Raising every federal individual income tax rate by one percentage point would bring in roughly $1.1 to $1.2 trillion in additional revenue over ten years, according to Congressional Budget Office projections.1Congressional Budget Office. Increase Individual Income Tax Rates So how much would a 1% income tax increase raise in practice? The static answer is around $100 billion in the first year, climbing toward $130 billion by year ten. The real-world answer is somewhat less, because taxpayers change their behavior when rates go up.
Where the Trillion-Dollar Figure Comes From
The CBO publishes budget options showing what specific policy changes would do to the deficit. One recurring option is a one-percentage-point increase across all seven individual income tax rates on ordinary income. The most recent estimate, prepared with staff of the Joint Committee on Taxation, puts the ten-year deficit reduction at approximately $1.1 trillion.1Congressional Budget Office. Increase Individual Income Tax Rates A slightly newer projection covering fiscal years 2026 through 2035 puts the number closer to $1.2 trillion, reflecting continued growth in the income tax base.
The revenue does not arrive evenly. Early years produce roughly $100 billion; later years approach $130 billion as wages and reported income grow. These are static estimates. They assume taxpayers keep earning and reporting income exactly as they did before the change.
One Percentage Point Is Not One Percent
The wording matters. A one-percentage-point increase moves the 10 percent bracket to 11 percent and the 24 percent bracket to 25 percent. A one-percent increase would only take the 10 percent bracket to 10.1 percent. The revenue difference between those two changes is enormous, because a percentage-point shift is an absolute change applied to every taxable dollar in each bracket. When the CBO scores a “one-point” increase, this is the version producing the trillion-dollar estimate.
The Tax Base Is Smaller Than Total Income
A rate increase applies to taxable income, not gross earnings. Taxpayers first arrive at adjusted gross income by subtracting above-the-line items like retirement contributions and student loan interest from total earnings.2Internal Revenue Service. Definition of Adjusted Gross Income Then they subtract either the standard deduction or itemized deductions. What remains is what gets taxed.
The standard deduction alone removes trillions of dollars from the national taxable pool. Itemizers who deduct mortgage interest, charitable giving, or state and local taxes shrink the base further. Credits such as the Child Tax Credit and the Earned Income Tax Credit then reduce the tax actually owed. A one-point rate increase produces meaningfully less revenue than the same percentage applied to raw earnings would suggest.
Bracket thresholds are also indexed to inflation each year, which prevents cost-of-living raises from silently pushing filers into higher brackets. That indexing means the revenue projections reflect only the deliberate rate change, not passive bracket creep.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
How the Burden Splits Across Brackets
A uniform one-point increase does not raise the same amount from every group. The 10 and 12 percent brackets cover tens of millions of filers. Individual liabilities are modest, but the collective contribution creates a stable, predictable revenue floor across the economic cycle.4Internal Revenue Service. Federal Income Tax Rates and Brackets
The 37 percent bracket works differently. Far fewer filers reach it, but those who do report very large incomes from executive pay, business ownership, and investment gains. A single percentage point at that tier still produces billions. The tradeoff is volatility: top-bracket income swings with stock markets, real estate cycles, and the timing of capital gains realizations. In a downturn, revenue from the top can drop sharply while the lower brackets barely move. The trillion-dollar estimate assumes the increase hits every bracket at once, which maximizes stability.
Behavioral Responses That Shrink the Yield
People change what they do when rates change. Economists measure this through the elasticity of taxable income, which captures how much reported taxable income shrinks in response to a higher rate. Available research puts that elasticity between 0.12 and 0.40. A 10 percent increase in the tax rate reduces reported taxable income by roughly 1.2 to 4 percent. Applied to the full income tax base, the effect adds up to tens of billions in foregone revenue.
The mechanisms are practical. Some filers contribute more to 401(k) plans and other tax-deferred accounts, sheltering income from the higher rate. Some shift compensation toward non-taxable benefits. High-income filers may delay selling appreciated stock to avoid realizing capital gains in a higher-rate year. Research from the National Bureau of Economic Research puts the long-run elasticity of capital gains realizations at roughly -0.3 to -0.5, meaning a 10 percent rate increase produces 3 to 5 percent fewer realizations. The Joint Committee on Taxation uses a more aggressive assumption of -0.7 when scoring capital gains changes.
Municipal bonds offer another escape. Interest on most municipal debt is exempt from federal income tax, and that exemption grows more valuable as rates climb. None of this behavior is illegal. It is a predictable response to changed incentives, and it lowers what the Treasury actually collects.
Static Versus Dynamic Scoring
The headline $1.1 to $1.2 trillion is a static, or conventional, estimate. It calculates the additional tax the government would collect if incomes stayed exactly the same and only the rate moved. It does not model whether the higher rate would slow growth, reduce hours worked, or discourage investment.
Dynamic scoring layers those effects in. If a tax increase trims GDP growth, wages rise more slowly, corporate profits soften, and the tax base itself shrinks. The CBO and JCT use dynamic analysis for major legislation, and the House requires it for bills with a budget impact above roughly 0.25 percent of GDP. Dynamic effects can push either direction: reduced work incentives lower the yield, while lower government borrowing can free up capital for private investment, partially offsetting the drag. For a one-point rate increase, the dynamic estimate would likely come in somewhat below the static figure, with the size of the reduction depending on the models and deficit assumptions used.
Overlap With the Alternative Minimum Tax
The Alternative Minimum Tax is a parallel calculation that keeps higher-income filers from cutting their bill below a floor by stacking deductions and credits. A taxpayer compares regular tax liability against a tentative minimum tax computed with fewer deductions and a separate rate schedule, and pays the difference as AMT if the tentative minimum is higher.5Internal Revenue Service. Topic No. 556, Alternative Minimum Tax
Raising the regular rates by one point narrows the gap between the two calculations. For some filers, the higher regular tax now exceeds the tentative minimum, and their AMT obligation disappears. The government was already collecting that money through the AMT, so part of the “new” revenue from the rate increase is really revenue shifting channels rather than revenue appearing for the first time. The net gain from those filers is smaller than the headline number implies.
How It Compares to a Corporate Rate Increase
Individual income taxes are the federal government’s largest revenue source, accounting for roughly $2.66 trillion in fiscal year 2025, or about half of all federal revenue. A one-point increase producing $110 to $120 billion per year represents roughly a 4 to 5 percent boost to that total.
A one-percentage-point increase in the corporate income tax rate raises far less. The CBO estimates that change would reduce the deficit by about $136 billion over ten years, roughly a tenth of what an equivalent individual rate increase generates.6Congressional Budget Office. Increase the Corporate Income Tax Rate by 1 Percentage Point The corporate tax base is much smaller, and corporations have more tools to shift income across jurisdictions and years. No other single revenue lever delivers as much per point as individual income tax rates, which is why even fractional changes to those rates drive so much of the fiscal policy debate.