Revenue Neutral Law and Legal Definition

The term Revenue Neutral implies changes in the tax laws that result in no change in the amount of revenue coming into the government's coffers. In other words, a tax proposal is revenue neutral if it neither increases nor decreases tax revenues when compared to existing law. For instance, a revenue neutral provision may require individuals to pay less tax, but corporations will pay correspondingly more taxes. The concept was the decisive factor in drafting the Tax Reform Act of 1986 “whereby provisions estimated to add revenue were offset by others estimated to reduce revenue, so that on paper the new bill would generate the same amount of revenue as the old tax laws.”