventually increase long-run
GDP by a small amount (~0.8% over 30 years) due to supply-side boosts. The flip side
(repealing TCJA) might decrease GDP by a similar small percentage in the long run. However,
our plan overshoots mere repeal (goes to higher rates than pre-2017), so the negative effect could
be larger.
o Conversely, the tariff removal should increase GDP. The trade war tariffs imposed by 2018–
2019 were found to reduce U.S. GDP by roughly 0.9% in the long run (with no foreign
retaliation). If we remove them, we avoid that loss – effectively adding back up to ~1% to GDP
over time, relative to keeping tariffs. One analysis from the Federal Reserve estimated the 2018
tariffs raised core inflation by ~0.1–0.2% and had a modest negative effect on output. So
removing tariffs could lower inflation (see below) and slightly raise output.
o The Penn Wharton model looked at a hypothetical 10% blanket tariff on all imports and found it
would reduce GDP by a larger amount (their extreme scenario of April 2025 tariffs, averaging
10%, gave a 6% GDP reduction long-run). Our case is removing tariffs averaging maybe 10–
25% on certain goods, so that’s a positive for GDP (though not +6%, because those tariffs
weren’t across the board to begin with, but perhaps avoiding a -0.5% to -1% hit).
o Combining these: we have a negative from higher taxes on growth, and a positive from freer
trade and lower deficits. We expect initially the negative might dominate (tax changes happen
immediately, whereas debt reduction yields benefits gradually). The 15-year horizon might see
a slightly slower average growth rate than otherwise – perhaps on the order of a few basis points
off annual GDP growth. For instance, if baseline growth is 2.0%, maybe it becomes 1.8–1.9%
on average with the high-tax regime (this is speculative). Over the 30-year horizon, however,
the deficit reduction could play a bigger role – a smaller debt burden can increase long-run
growth by crowding in private investment. It’s plausible that by the end of 30 years, GDP could
even be higher than baseline if the debt reduction prevents a fiscal crisis and lowers interest
rates. But standard dynamic scoring (like JCT/CBO) would likely still find a slight drag on longrun
GDP from raising taxes so steeply, because the disincentive effect on work and saving is
usually modeled to outweigh benefits of lower debt (especially when the taxes target high-saving
individuals).
o In sum, we anticipate slightly lower GDP in the medium term than baseline (maybe 1–2%
smaller by year 15), but potentially a similar or improved GDP by year 30 if lower deficits
lead to significantly lower interest rates and higher investment than otherwise. This is
speculative; different models will give different results. For caution, our dynamic revenue
estimates assumed a modest contraction in the tax base relative to static (as seen in Table 1, ~15-
20% less revenue), consistent with some output loss.
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Inflation and Interest Rates
The policy has implications for inflation dynamics and interest rates, through both demand and supply
channels:
Inflation: Repealing tariffs is disinflationary in the short run, as it directly reduces import prices. As
noted, the 2018 tariffs were estimated to contribute about 0.1–0.2 percentage points to core inflation.
Removing them would likely have a one-time effect of lowering the price level of affected goods (think
of it like a -0.1 to -0.2% off the inflation rate spread over a year or so). This helps consumers and could
slightly ease the burden on the Federal Reserve to raise interest rates. Additionally, if high-income
consumers have less after-tax income (due to these taxes), they might spend less, which could reduce
aggregate demand a bit – that, too, is disinflationary (though the rich have a lower marginal propensity
to consume than the poor, so the effect may be small). Also, deficit reduction in general can be
disinflationary: by reducing government-induced demand (the government is taking money out via taxes
and not spending it, just paying debt), overall demand in the economy might be lower than otherwise,
alleviating overheating pressures. During high-inflation periods, fiscal contraction (higher taxes or
lower spending) tends to dampen inflation. In the long run, a lower debt-to-GDP can also mean less
pressure to monetize debt, etc. So we expect inflation would be slightly lower under this policy than
otherwise, especially in the first decade. Quantitatively, maybe inflation runs a few tenths of a percent
lower for a couple years due to these factors, but it’s hard to pin down. The main clear effect is the tariff
removal: a Federal Reserve study found that the tariffs increased import price inflation significantly for
the directly impacted categories, but overall core PCE by only ~0.1–0.2%. Thus, we can say repealing
tariffs could shave ~0.1–0.2% off the inflation rate in the near term. That’s not huge, but meaningful
when central banks target 2% inflation.
