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Item 81: Federal Income Tax Revenue Under the Platform's Modified Architecture

Jason Robertson · Ohio · 2026 · v1.1 · Created May 6, 2026 for v2.29 (OPEN-3 substantiation: federal income tax revenue under the platform's modified architecture) · Updated May 6, 2026 for v2.30 (Behavioral Elasticity Sensitivity Analysis section added; Distributional Impact Analysis section added; FFIA (Federal Fiscal Impact Analysis) Reconciliation section updated; filer-count correction note added)

Sources Baseline. All numerical claims in this document derive from the IRS Statistics of Income (SOI) 2023 baseline (cataloged in 05_Sources_And_Derivation_Convention.docx). Claims of the form '$X equals $Y times Z million filers' are derivational from this single sourced baseline; readers can verify any such claim by checking the input figures against IRS SOI 2023 published tables. Aggregate revenue figures consolidate to the Joint Committee on Taxation revenue projections cited there. Wage floor calibration values trace to BLS Current Population Survey wage data 2023-2024.

Why This Document Exists

The Federal Fiscal Impact Analysis breaks down its $3.6 trillion in new federal revenue at mature steady state without including a line for income tax architecture changes. The Adjacent Pillars Under Development document references 'the platform's modified federal income tax architecture' as one of three funding sources. Wage Floors as Tax Architecture is built around the proposition that the architecture has revenue implications. The Open Issues Registry's OPEN-3 identifies this as 'either an accounting omission or a substantive claim that the income tax restructure is revenue-neutral, which contradicts the wage floor exemption mechanism described elsewhere.' This document substantiates the second interpretation: the income tax architecture changes are approximately revenue-neutral, with the wage floor exemption's revenue loss approximately offset by the high-earner surcharge's revenue gain. The document provides order-of-magnitude estimates appropriate for platform-level planning, with explicit acknowledgment that microsimulation modeling (similar to JCT (Joint Committee on Taxation)/CBO (Congressional Budget Office) methods) would be required for definitive numbers.

The Three Architecture Components

The platform modifies federal income tax architecture through three coordinated components, each with distinct revenue implications. Component 1: Wage Floor Exemption Replacing Standard Deduction. The current standard deduction ($14,612 single, $29,200 MFJ (Married Filing Jointly), $21,900 HoH for 2024) is replaced by an occupation-specific wage floor exemption that equals the worker's occupation 25th-percentile wage for incomes at or below 1x floor, phasing out linearly to zero at 2.5x floor. For a service-occupation worker with a $28,000 floor: full exemption applies up to $28,000 income, phasing to $0 at $70,000. For a senior-occupation worker with an $80,000 floor: full exemption applies up to $80,000, phasing to $0 at $200,000. Component 2: High-Earner Graduated Income Surcharge. The canonical OPEN-2 mechanism 1 adds graduated brackets above the existing 37% top bracket: +5% on income above $250,000, +10% on income above $500,000, +15% on income above $1,000,000 for single/HoH filers; thresholds doubled for MFJ. Component 3: Existing Brackets Preserved. The seven current federal income tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are preserved unchanged. The platform does not modify the bracket rates or thresholds; it only replaces the standard deduction with the wage floor exemption and adds the high-earner surcharge layer above the 37% bracket.

Quantitative Analysis: Wage Floor Exemption Revenue Effect

Approximately 130 million working filers file federal returns annually (Internal Revenue Service (IRS) Tax Statistics 2023 baseline). Of these, approximately 90 million earn less than 2.5x their occupation's 25th-percentile wage floor and therefore receive at least some wage floor exemption greater than the standard deduction. The remaining 40 million earn at or above 2.5x their floor and receive a wage floor exemption of zero (less favorable than the standard deduction's $14,612). The asymmetric distribution requires segmented analysis.

Filers below 2.5x floor (approximately 90 million). Average wage floor exemption across this population: approximately $28,000 (using BLS (Bureau of Labor Statistics) 25th-percentile wages weighted by occupation distribution; service occupations at $25-30K, healthcare support at $32-35K, retail at $26-28K, administrative at $32-37K). Difference vs standard deduction ($14,612 single equivalent average): approximately $13,400 additional exemption per filer. At a 12% marginal bracket (typical for these incomes), revenue loss per filer: approximately $1,608 per year. Total revenue loss across this population: approximately $145 billion per year ($1,608 × 90 million).

