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Macroeconomic Effects of Coming Tax Increases: 2013-22
At the beginning of next year, a large number of tax increases are legislated to occur. Table 1 shows the tax increases, estimated amounts year-by-year to 2017, and the cumulative totals over five and ten years.
This paper provides a large-scale structural macroeconometric model assessment of the potential impacts from the tax increases, together or singly in some instances, on the U.S. economy. The effects on the economy and its components, jobs and the unemployment rate, inflation, the federal budget deficit, and gross public debt in relation to GDP are assessed quantitatively.
The tax increases are part of what has been called the “Fiscal Cliff,” legislation set for 2013 and beyond, now the “Law-of-the-Land,” also large federal government outlay reductions, that would reduce federal budget deficits well in excess of $7 trillion, including interest savings on reduced public debt, over 10 years.
The tax increases are the result of deliberations in Congress over the past two years with, and by, the Obama Administration on how to deal with growing and outsized U.S. federal government deficits and debt.