Interest Rates: Several aspects influence interest rates:
- Government borrowing: By greatly reducing deficits, the Treasury’s demand for loanable
funds falls. Basic crowding-out theory suggests this would put downward pressure on interest
rates over time. Less competition for funds means lower yields needed to attract buyers. The
CBO often notes that higher debt leads to higher interest rates (all else equal); conversely,
lowering projected debt should ease rates. With trillions less in debt, it’s conceivable long-term
interest rates (like 10-year Treasury yields) could be modestly lower than baseline – perhaps by
on the order of 20–30 basis points in a decade (as an illustrative guess), growing to maybe 50+
bps lower in the longer term if debt is substantially smaller. Lower interest rates also stimulate
private investment, partially offsetting the tax drag.
- Federal Reserve response: If inflation indeed comes in lower due to the policies, the Fed may
adopt a looser monetary stance than otherwise, also contributing to lower interest rates.
However, if the economy is running cooler (slightly lower growth), the Fed might also lower
rates to compensate. Essentially, nothing in this plan is inflationary, so we don’t anticipate the
Fed needing to hike rates more; rather, they might even be able to allow rates to be lower.
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- Risk premiums and confidence: A plan that significantly improves the long-run fiscal outlook
could reduce the “risk premium” on government debt. Investors might see U.S. debt as safer with
a declining debt/GDP, so they demand a smaller premium. This again could reduce yields
slightly relative to a scenario of ever-rising debt.
- Private credit demand: On the flip side, if after-tax returns to investment are lower, businesses
might invest less and borrow less, which also reduces demand for credit, further easing rates.
However, reduced private investment is not a good thing in terms of GDP (that’s the supply-side
drag), but it does mean less upward pressure on rates from the private sector.
Netting these out, it’s reasonable to expect interest rates to be lower than baseline under this tax regime,
especially in the long run. In the short run, there could be financial market adjustments (for example, if equity
markets fall due to higher corporate taxes, investors might flee to bonds, lowering yields). Over 15–30 years,
the vastly improved federal debt position is a dominant factor. For instance, one study noted that using new
revenue to pay down debt “encourages private investment” by freeing up capital. This likely refers to lower
interest rates enabling more business borrowing and investment. So dynamically, the high taxes might reduce
private investment some, but the lower interest environment could stimulate other investments – a bit of a pushpull.
Bottom line: We assume dynamic modeling would incorporate slightly higher private investment than
otherwise because of deficit reduction, but slightly lower due to tax disincentives. Sophisticated models (like
those at CBO or PWBM) typically find that debt reduction can offset a portion (but not all) of the negative
growth from higher taxes. For example, PWBM compared tariffs vs. corporate tax hike: they noted that using
revenue to reduce debt mitigates harm. In our scenario, all new revenue reduces debt, so that’s a mitigating
factor.
Behavioral Responses and Other Considerations
Tax Evasion/Avoidance: With such high rates at the top, a major dynamic factor is behavioral changes to
avoid taxes. Historically, when top rates were very high, wealthy individuals found creative ways to reclassify
or hide income. In the 1950s, many high earners would turn wage income into capital gains (e.g. actors using
personal corporations) because capital gains were taxed much lower. Our plan tries to close that particular
avenue (since we tax gains as ordinary income). But new schemes could emerge. Some might shift income
overseas or defer compensation. There could be an increase in illegal evasion (offshore accounts,
underreporting) if people feel rates are “confiscatory.” We have assumed stronger enforcement to counteract
this (e.g. more audits for >$10M income folks), but realistically, some avoidance will happen. This reduces the
effective revenue collected and also can show up as lower measured economic activity (since unreported
income doesn’t count in GDP, though the actual work might still be done).
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Migration and Mobility: One behavioral response is that some high-net-worth individuals might emigrate
(leave the U.S.) to avoid the wealth tax or 90% rate. The proposal does include an “exit tax” of 40% on net
worth for those renouncing citizenship (like Warren’s plan), which discourages this but may not fully stop it. If
a number of billionaires or top-earners left, the U.S. could lose not only their tax revenue but also their
entrepreneurship or investment in the domestic economy. This is hard to model, but it’s a risk: the higher the
rate, the bigger the incentive to relocate if possible. In the 1960s, despite 70% top rates, we didn’t see an exodus
of talent – probably because other countries had high rates too or the U.S. market was worth staying in. Today,
global tax coordination would help; otherwise, some may relocate to tax havens.
Laffer Curve Considerations: As mentioned, evidence suggests the revenue-maximizing top income tax rate
is somewhere around 60-70% under normal conditions. At 90%, we might be on the downward slope – meaning
each further increase yields less revenue or even reduces it. However, because we pair it with base broadening
(closing capital gains preference, etc.), the Laffer peak might be higher – perhaps ~75% or more. Still, 90%
likely exceeds it, implying the last 15 percentage points might not raise much and could induce a lot of
avoidance. Our static estimates probably overstate revenue from the top bracket for this reason. Dynamic
scoring would dial that back. For example, Tax Foundation’s analysis of a 70% top rate (as proposed by AOC)
noted that much of the income above $10M might not be realized; they and others (like economist Scott
Greenberg) argued 70% would “likely lead to significant tax avoidance and lower reported income”. A 90%
rate even more so. Thus, the dynamic outcome could be that taxable income for the ultra-rich falls
substantially relative to static projections. We saw an illustration of this in the 1930s data: when rates shot up,
reported income by the rich dropped and revenue gains were muted.