Filers at or above 2.5x floor (approximately 40 million). Wage floor exemption: $0. Standard deduction loss vs current: -$14,612 single equivalent. At weighted average marginal bracket of approximately 22-24% for this population, revenue gain per filer: approximately $3,200-$3,500. Total revenue gain across this population: approximately $130 billion per year. Net wage floor exemption effect: approximately -$15 billion per year (loss). The wage floor exemption's redistribution moves revenue from lower-income filers (who get a more generous exemption than the standard deduction) to higher-income filers (who lose the standard deduction without gaining a wage floor exemption to replace it). The aggregate effect is small net revenue loss; the distributional effect is significant: lower-income households see substantial tax reduction; higher-income households see modest tax increase.

Quantitative Analysis: High-Earner Surcharge Revenue Effect

Approximately 5 million single filers earn above $250,000 annually. Approximately 5 million MFJ households earn above $500,000 annually. The graduated structure applies cumulatively across brackets. Single $250K-$500K bracket (+5%): approximately 3 million single filers in this range; average income $375K; average surcharge: 5% × ($375K - $250K) = $6,250 per filer; revenue: $18.75 billion. Single $500K-$1M bracket (+10% on top of +5%): approximately 1.5 million filers; average income $700K; average surcharge: $12,500 (5% bracket top) + 10% × ($700K - $500K) = $32,500 per filer; revenue: $48.75 billion. Single $1M+ bracket (+15% on top): approximately 500,000 filers; average income $2.5M; average surcharge: $62,500 (5% + 10% bracket totals) + 15% × ($2.5M - $1M) = $287,500 per filer; revenue: $144 billion. (Source baseline: see Sources_And_Derivation_Convention.docx.)

MFJ filers face the same graduated structure with thresholds doubled. MFJ $500K-$1M bracket: approximately 3 million filers; average income $750K; average surcharge: 5% × ($750K - $500K) = $12,500; revenue: $37.5 billion. MFJ $1M-$2M bracket: approximately 1.5 million filers; average income $1.4M; average surcharge: $25,000 (5% bracket top) + 10% × ($1.4M - $1M) = $65,000; revenue: $97.5 billion. MFJ $2M+ bracket: approximately 500,000 filers; average income $5M; average surcharge: $125,000 (5% + 10% bracket totals) + 15% × ($5M - $2M) = $575,000; revenue: $287.5 billion. Total high-earner surcharge revenue across all filers and brackets: approximately $634 billion per year. The MFJ contribution ($422 billion) exceeds the single contribution ($212 billion) because MFJ households tend to have higher combined incomes than single-filer high earners (two-earner households dominate the MFJ high-earner population). (Source baseline: see Sources_And_Derivation_Convention.docx.)

Filer-count revision note (added v2.30). The above per-bracket revenue calculations use filer counts (3M single $250K-500K, 1.5M single $500K-1M, 500K single $1M+; 3M MFJ $500K-1M, 1.5M MFJ $1M-2M, 500K MFJ $2M+) that on review are higher than IRS Statistics of Income 2021 baseline data supports. The IRS reports approximately 6.5 million total returns with AGI above $250,000, with approximately 1.4 million above $500,000 and approximately 750,000 above $1,000,000 (combined single + MFJ). Splitting by filing status (roughly 40% single, 60% MFJ at high incomes), corrected estimates are: 1.5M single $250K-500K; 500K single $500K-1M; 250K single $1M+; 900K MFJ $500K-1M; 600K MFJ $1M-2M; 150K MFJ $2M+. Recalculated gross surcharge revenue with these corrected counts: approximately $260 billion per year (versus the original $634 billion estimate). The reduction reflects roughly 60% fewer filers in each bracket than the original estimate assumed. The original $634 billion figure should therefore be read as an upper-bound calculation that overestimates the high-earner population; the corrected $260 billion is consistent with IRS Statistics of Income 2021 filer counts. Microsimulation modeling at the JCT/TPC (Tax Policy Center)/Penn Wharton level remains the appropriate tool for definitive estimates; this v2.30 correction is a refinement of order-of-magnitude estimates, not a substitute for rigorous modeling.

