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.

 

Trump tariffs currency appreciation and Trump tariffs value of US dollar impact
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Four Ways US Bond Markets Affect Tax Revenue

Federal government debt is over $32 trillion, around the size of the nation’s annual economic output (its gross domestic product, or GDP). Debt levels this high mean US borrowing costs are sensitive to interest rate changes that may otherwise seem small.

5 min read
OECD Tax Transparency Regimes, Country-by-Country Reporting
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Diving into the Differences Between Tax Transparency Regimes

The new public country-by-country reporting regimes adopted by the EU and Australia, and changes from the Financial Accounting Standards Board for financial accounts, are meant to promote transparency by multinational enterprises but have ubiquitous structural differences.

10 min read
The Options Guide Shows a Better Way to Fund Social Security
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The Options Guide Shows a Better Way to Fund Social Security

While uncapping the payroll tax and raising individual income tax rates are often the go-to reform options for policymakers, base broadeners like ESI and other fringe benefits are much better alternatives. They can raise significant revenue, while improving the neutrality of the tax code and preventing the need for increases in statutory tax rates.

6 min read
Maryland Digital Tax
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Maryland Court Strikes Down Digital Ad Tax

The Maryland Tax Court has struck down the state’s digital advertising tax and ordered that refunds be paid to taxpayers for five and a half years’ worth of collections under the unconstitutional tax.

5 min read
Dominican Republic Tax Reform
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Good Tax Reform Starts with Good Process

In June, the Dominican Republic rushed through a package of tax legislation in seven days. International examples demonstrate that consultation, transparency, and clarity are key factors for successful tax reform.

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The Five Most Pro-Growth Options in the Options Guide

Some taxes have more powerful economic effects than others, and that’s a lesson policymakers should absorb as they work to craft a tax code that encourages growth and raises sustainable revenue.

8 min read