JOINT COMMITTEE ON TAXATION 

 June 25, 2008 

 JCX-54-08 

REVENUE ESTIMATES OF SELECTED TAX POLICIES RELATING 

TO THE 2001 AND 2003 TAX ACTS 

Overview and Purpose

The Congressional Budget Office (“CBO”) projects that total revenues for the Federal 

government will increase from $2.7 trillion in fiscal year 2008 to $4.5 trillion in fiscal year 

2018.1 To get a better sense of what these figures mean for American taxpayers, some analysts 

find it useful to convert these nominal dollar amounts into a fraction of U.S. gross domestic 

product (“GDP”). As a percentage of GDP, CBO’s projection of Federal revenues rises from 

18.7 percent for FY2008 to 20.3 percent for FY2018. 

This brief looks at how several widely discussed tax policy options would affect total 

Federal government revenues as a fraction of GDP. In particular, this brief estimates the revenue 

consequences of extending the tax reductions adopted by the Economic Growth and Tax Relief 

Reconciliation Act of 2001 (“EGTRRA”) and the Jobs and Growth Tax Relief Reconciliation 

Act of 2003 (“JGTRRA”) that expire at the end of 2010, either with or without also amending 

the individual alternative minimum tax (the “AMT”).2 The EGTRRA and JGTRRA temporary 

income tax reductions included reductions in individual tax rates, the introduction of a new 10 

percent tax bracket for individuals, expensing of certain capital investments for small businesses, 

and reduced tax rates on certain dividend income and capital gains.3

The goal for a tax system is to provide revenues to the government sufficient to its needs 

in a manner that is as simple, equitable and efficient as possible. This brief provides a 

straightforward comparison of projected Federal revenues as a share of GDP to historical 

averages, but it does not by itself provide information on the relationship of projected Federal 

revenues for the coming decade to the level of projected Federal outlays, as determined by the 

 1

 Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2008 to 2018, 

January 2008. 

2

 The reduced rates on capital gains and dividend income and increased expensing for small 

business enacted in JGTRRA were extended though 2010 by the Tax Increase Prevention and 

Reconciliation Act of 2005. 

3

 For more detail on the tax provisions of EGTRRA and JGTRRA, see Joint Committee on 

Taxation, General Explanation of Tax Legislation Enacted in the 107th Congress, JCS-1-03, January 24, 

2003, and Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 108th

Congress, JCS-5-05, May 2005. 
Congressional process. It also does not address how to raise those future revenues in a manner 

consistent with Congressionally-determined equity norms. The information contained in this 

brief therefore should be viewed as simply one component in the larger analysis of the 

consequences of the tax policies that are described below. 

The revenue estimates set out below were prepared using the standard estimating models 

and methodologies of the Staff of the Joint Committee on Taxation.4 These methodologies take 

into account taxpayers’ expected behavioral responses to changes in tax law, and rely on CBO 

estimates for the overall growth of the U.S. economy and for projections of Federal government 

outlays. Consistent with our standard practice, our revenue estimates assume that the gross 

national product of the United States would not change as a result of the tax policies under 

consideration. Finally, and again consistent with longstanding practice, references below to 

“present law” mean the Internal Revenue Code in its current form, including the Code’s 

sunsetting of the temporary provisions of EGTRRA and JGTRRA. 

The tax policies analyzed in this brief were selected because they are straightforward and 

because they have been widely discussed in recent months. The JCT Staff is providing this data 

to ensure that interested readers have available to them accurate estimates of the consequences of 

these policies. Obviously, many variations on these themes can be imagined, and many other tax 

policies can be suggested. The JCT Staff therefore envisions this brief as the first of an 

occasional series; others will be released from time to time to provide information about other 

unambiguous policies that are of widespread general interest. 

History of Relationship of Revenues to GDP

Over the past fifty years, the total revenue of the Federal government has ranged, as a 

percentage of GDP, from a low of 16.1 percent in 1959 to 20.9 percent in 2000. For the period 

from 1958-2007, total revenues as a percentage of GDP averaged 18.1 percent. Figure 1 shows 

the yearly fluctuations of total revenues as a share of GDP about the fifty-year mean. Wide 

swings from the mean are not uncommon during this period, particularly during the last twenty 

years. There appears to be a slight upward trend in Federal revenue as a percentage of GDP over 

the past fifty years. Table 1 shows the ten-year averages for Federal revenues as a share of GDP 

for 1958-2007. From 1958-67, the Federal revenues averaged 17.5 percent of GDP. For the last 

ten years, Federal revenues as a share of GDP averaged 18.6 percent. Federal outlays as a 

percentage of GDP have averaged 20.2 percent during the past fifty years. 

 4

 For further information on the JCT Staff’s estimating methodologies, see Edward D. Kleinbard, 

Inside the JCT Revenue Estimating Process, Jan. 30, 2008, available at 

http://www.jct.gov/Inside_Revenue_Estimating.pdf, and Joint Committee on Taxation, Overview of 

Revenue Estimating Procedures and Methodologies Used by the Staff of the Joint Committee on Taxation, 

JCX-01-05, February 2, 2005. 
Table 1: 

Total Revenues and Outlays as a Percentage of GDP, 

Average for Selected Periods 

Calendar Years Revenues Outlays 

1958-1967.......................................... 17.5 18.3 

1968-1977.......................................... 18.0 19.9 

1978-1987.......................................... 18.3 22.0 

1988-1997.......................................... 18.2 21.2 

1998-2007.......................................... 18.6 19.5 

1958-2007.......................................... 18.1 20.2 

Policy Proposals

In this brief we look at the effect of six possible policy options on Federal revenues as a 

percentage of GDP. These policy options involve the extension of certain expiring tax 

provisions and the curtailing of the individual alternative minimum tax (“AMT”). The results 

are presented in Table 2 and Figure 2. 