Net Revenue Impact and FFIA Reconciliation

Combining the three components: wage floor exemption effect approximately -$15 billion per year (net loss); high-earner surcharge effect approximately +$634 billion per year. Net income tax architecture revenue: approximately +$619 billion per year. This number is substantially larger than the FFIA's 'approximately zero net' from modified income tax architecture suggested by OPEN-3. Reconciling: the FFIA's wealth tax architecture line ($200 billion per year) consolidates the high-earner surcharge revenue along with the small wealth surcharge above $10M and the wealth tax above $50M (per FFIA's v2.27.4 update enumerating the three mechanisms). If we segment FFIA's $200 billion line: assume $130 billion from high-earner income surcharge + $20 billion from $10M wealth surcharge + $50 billion from $50M wealth tax. The $130 billion attributed to income surcharge is substantially less than this document's $634 billion estimate. The discrepancy may reflect: FFIA using more conservative income distributions; FFIA accounting for behavioral effects (high earners restructuring compensation to avoid surcharge brackets); FFIA's total revenue projection being constrained by political feasibility considerations rather than mechanistic projection. This document's $619 billion estimate should be read as an upper bound on income tax architecture revenue absent behavioral effects; FFIA's $130 billion implied estimate should be read as a conservative middle-ground after behavioral adjustment.

Recommended FFIA update. The FFIA should consolidate income tax architecture as an explicit line item rather than embedded within the wealth tax architecture line. Recommended language: 'Modified income tax architecture (wage floor exemption replacing standard deduction; canonical OPEN-2 graduated income surcharge above 37% top bracket): approximately $130 billion per year net at conservative behavioral-adjusted projections; up to $620 billion at gross projections without behavioral effects. Wealth tax architecture (small wealth surcharge above $10M at 0.5%; wealth tax above $50M at 2.5% funding Sovereign Investment Fund corpus accumulation): approximately $70 billion per year combined.' This separation preserves the FFIA's overall $200 billion combined figure while distinguishing the income-tax-bracket effects from the wealth-based mechanisms. The OPEN-3 issue is then resolved at the FFIA level by making the income tax revenue an explicit line rather than implicit zero or embedded.

Caveats and Limitations

Microsimulation modeling required for definitive numbers. The estimates in this document use aggregate income distribution data and bracket-average marginal rates. Definitive revenue projections require microsimulation modeling at the level of millions of representative filers, capturing: actual income distribution within brackets (not just averages); occupation-specific wage floor exemption variation; filing-status interactions (MFJ versus separate, qualifying widow rules); phaseout interactions with other tax provisions (CTC phaseouts, EITC (Earned Income Tax Credit), AMT, NIIT); behavioral elasticities (income response to surcharge brackets, particularly at the $1M and $5M thresholds where compensation restructuring becomes economically rational). Tools: the Joint Committee on Taxation's Individual Tax Model, the Tax Policy Center's microsimulation, or the Penn Wharton Budget Model would all be appropriate. Any of these would refine the order-of-magnitude estimates here into definitive projections.

Behavioral effects not modeled. High-income earners can restructure compensation to avoid the surcharge brackets in ways the simple per-filer averaging here does not capture. Specifically: deferred compensation moving income across years to smooth surcharge exposure; conversion of wage income to capital gains or qualified dividends (lower bracket rates); pass-through entity reorganization to spread income across multiple entities; international migration to lower-tax jurisdictions (though limited by US citizenship-based taxation). Empirical estimates of taxable-income elasticities at high incomes range from 0.2 to 0.8; the higher end implies substantial behavioral revenue offset (a 5% surcharge produces 80% of static revenue at 0.8 elasticity, versus 60% at 0.2). The platform's revenue projections should adopt explicit elasticity assumptions; this document does not.

Wage floor exemption phase-out interaction. The phase-out from 1x floor to 2.5x floor creates a marginal-rate spike for workers in that income range. A worker going from $30K to $35K with a $28K floor sees: standard wage tax on the $5,000 raise plus loss of approximately $1,250 of wage floor exemption (5/42 of the phase-out range) at their marginal bracket. The effective marginal rate in the phase-out zone can reach 25-35% even at low statutory brackets. This is a well-known issue with phase-out structures generally (analogous to the EITC phase-out). The platform's design choice is to accept this in exchange for preserving the wage floor exemption's targeting at workers below 2.5x their floor. Alternative designs (cliff-style with sharp cutoffs; hybrid combining exemption with earned income credit) trade off targeting against marginal-rate smoothness. This document does not evaluate alternatives; it documents the current architecture's revenue implications.

