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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Federal Plastics Tax Is Not a Good Revenue Raiser

One of the Senate’s proposals to pay for the Build Back Better Act is a federal excise tax on virgin plastics, which are plastics that are not reprocessed or recovered.

4 min read
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How Heavily Taxed Are U.S. Multinationals?

In general, the effective tax rates on the foreign profits of U.S. multinationals are not that low relative to the U.S. tax rate, contrary to popular rhetoric.

7 min read
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Carbon Tax: Weighing the Options for Financing Reconciliation

A carbon tax would be a less economically harmful pay-for than either personal or corporate income tax hikes and a more efficient way to reduce carbon emissions than green energy tax credits, but would come with other trade-offs.

4 min read
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History of Attempted Changes to Step-Up in Basis Shows Perilous Road Ahead

As Congress considers President Biden’s proposal to tax unrealized capital gains at death, the history of previous efforts suggests it faces a perilous road ahead. Lawmakers must resolve tricky design and implementation details that derailed past attempts to change how capital gains are treated when assets are passed from one generation to the next.

4 min read
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Federal Judge Rules Against ARPA’s Tax Mandate

Kentucky and Tennessee won an important legal victory Friday when a federal court ruled that the American Rescue Plan Act (ARPA)’s restrictions on state fiscal autonomy were unconstitutional and enjoined (blocked) the enforcement of those provisions against both states.

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Choose Your Own Adventure: Global Minimum Tax Edition

Over the course of the last year, it has become clear that Democratic lawmakers want to change U.S. international tax rules. However, as proposals have surfaced in recent weeks, there are clear divides among various proposals.

5 min read
2022 Spanish Regional Tax Competitiveness Index
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2021 Spanish Regional Tax Competitiveness Index

The Spanish Regional Tax Competitiveness Index allows policymakers, businesses, and taxpayers to evaluate and measure how their regions’ tax systems compare and serves as a road map for policymakers to reform their tax systems and make their regions more competitive and attractive for entrepreneurs and residents.

7 min read
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The Good, the Bad, and the Ugly of the Ways and Means Plan

The latest version of the Biden Build Back Better agenda, released last week by the House Ways and Means committee, is dense, with too many provisions to flesh out completely. Here’s a rundown of the good, the bad, and the ugly of it.

7 min read