Under present law, Federal revenues as a percentage of GDP are projected to increase 

from 19.0 percent for FY 2009 to 20.3 percent for FY 2018. As shown in Table 2, a sudden 

increase in Federal revenues as a share of GDP is projected to occur under present law after 

EGTRRA and JCTRRA expire at the end of 2010. 

AMT

The first two policy options focus on the AMT. Unlike the regular individual income tax, 

the AMT is not indexed for inflation. If left unchanged, the individual AMT will affect an 

increasing share of all individual taxpayers.5

 Under present law, the AMT exemption is 

scheduled to fall from $44,350 ($66,250 for joint filers) for tax year 2007 to $33,750 ($45,000 

for joint filers) for tax year 2008.6

 We estimate that the present law decline in the AMT 

 5

 Joint Committee on Taxation, Present Law and Background Related to the Individual 

Alternative Minimum Tax, JCX-10-07, March 5, 2007. 

6

 H.R. 6275, the Alternative Minimum Tax Relief Act of 2008, as passed by the Committee on 

Ways and Means on June 18, 2008, would increase the AMT exemption amount to $46,200 ($69,950 for 

joint filers) for tax year 2008. 
exemption amount will increase the number of taxpayers affected by the AMT from 4.2 million 

for tax year 2007 to over 25 million for tax year 2008. 

Indexing the AMT exemption amount for inflation beginning in 2008 would reduce 

Federal revenues as a share of GDP to 18.5 percent in FY 2009 and 19.9 percent in FY 2018. 

Repealing the individual AMT would reduce Federal revenues as a fraction of GDP to 18.2 

percent in FY 2009 and 19.8 percent in FY 2018. 

Extension of present law

Permanently extending the present-law tax provisions in EGTRRA and JGTRRA that 

expire in 2010 dramatically lowers Federal revenues as a share of GDP for fiscal years after 

2010. In FY 2012, Federal revenues as a percentage of GDP would fall to 18.4 percent if 

EGTRRA and JGTRRA were extended. This compares with the projection of Federal revenues 

as a percentage of GDP under present law for FY 2012 of 19.9 percent. If all tax provisions set 

to expire in years after 2007, including EGTRRA and JGTRRA, were extended, Federal 

revenues as a share of GDP would decrease to 17.7 percent in FY 2012.7

Modifying the AMT and extending EGTRRA and JGTRRA

Permanent extension of EGTRRA and JGTRRA combined with indexing the AMT 

exemption amount would reduce Federal revenues as a share of GDP to 17.8 percent in FY 2012. 

Permanent extension of EGTRRA and JGTRRA combined with repeal of the individual AMT 

would reduce Federal revenues as a percentage of GDP to 17.5 percent in FY 2012, a reduction 

of 2.4 percentage points from the present law projection of Federal revenues as a share of GDP 

for FY 2012. 

 7

 Under this option, the AMT exemption would remain at the 2007 amount, $44,350 ($66,250 for 

joint filers). 
Figure 1:

Federal Revenues as a Percentage of GDP

1958-2007

14.016.018.020.022.024.0

1

958

1

960

1

962

1

964

1

966

1

968

1

970

1

972

1

974

1

976

1

978

1

980

1

982

1

984

1

986

1

988

1

990

1

992

1

994

1

996

1

998 2000 

Calendar Years

Percentage of GDP

Average

1958-2007

Source: CBO and the Economic Report of the President.

Outlays as a Percentage of GDP
Policy Options 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2

Federal revenues under present law. 18.5% 18.8% 18.7% 19.0% 18.6% 19.3% 19.9% 19.9% 20.0% 20.0% Federal revenues with indexing of the AMT exemption amounts. 18.5% 18.8% 18.7% 18.5% 18.2% 18.9% 19.7% 19.6% 19.7% 19.7% Federal revenues with the AMT repealed. 18.5% 18.8% 18.7% 18.2% 17.9% 18.7% 19.6% 19.5% 19.6% 19.6% Federal revenues with EGTRRA and JGTRRA permanently extended. 18.5% 18.8% 18.7% 19.0% 18.6% 18.4% 18.4% 18.2% 18.3% 18.4% Federal revenues with EGTRRA and JGTRRA permanently extended and indexing of the AMT exemption amounts. 18.5% 18.8% 18.7% 18.5% 18.1% 17.9% 17.8% 17.6% 17.6% 17.6% Federal revenues with all expiring provisions permanently extended. 18.5% 18.8% 18.7% 18.4% 18.0% 17.8% 17.7% 17.4% 17.5% 17.5% Federal revenues with EGTRRA and JGTRRA permanently extended and the AMT repealed. 18.5% 18.8% 18.7% 18.2% 17.9% 17.6% 17.5% 17.3% 17.3% 17.3% 

Federal Fiscal Years

Table 2:

Federal Revenues as a Percentage of GDP

Under Selected Policy Options
7 

Figure 2:

Federal Revenue as a Percentage of GDP

Under Selected Policy Options

16.0%17.0%18.0%19.0%20.0%21.0%22.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 

Federal Fiscal Years

Percentage of GDP

Federal revenues under present law.Federal revenues with indexing of the AMT exemption amounts.Federal revenues with EGTRRA and JGTRRA permanently extended.Federal revenues with EGTRRA and JGTRRA permanently extendedand indexing of the AMT exemption amounts.