Three-Year Phase-In Considerations

The platform's transition to mature steady state takes approximately 30 years per the Combined Reform Model, but the income tax architecture changes phase in earlier (years 1-5 of the deployment). During the phase-in: wage floor exemption ramps from 0% to 100% over years 1-3 (annual 33% increment); high-earner surcharge applies at half-rate in year 1 (e.g., +2.5% above $250K instead of +5%), three-quarter-rate in year 2, full-rate in year 3+. This phase-in smooths the transition for affected households and reduces year-1 fiscal disruption. Revenue projections during phase-in: year 1 net effect approximately $200 billion; year 2 approximately $440 billion; year 3 approximately $620 billion (mature steady state). The phase-in pattern allows the platform's other commitments (Sovereign Fund disbursements, healthcare contributions, Civic Infrastructure investments) to ramp coordinately rather than producing year-1 fiscal whiplash.

OPEN-3 Status After This Document

OPEN-3 is substantively addressed. The income tax architecture's revenue effect is now quantified: approximately +$619 billion per year mature steady-state (without behavioral adjustment) or approximately +$130 billion (with conservative behavioral adjustment). The FFIA's previous treatment of this as 'approximately zero net' is reconciled: the FFIA's wealth tax architecture line ($200B/year) implicitly included the high-earner surcharge component along with the wealth-based mechanisms; this document recommends the FFIA explicitly separate the two. OPEN-3 is not fully resolved in the sense that microsimulation modeling has not been performed; that work requires external tools (JCT/TPC/Penn Wharton models) that the platform does not have access to. The substantive analytical question (does the income tax architecture have revenue implications, and if so, how much) is now answered at order-of-magnitude precision; the precise number requires deeper modeling. The OPEN-3 entry in OIR (Open Issues Registry) Section 2 should be updated to reflect this partial resolution.

Behavioral Elasticity Sensitivity Analysis

Empirical estimates of taxable-income elasticity (Elasticity of Taxable Income (ETI)) for high-income earners range from 0.2 to 0.8 across the literature. Saez (2003) and Gruber and Saez (2002) estimate ETI of approximately 0.4 for top earners. Auten and Carroll (1999) estimate 0.6-0.8 for the highest brackets. Piketty, Saez, and Stantcheva (2014) estimate 0.2-0.5 with confidence intervals. The platform's revenue projections should adopt explicit elasticity assumptions; this section presents sensitivity analysis at four elasticity values.

Method. For each surcharge bracket layer (5%, 10%, 15%), compute the change in net-of-tax rate (existing 63 percent net rate at the 37 percent top bracket; new net rate of 58 percent for the 5 percent layer, 53 percent for 10 percent layer, 48 percent for 15 percent layer). Apply ETI to compute the percentage change in taxable income at each layer (ETI multiplied by percent change in net-of-tax rate). Apply the income-shift to the static revenue. Sum across layers and across filing statuses. (Source baseline: see Sources_And_Derivation_Convention.docx.)

Results using corrected filer counts (~$260B static gross). At ETI of 0.2 (conservative): 5 percent layer revenue retains approximately 98.4 percent of static; 10 percent layer retains 96.8 percent; 15 percent layer retains 95.2 percent. Total behavioral-adjusted revenue: approximately $250 billion per year (96 percent of static). At ETI of 0.4 (median literature): 5 percent layer 96.8 percent; 10 percent layer 93.7 percent; 15 percent layer 90.5 percent. Total: approximately $240 billion per year (93 percent of static). At ETI of 0.6 (literature higher end): 5 percent layer 95.2 percent; 10 percent layer 90.5 percent; 15 percent layer 85.7 percent. Total: approximately $230 billion per year (89 percent of static). At ETI of 0.8 (upper bound): total approximately $220 billion per year (85 percent of static). (Source baseline: see Sources_And_Derivation_Convention.docx.)

Implication. Behavioral effects reduce gross revenue by 4 to 15 percent across the literature's elasticity range. The platform's projection should adopt the median ETI of 0.4 and project approximately $240 billion per year mature steady-state from the income tax architecture. The 0.2 to 0.6 range produces $230 to $250 billion. This is a relatively narrow range because the surcharge rates are moderate (5 to 15 percentage points) and the existing top bracket is already high (37 percent), limiting the relative net-of-tax change at each layer. If the surcharge rates were higher (e.g., 20 to 30 percent) or if the existing top bracket were lower, the behavioral revenue offset would be substantially larger.

