Evaluating U.S. Tax Reform Options & Trade-Offs

The economic crisis caused by the coronavirus pandemic poses a triple challenge for tax policy in the United States. Lawmakers are tasked with crafting a policy response that will accelerate the economic recovery, reduce the mounting deficit, and protect the most vulnerable.

To assist lawmakers in navigating the challenge, and to help the American public understand the tax changes being proposed, the Tax Foundation’s Center for Federal Tax Policy modeled how 70 potential changes to the tax code would affect the U.S. economy, distribution of the tax burden, and federal revenue.

In tax policy there is an ever-present trade-off among how much revenue a tax will raise, who bears the burden of a tax, and what impact a tax will have on economic growth. Armed with the information in our new book, Options for Reforming America’s Tax Code 2.0, policymakers can debate the relative merits and trade-offs of each option to improve the tax code in a post-pandemic world.

 

qbai exemption, one big beautiful bill, fdii and gilti
Blog

A Partial Defense of the QBAI Exclusion

Lawmakers should consider maintaining QBAI and applying the several billion dollars from the Senate’s change toward other pro-growth international tax reforms instead.

6 min read
No Tax on Social Security vs. Proposed $4,000 Senior Bonus Senior Tax Deduction One Big Beautiful Bill Act OBBB
Blog

How Would the Proposed Additional Senior Deduction Compare to No Tax on Social Security?

The increased senior deduction with the phaseout would deliver a larger tax cut to lower-middle- and middle-income taxpayers compared to exempting all Social Security benefits from income taxation and would not weaken the trust funds as much. But given the temporary nature of the policy, it would increase the deficit-impact of the reconciliation bills without boosting long-run economic growth.

3 min read
Big Beautiful Bill Impact on Economy and Economic Growth
Blog

Will the Big Beautiful Bill Lead to an Economic Boom or Just Modestly Higher Growth?

Lawmakers are right to be concerned about deficits and economic growth. The best path to address those concerns is to ensure OBBB provides permanent full expensing of capital investment, avoids inefficient tax cuts, and offsets remaining revenue losses by closing tax loopholes and reducing spending.

8 min read
Michigan Ballot Tax Plan: Progressive Income Tax for Education Invest in MI Kids Tax the Wealthy and Rich
Blog

Progressive Income Tax on the Ballot in Michigan?

If Michiganders are interested in increasing the state’s spending on education or other priorities—and believe that current revenues are insufficient to support such an increase—there are several ways to do so without significantly affecting residents’ incentives to live and work in Michigan.

4 min read
future of eu tax mix with stefanie geringer, university of vienna
Blog
Europe

Fiscal Forum: Future of the EU Tax Mix with Dr. Stefanie Geringer

Tax Foundation Europe’s Sean Bray had the opportunity to interview Dr. Stefanie Geringer, a postdoctoral researcher at the Faculty of Law at the University of Vienna and Masaryk University Brno, a certified tax advisor and manager of tax at BDO Austria, about the future of the EU tax mix.

14 min read
illinois budget, tax on gilti, business tax increase
Blog

Illinois Policymakers Should Think Twice Before Taxing GILTI

If Illinois’ budget is enacted as-is, Illinois will newly tax 50 percent of Global Intangible Low-Taxed Income (GILTI) as of tax year 2025, retroactively increasing tax burdens for US businesses and further hindering Illinois’ business tax competitiveness.

7 min read