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.

corporate alternative minimum tax corporate amt or corporate minimum tax build back better additional relief for coronavirus, additional stimulus payments
Blog

Additional Pandemic Relief Might Be Taking Shape

With days left until government funding runs out, congressional lawmakers are down to the wire to fund the government and provide additional pandemic-related relief to the households and businesses trying to make it through the winter.

3 min read
Blog

Poland Borrows an Idea from Estonia’s Tax System, but Misses the Point

It’s important for Poland to understand the main lesson of the Estonian approach: taxes should be designed with an overarching approach to maximize neutrality and minimize complexity and distortions. Instead of simply adopting a preference for small businesses, the Polish government should instead overhaul its corporate tax rules and truly adopt the Estonian approach to taxation.

2 min read
Indiana Lawmakers Consider Cigarette Tax Increase, Indiana would have the highest cigarette tax in the region, $3 a pack cigarette tax rate
Blog

Indiana Lawmakers Consider Cigarette Tax Increase

While increasing taxes on cigarettes may limit demand, a 200 percent hike may also result in a number of unintended consequences, such as increased smuggling.

2 min read
American Rescue Plan Act of 2021, Covid relief federal economic relief package, Biden stimulus $1,400 payments or stimulus checks COVID-19 tax resource center. coronavirus tax policy and the coronavirus (covid-19)
Blog

How Would the Proposed $160 Billion in State and Local Aid Be Allocated?

A bipartisan coalition of Senators unveiled a $908 billion COVID-19 relief bill on Tuesday, which includes, among other provisions, $160 billion in additional aid to state and local governments. It is worth briefly exploring what this would mean, and the amounts of aid your state might expect.

5 min read
Permanent Build Back Better middle class tax hike Tax Cuts and Jobs Act, Tax Reform
Blog

Outlining a Path for Tax Policy Compromises

While a sweeping tax policy bill is unlikely in the near future, lawmakers may be able to come together on a smaller scale. Pairing better cost recovery on a permanent basis with support for vulnerable households as well as additional pandemic-related relief would help promote a more rapid return to growth and help businesses and households weather the ongoing crisis.

4 min read
New York cigarette smuggling sin taxes
Blog

New York Lawmaker Looks to Sin Taxes Once More

New York already suffers from significant smuggling of untaxed tobacco products—smuggled cigarettes accounted for 53 percent of cigarettes consumed in the state in 2018—and further increasing tobacco taxes is likely to make matters worse.

3 min read