JCT Estimates Income, Payroll Tax Offsets to Excise Tax Changes

UPDATED INCOME AND PAYROLL TAX OFFSETS TO CHANGES IN EXCISE TAX REVENUES FOR 2021-2031¹

JOINT COMMITTEE ON TAXATION
February 23, 2021
JCX-11-21

Table 1, below, presents the updated income and payroll tax offsets that the staff of the Joint Committee on Taxation (“Joint Committee staff”) will apply in its economic models of proposed changes in Federal excise taxes during the first session of the 117^th Congress. This update accounts for the COVID-19 related downturn by using the February 2021 macroeconomic forecast of the Congressional Budget Office.² The Joint Committee staff explained the methodology underlying these estimates in a prior publication.³

The new offsets are calculated on a calendar year basis. The new income and payroll tax offsets will be applied to excise tax estimates. Generally, these offsets will be applied to calendar year excise tax effects and then fiscalized. With this publication the Joint Committee staff plans to start using these offsets exclusively.

The increase in the magnitude of the offset for years after 2025 is due to the expiration of certain tax provisions after December 31, 2025.⁴ As a result, the estimated income and payroll excise tax offsets return close to the long-time standard offset factor of 25 percent. The offsets calculated above take into account both the changes in tax rates that have been legislated to occur over the budget window, as well as adjustments to the taxable portion of income consistent with the February 2021 Congressional Budget Office macroeconomic forecast.