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.

Portugal inflation tax policies include Portugal VAT exemption for value added tax goods and services
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VAT Carveouts in Portugal

The Portuguese government has introduced plans to exempt “essential” food items from its value-added tax (VAT) in response to the recent inflation spike. While this may sound like a reasonable measure on the surface, it comes with numerous unintended consequences that compromise its effectiveness.

4 min read
2023 spain tax reform and spain tax policy including Spain wealth tax and Spain windfall tax policies
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Spain Is Doubling Down on Poor Tax Policy

Spain should follow the examples of Italy and the UK and enact tax reforms that have the potential to stimulate economic activity by supporting private investment while increasing its international tax competitiveness.

7 min read
2023 Missouri tax reform proposals and Missouri income tax reform including corporate income tax rate reductions
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Missouri Tax Package Would Set State Up for Success

Accelerating its current individual income tax triggers and setting up the corporate income tax for eventual elimination would increase Missouri’s attractiveness among states at a time when businesses are increasingly mobile and tax competition matters more than ever.

4 min read
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Shrinking Revenue from Sin Taxes: A Small Price to Pay for Healthier Behaviour

Younger and healthier Brits have created a $17.1 billion budget hole by smoking and drinking less. Yet, despite this resounding piece of positive news, some see any decline in tax revenues as a public finance crisis. Excise taxes target a tax base that is intended to shrink. Less consumption is a stated goal of the policy.

3 min read
Mississippi business tax reform Mississippi capital improvement plan full expensing Governor Tate Reeves
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Mississippi’s Capital Improvement Plan Leads in the South and Nationwide

A recently enacted bill in Mississippi made the Magnolia State only the second state in the country to make full expensing permanent. The bill joins reductions to the individual income tax and capital stock tax rates, already in progress, as model, pro-growth reforms for the region.

5 min read
UK budget tax policies like UK tax reform options UK full expensing Spring Budget
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Temporary Full Expensing Arrives in the UK

The UK’s adoption of full expensing is a welcome step that may generate short-run economic benefits. However, for the reform to have a meaningful effect on the UK’s international competitiveness and long-run economic performance, it must be made permanent—which the British government has said it hopes to do.

6 min read
New Mexico tax reform 2023 New Mexico omnibus tax bill business tax reform HB 547 New Mexico gross receipts tax
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New Mexico’s Omnibus Tax Bill

Adopting the sound tax reforms still pending in Santa Fe is an opportunity for New Mexico to keep up with the pack or risk falling further behind.

7 min read