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.

 

California Worldwide Combined Reporting, CA Corporate Income Taxation
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California’s Mandatory Worldwide Combined Reporting Proposal Is a Mistake

California lawmakers are considering mandating worldwide combined reporting, bringing back a policy the state abandoned in the 1980s due to strong pushback from international trading partners and the federal government. The policy failed to work as intended then and doesn’t make any better sense now.

8 min read
Economic Impact of Tariffs, trade tensions, trade, china tariffs
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American Compass’s “Tariff Tally” Doesn’t Add Up

The evidence overall paints a far different picture than American Compass presents, and a consistent theoretical framework undercuts its assertions of how tariffs should be expected to impact the economy moving forward.

25 min read
state full expensing permanent to curb inflation Cost Recovery and Full Expensing
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The OBBBA Improved the Treatment of Investment—but There’s Still Work to Do

The OBBBA significantly boosted economic prospects by improving the treatment of investment. By making key expensing provisions permanent, the OBBBA created better conditions for long-term growth. However, there’s still work to be done, and the OBBBA provided a blueprint for policymakers to follow.

4 min read
Georgia tax reform and relief GA tax package including Georgia property tax relief and Georgia income tax elimination
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Georgia Needs to Aim for True Tax Improvement, not Just Change

It’s for good reason that Georgia wants to eliminate the income tax and rein in property taxes. However, the changes Georgia would need to make to accomplish these goals would work against its overall competitiveness.

8 min read
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Avenues for Property Tax Reform in North Carolina

When evaluating property tax reform options in North Carolina, only changes that restore balance—without distorting investment or shifting costs unfairly—will ensure the state’s local tax system supports, rather than hinders, continued prosperity.

8 min read