Distributional Impact Analysis

The income tax architecture has three distributional effects: redistribution at the bottom (wage floor exemption favors lower-income workers); mild burden increase in the middle (standard-deduction-loss for filers above 2.5x their floor); and progressive increase at the top (graduated surcharge above $250K).

Bottom of distribution (filers below 2.5x their floor, approximately 90 million filers). Average tax reduction: approximately $1,600 per year per filer (at the 12 percent typical marginal bracket on the $13,400 difference between average wage floor exemption $28,000 and current standard deduction $14,612). Total tax reduction at this segment: approximately $145 billion per year. The most-affected occupations are service occupations, retail, healthcare support, and administrative support, where median earners typically fall below 2x their occupation's 25th-percentile floor. (Source baseline: see Sources_And_Derivation_Convention.docx.)

Middle of distribution (filers above 2.5x their floor but below $250,000, approximately 40 million filers). Average tax increase: approximately $3,200 per year per filer (loss of $14,612 standard deduction at 22-24 percent marginal brackets). Total tax increase at this segment: approximately $130 billion per year. The most-affected workers are upper-middle-class professionals: senior engineers, mid-career managers, established medical professionals, lawyers, and similar high-earning occupations where individual workers typically earn 3-5x their occupation's 25th-percentile floor. (Source baseline: see Sources_And_Derivation_Convention.docx.)

Top of distribution (filers above $250,000, approximately 6.5 million filers total per IRS data). Average tax increase from graduated surcharge: approximately $40,000 per year per filer in the $1M+ bracket; $20,000 per year per filer in the $500K-1M bracket; $5,000 per year per filer in the $250K-500K bracket. Total tax increase at this segment: approximately $260 billion per year (gross before behavioral adjustment) or approximately $240 billion (with median 0.4 ETI). The highest-income subset (top 0.1 percent, approximately 165,000 households) bears the largest absolute increases; per-filer surcharges range from $62,500 (single $1M) to $662,500 (single $5M) to over $1 million (single $10M+).

Net distributional summary. The architecture is progressive: lower-income workers see a tax reduction; middle-income workers see a modest increase; high-income workers see a substantial increase. Aggregate net revenue change is positive (approximately +$110 to +$140 billion per year combining the three components, where the wage floor exemption produces -$15 billion net, the middle-income standard deduction loss produces $0 to +$20 billion net depending on how phaseout boundary is treated, and the high-earner surcharge produces +$220 to +$250 billion net). The architecture funds part of the platform's other commitments while distributionally being progressive in the way the platform's values would predict.

FFIA Reconciliation (Updated for v2.30)

Combining the corrected filer counts and behavioral-adjusted estimates: total income tax architecture revenue is approximately $110 to $140 billion per year (net, after the wage floor exemption's redistribution loss). The FFIA's existing wealth tax architecture line of $200 billion per year combines this with the $10M small wealth surcharge (approximately $30-40 billion at 0.5 percent on net worth above $10M for approximately 75,000 households) and the $50M wealth tax (approximately $50-70 billion at 2.5 percent on net worth above $50M for approximately 30,000 households). Recommended FFIA line items going forward: (1) Modified income tax architecture: approximately $130 billion per year mature steady-state at median behavioral elasticity; (2) Small wealth surcharge ($10M+): approximately $35 billion per year; (3) Wealth tax ($50M+): approximately $60 billion per year. Combined: approximately $225 billion per year, modestly above the FFIA's original $200 billion estimate. The discrepancy is within the reasonable uncertainty range for order-of-magnitude estimates.

Cross-References

This document substantiates OPEN-3 documented in Open Issues Registry, Section 2. It cross-references Wage Floors as Tax Architecture, canonical structure, Does This Raise Taxes, citizen-facing, What This Means For You (specifically its high-earner section), and Federal Fiscal Impact Analysis, where the FFIA reconciliation should be applied. This document thus bridges the gap between the structural architecture documents and the consolidated revenue projection document by quantifying the architecture's revenue effect at order-of-magnitude precision.