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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.

Wisconsin income tax reform proposals competition

Wisconsin Losing Ground to Tax-Friendly Peers

While Wisconsin has long been one of the highest-tax states in the nation, that distinction is increasingly detrimental as businesses and individuals enjoy increased economic and geographic mobility.

6 min read
Kansas tax cuts what about kansas tax experiment (kansas experiment about brownback tax cuts)

Two Dozen States Show Why the Kansas Critique of Income Tax Cuts Is Mistaken

The Kansas experience is so infamous that “what about Kansas?” is almost guaranteed to be a question—sometimes as a retort, but often a genuine expression of concern—any time any state explores tax relief. But what about the other two dozen states that have cut their income taxes since then?

6 min read
section 179 expensing state tax conformity section 168 Oklahoma State Capital Building

Oklahoma Should Prioritize Pro-Growth Relief, Not Gimmicky Rebate Checks

If Sooner State policymakers want to use a portion of their higher revenues to make the economy work better for all Oklahomans, they should consider repealing the franchise tax, trimming the income tax, or both—paired, if desired, with targeted aid to those in the greatest need—not writing a single round of gimmicky checks.

5 min read
global tax agreement global tax deal OECD global minimum tax rules corporate minimum tax rules Secretariat Proposal, OECD Public Consultation Document, Unified Approach under pillar one profit shifting definition tax planning and avoidance foreign direct investment FDI global tax deal impact of global tax agreement OECD international tax proposal

Time for an Updated Impact Assessment of the Global Tax Deal

Treasury Secretary Janet Yellen offered estimates from the EU Tax Observatory as evidence that the Polish government would benefit from supporting the global tax deal. Unfortunately, evidence was, at best, out of date.

2 min read
EU windfall profits tax EU energy security EU fossil fuel EU presidency European Union presidency including Czech presidency Europe council EU VAT Rates: EU VAT Directive & EU Reduced VAT Rates

Europe Opened the Pandora Box of Reduced VAT Rates

With this new VAT directive, the EU has invited member states to adopt policies that create new complexities, are poorly targeted, and undermine an Own Resource.

5 min read
US China tariffs and effect of US china trade war policies

U.S.-China Trade War Hurt American Industries and Workers

While the U.S. tariffs were intended to protect American industries, they have largely hurt the U.S. economy. Rather than pass on the tariffs to Chinese consumers, analysis shows that most U.S. firms simply bore the costs.

4 min read