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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A Small Value-Added Tax Could Pay for Tariff Repeal

Rather than continuing the Trump administration’s tariff policy, policymakers should explore new solutions that can raise sustainable revenue with fewer distortions, like replacing the tariffs with a value-added tax.

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Colorado’s Election Day Choice on Income Taxes

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Three Facts Straightening Out the Debate Over Bonus Depreciation

Expensing for capital investment is not a special tax break. Expensing aligns the timing of tax deductions with the timing of actual capital expenditures so that the tax code does not discourage marginal investment projects. 

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