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.

 

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Europe

How Fixed-Rate Excise Taxes Can Produce Unintended Harm

Fixed-rate excise taxes are often adopted to reduce harm, curb excessive consumption, or discourage dangerous behaviors. However, without attention to how consumers substitute between products, well‑meaning policies may exacerbate the very harm they aim to prevent.

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Chicago Bears Threaten Relocation over Illinois Taxes

The Chicago Bears are threatening to relocate from Illinois to Indiana as they negotiate over taxes and public financing. Illinois’ uncompetitive and burdensome tax environment makes it difficult for the NFL team to operate.

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Movers and Shakers in the International Tax Competitiveness Index

For the past 12 years, the International Tax Competitiveness Index has examined which countries have truly embraced tax competitiveness and which ones have lagged behind. Our experts examine how country rankings have changed over time and identify the largest movers and shakers.

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Excise Taxes Cannot Replace Property Taxes

While rising property values and taxes have intensified calls for reform, the reality is that property taxes fund the lion’s share of local services and lack a viable substitute. Excise taxes are far too narrow to fill the gap, and a poor candidate for filling any meaningful portion of it.

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How Does the OBBBA Impact Debt, Deficits, and Tax Revenue?

Our modeling indicates the One Big Beautiful Bill Act (OBBBA) will boost economic growth but increase deficits, leading to record high debt in 2028 that rises to 124 percent of GDP by 2034.

7 min read
GILTI to NCTI, State Tax Codes Decouple
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Some States Will Tax NCTI Despite Prior Votes to Exempt International Income

Several states have decoupled from GILTI by name rather than statutory citation. Lawmakers in those states should amend these statutes to ensure that their tax code does not accidentally incorporate a much more aggressive tax on international income than the tax from which they previously decoupled.

6 min read