The Tax Foundation’s Center for Federal Tax Policy takes a quantitative approach to analyzing the economic, budgetary, and distributional impact of important campaign, legislative, and other popular tax proposals using our General Equilibrium Model, known as our Taxes and Growth (TAG) Model.
The mission of our economic and tax modeling program is to educate lawmakers and the public about the key trade-offs in tax policy, the real-world impact of those trade-offs on taxpayers and our economy, and the best options for achieving principled and pro-growth tax reform.
The Tax Foundation uses and maintains a General Equilibrium Model, known as our Taxes and Growth (TAG) Model to simulate the effects of government tax and spending policies on the economy and on government revenues and budgets.
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The Tax Foundation models tax policy using our proprietary Taxes and Growth model, illustrating the economic, revenue, and distributional impacts of different changes to the federal tax code. We’ve recently implemented improvements to the model that have been underway for the past several years, and we will be detailing them further in our forthcoming model methodology update.
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This tax reform plan would boost long-run GDP by 2.5%, grow wages by 1.4%, and add 1.3M jobs, all while collecting a similar amount of tax revenue as the current code and reducing the long-run debt burden.
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Policymakers should have two priorities in the upcoming economic policy debates: a larger economy and fiscal responsibility. Principled, pro-growth tax policy can help accomplish both.
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A robust collection of 70 potential US tax reform changes and US tax reform options for reforming the tax code. See the comprehensive tax reform guide.
Lawmakers should use the most comprehensive analytical tools available to them—like dynamic scoring—to make informed decisions about policy changes.
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Pairing permanent TCJA individual tax cuts with new limits on business SALT deductions would shrink the economy, reduce American incomes, and increase the federal budget deficit, undermining the policy goals of TCJA permanence.
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The tariff policies already in effect threaten to offset the benefits of the promised tax cuts.
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On April 10, the House adopted the Senate’s amended version of the budget resolution, which allows $5.3 trillion in deficit-financed tax cuts.
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The tariffs amount to an average tax increase of nearly $1,300 per US household in 2025.
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Raising the top income tax rate would raise several hundred billion dollars but would offset most of the pro-growth effects of making the TCJA’s individual tax provisions permanent by reducing incentives to work and invest.
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Could tariffs, a form of government finance heavily relied upon in the 18th and 19th centuries, function as a major source of revenue for a modern, developed economy in the 21st century?
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Lawmakers should prioritize pro-growth tax policies and use the least economically damaging offsets to make the legislation fiscally responsible. If lawmakers choose to use C-SALT, they should carefully consider the economic trade-off with permanent, pro-growth tax cuts that support investment and innovation in the US.
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Contrary to the president’s promises, the tariffs will cause short-term pain and long-term pain, no matter the ways people and businesses change their behavior.
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Tax legislation in 2025 may have good reason to address international corporate income taxes, because of scheduled changes slated to go into effect or because of international developments like the Pillar Two agreement.
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The Tax Foundation uses and maintains a General Equilibrium Model, known as our Taxes and Growth (TAG) Model to simulate the effects of government tax and spending policies on the economy and on government revenues and budgets.
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While capping C-SALT has superficial appeal in perceived parity with personal limits, it rests on flawed assumptions about the nature of individual and corporate income taxes.
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Permanently extending the Tax Cuts and Jobs Act would boost long-run economic output by 1.1 percent, the capital stock by 0.7 percent, wages by 0.5 percent, and hours worked by 847,000 full-time equivalent jobs.
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The Tax Foundation models tax policy using our proprietary Taxes and Growth model, illustrating the economic, revenue, and distributional impacts of different changes to the federal tax code. We’ve recently implemented improvements to the model that have been underway for the past several years, and we will be detailing them further in our forthcoming model methodology update.
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As lawmakers work through the reconciliation process, permanently enacting improvements to deductions for capital investment and research and development (R&D) costs will create an economically powerful package.
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Republican policymakers in Congress are considering options to raise revenue as part of their expected legislative package in 2025. One such option involves raising the tax rate on university endowments first put in place as part of the TCJA in 2017.
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Given the poor state of the budget process and worsening debt trajectory, lawmakers should move boldly and quickly to address the issue, including via a fiscal commission process. Issues to consider should include reforms to both spending and taxes.
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The analysis provides key insights into how their models work and the sort of outputs we can expect from their models as part of next year’s tax debate.
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If lawmakers are serious about pro-growth policies and fiscal responsibility, they will need to put policies forward that achieve those goals. Simply adjusting the baseline doesn’t reduce actual deficits in the coming years.
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Fiscal pressures are likely to weigh heavily on lawmakers as they craft a tax reform package. That increased pressure could result in well-designed tax reform that prioritizes economic growth, simplicity, and stability, or it could encourage budget gimmicks and economically harmful offsets. Lawmakers should avoid the latter.
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President-elect Trump may want to impose tariffs to encourage investment and work, but his strategy will backfire. Tariffs will certainly create benefits for protected industries, but those benefits come at the expense of consumers and other industries throughout the economy.
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