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.
Sens. Kevin Cramer (R-ND) and Christopher Coons (D-DE) have recently introduced a bill laying the groundwork for a possible solution to the problem: a tax on the carbon content of imports. But it falls short of the optimal approach in several ways.4 min read
By extending bonus depreciation and introducing neutral cost recovery, the RSC budget would significantly improve the treatment of investment leading to increased growth, expanded employment, and higher wages.3 min read
The price tag of the Inflation Reduction Act’s green energy tax credits is much higher than originally thought. Among other things, the updated analysis indicates the Inflation Reduction Act does not reduce deficits after all.6 min read
In the closing days of the 2023 legislative session, Oklahoma lawmakers repealed the state’s corporate franchise tax and eliminated the marriage penalty in its individual income tax. Both tax changes represent a positive step forward for the state.4 min read
The National Foreign Trade Council’s survey shows that the private sector recognizes the economic value of treaties as an instrument to increase tax certainty and decrease distortions.4 min read
Lawmakers should avoid delivering social and economic benefits through the tax code whenever possible and work to simplify or repeal the tax expenditures already in the tax code.7 min read
The current tax treatment of R&D expenses is irrational, complicated, and counterproductive. Fortunately, fixing this problem is a bipartisan issue.4 min read
As the UTPR is a new concept, it is worth explaining what it is and why Rep. Smith cares about it. In a sentence, the Undertaxed Profits Rule (UTPR) is a looming extraterritorial enforcement mechanism for a tax base the U.S. has not adopted.6 min read
Debt Ceiling Deal Reduces Deficits in the Short Term but Delays a More Comprehensive Budget Reckoning
To address the more challenging parts of the budget, especially the unsustainable growth in mandatory spending, lawmakers should follow up on this debt ceiling agreement with a focus on long-term fiscal sustainability.6 min read
Making expensing permanent is especially important now, when the economy is threatened with a recession and inflation remains high.7 min read