Government Spending and Interest Savings: Although not the focus of the question, it’s worth noting what
happens with the money. We’ve assumed it reduces deficits (i.e. debt). This has positive feedback as discussed
(lower interest burden freeing resources). If instead the revenue was spent on productive public investments
(infrastructure, education, etc.), that could also boost long-run growth – potentially offsetting the tax drag via
higher productivity of the workforce or better infrastructure for business. Post-WWII, high taxes funded
investments like the interstate highways and GI Bill, which had growth payoffs. Our analysis sticks to deficit
reduction, but policymakers might mix uses. Dynamic models often find that if extra revenue is used to reduce
debt, the long-run GDP is higher than if it’s used on transfers or consumption, but certain investments could
also raise GDP. For maximizing deficit reduction’s effect, assume it all goes to debt reduction as we did.
Trade and Global Effects: Repealing tariffs will likely cause an increase in imports and exports (trade
volumes). Consumers benefit from cheaper imported goods (raising their real incomes), and export industries
benefit from fewer retaliatory tariffs and potentially a weaker dollar (if less need to finance deficits, dollar
might adjust). The increase in trade could improve productivity (access to cheaper intermediate goods, etc.).
Some domestic industries that were protected (say, steel) might face more competition, potentially contracting,
but economy-wide resources shift to more efficient uses. The long-run effect of removing a nearly global tariff
regime (as Trump’s was becoming) is to raise global GDP and U.S. GDP modestly. One estimate: a 10%
universal tariff reduces global GDP ~1%, so removing such tariffs avoids that loss. Because our tariffs were
targeted, the effect is smaller but positive.
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Dynamic Revenue Feedback: Incorporating all these factors, our dynamic revenue estimates (as in Table 1)
assumed roughly a 15-20% reduction in total revenue gain compared to static. That is, instead of $30T over 30
years, maybe ~$25T is realized. This accounts for the contraction in the tax base (people earning/realizing less
income under high rates), partially offset by a slightly larger economy due to lower debt and tariffs. For
example, the Penn Wharton model of the wealth tax saw about a 17% drop in 10-year revenue when macro
feedback was included. The Tax Foundation’s dynamic scoring of the TCJA also showed feedback (they found
TCJA’s cuts partly paid for ~20% of themselves via growth) – in reverse, our increases might lose some
revenue via negative growth feedback (a smaller economy yields less tax). But because we’re also improving
factors like interest rates and trade, the net feedback might be closer to neutral or slightly negative. We
conservatively assume a net negative feedback on revenue (hence dynamic revenue is a bit lower).
To summarize dynamic outcomes in a narrative form:
GDP: Slightly lower in medium term, potentially catching up in long term. Economy likely smaller than
otherwise for a time due to reduced private incentives, but long-run debt reduction and efficient taxation
(fewer distortions like tax shelters) could improve growth prospects. Estimates range from a few percent
lower GDP in 2030 than baseline, to maybe near baseline in 2050. For example, the wealth tax alone
was -1.2% GDP by 2050; adding other high taxes might amplify that, but eliminating tariffs and
lowering debt could counteract it.
Unemployment: In the short run, taking money out of the economy (via taxes) could soften demand,
possibly raising unemployment slightly until monetary policy offsets it. But with tariff repeal, export
sectors expand. This is complex, but no severe unemployment effects are expected after adjustments; the
labor market might shift (financial sector might shrink a bit, manufacturing could grow with more
exports, etc.).
Inflation: Marginally lower, as discussed (tariff removal and lower deficits ease inflation).
Interest Rates: Lower long-run real interest rates due to fiscal improvement, making it cheaper for
businesses to borrow – a pro-growth factor for investment that could mitigate some negative tax effects.
Budget Health: Improved – lower interest payments (the federal government saves potentially trillions
in interest over decades by paying down debt), creating more fiscal space for future needs.
Wealth and Inequality: Lower – dynamic model doesn’t capture “inequality” per se, but economically,
wealth concentration would likely decline relative to baseline. That might have socio-economic benefits
(or costs, depending on perspective, like possibly less capital concentration).
Innovation/Startups: Hard to quantify. Possibly fewer big unicorn IPOs (if founders know 90% of their
gain goes to tax, maybe they sell earlier or don’t start), but also the environment of stable economy and
lower interest could encourage broad investment. Historically, the 1950s–60s had plenty of innovation
(space race, etc.) despite high taxes, suggesting innovation is not purely tax-driven.
In conclusion, the dynamic scoring indicates that while the static revenue gains of this tax overhaul are
enormous, the actual realized revenue would likely be a bit lower after accounting for economic adjustments
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– but still extremely large. We might see, for example, instead of $12T in 15 years, something like ~$10T in
deficit reduction after feedbacks. That is still an unprecedented fiscal improvement. Importantly, none of the
dynamic factors appear to reverse the sign of the budget impact (we still reduce deficits massively; growth
feedback won’t negate the trillions in revenue, it would only trim it). Even under pessimistic assumptions, this
policy package dramatically strengthens the federal fiscal position over the next generation.
Finally, it’s worth noting the broader context: The post-WWII-like tax regime is intended to prioritize
equality and fiscal prudence over maximal growth. The slight sacrifices in private output or efficiency (if
any) are traded for a more balanced budget and reduced inequality. Some studies argue that within reasonable
ranges, higher taxes on the rich have minimal impact on macroeconomic growth – the past decades of tax
cuts did not produce spectacular growth or broad wage gains, and conversely, the high-tax mid-century era had
strong growth. Our analysis suggests that with this modernized approach (including plugging loopholes and
encouraging productive use of revenue), the U.S. could see significant deficit reduction and a more equitable
tax system with only modest impacts on growth and inflation. The policy essentially trades a bit of private
capital accumulation for public balance sheet health.
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Conclusion
Replacing the Trump-era tax cuts with a modern post-WWII-style tax policy would profoundly increase federal
revenue and tilt the tax burden toward the rich and corporations. Over a 15-year horizon, we project on the
order of $10+ trillion in additional revenue (perhaps ~4% of GDP per year on average), rising to around $25+
trillion over 30 years. This would slash deficits and could start to pay down the national debt, improving fiscal
sustainability. High-income individuals (especially the top 0.1%) would pay much more – through a 90%
marginal rate on ultra-high earnings, taxation of investment income at that rate, and a direct wealth tax – while
middle and low-income households would see relatively minor changes (mostly just a reversion of the
temporary 2017 cuts). Corporations would face a dramatically higher 42% tax rate, likely doubling the
corporate tax revenue as a share of the economy, with sectors like tech, finance, and retail contributing large
sums, whereas previously tax-sheltered sectors might continue to pay less unless loopholes are closed.
Regionally, wealthy states and those with many high-earners (California, New York, Texas, Florida, etc.) would
supply a disproportionate share of the revenue, reflecting the geographic distribution of income and wealth.
In dynamic terms, the policy is a mix of demand contraction and supply-side changes: it would likely reduce
inflation modestly (by removing tariffs and lowering deficits), and lower long-term interest rates due to
improved federal finances. These factors help offset some negative effects of higher taxes. There could be some
drag on economic growth and private investment, as high marginal rates might discourage some additional
work or risk-taking and lead to avoidance behaviors. However, historical evidence suggests the magnitude of
such drag may be limited if the economy has compensating policies and public investments. With robust tax
enforcement and base-broadening, the revenue-maximizing potential of high tax rates increases, meaning the
government can capture substantial revenue with manageable efficiency costs.
Overall, a modernized post-WWII tax policy — featuring very high taxes on the richest taxpayers and
corporations, paired with the removal of protectionist tariffs — would significantly increase federal revenues,
reduce the deficit, and compress after-tax income inequality. The 15-year deficit reduction on a dynamic
basis (accounting for economic effects) might be on the order of $8–10 trillion, and around $20–25 trillion
over 30 years, which would be transformative for the U.S. budget. While the economy might be slightly
smaller in the short-to-medium term than under status quo policy, the benefits of lower debt, lower interest
rates, and a fairer tax distribution could yield a more stable and equitable growth path in the long run.
Sources: Historical tax rates and revenue shares; JCT and CBO projections for TCJA impacts; Penn Wharton
Budget Model for wealth tax and tariff effects; ITEP and Tax Policy Center analyses for distribution by income
and state; Federal Reserve and Tax Foundation research on tariffs and inflation/GDP; Economic studies on
behavioral responses and growth. All evidence indicates that such a sweeping tax change would indeed raise
unprecedented revenue from those with the greatest ability to pay, substantially shrinking deficits over the
next generation while modestly reining in the most extreme accumulations of private wealth. The trade-offs
include careful management of tax avoidance and ensuring the policies do not inadvertently stifle productive
economic activity more than necessary – challenges policymakers would have to navigate in implementation.
