A New Menu of Options for Tax Reform

June 6, 2016

It’s been clear for a while that the U.S. Congress will not pass a major tax reform bill in 2016. This means that it have been over 30 years since the last time that Congress undertook a comprehensive tax reform effort: the Tax Reform Act of 1986. Since then, the U.S. tax code has become more complex and less globally competitive.

However, there is some indication that 2017 may be the year in which Congress finally overhauls the nation’s tax code. Legislators in both parties have expressed interest in tax reform, and some are beginning to offer their own proposals in preparation.

When Congress does begin considering tax reform in earnest, it will face a set of complex considerations and difficult tradeoffs. After all, every change to the tax code creates a number of important effects: on the level of revenue the federal government raises, on the distribution of the tax burden between income groups, on the incentives that individuals and businesses face, and on the overall size of the economy. In a tax reform proposal with dozens of moving parts, it can be difficult to figure out what effects each component would have.

To help lawmakers and voters sort through the considerations behind tax reform, we’ve released a new book, Options for Reforming America’s Tax Code. The book describes 86 different changes to the U.S. tax code that are commonly proposed, and presents the Tax Foundation’s analysis alongside each option.

In writing this book, we were inspired by the Congressional Budget Office, which regularly issues a publication titled Options for Reducing the Deficit. However, our new book differs from the CBO’s report in several important ways. For instance, the CBO only includes tax changes that would raise additional revenue and decrease the deficit, while our book also includes proposals that would decrease federal revenue.

More importantly, the Congressional Budget Office’s report only includes figures for how much each tax proposal would affect federal revenue collections. On the other hand, Options for Reforming America’s Tax Code includes several figures alongside each tax proposal, including how each change would affect the distribution of the tax burden and the U.S. economy.

One of the major themes that echoes throughout our book is that no two tax changes affect the U.S. economy in the same way. While many lawmakers and voters are aware that changing the tax code can grow or shrink the economy, few could tell you which tax cuts are the most economically effective, or which tax increases are likely to be the least harmful. Our new book is designed to educate legislators and the American public on the economics of tax reform.

If you’re wondering – am I the audience for Options for Reforming America’s Tax Code? – the answer is yes! The book was written for Congressional staffers putting together tax reform proposals, for journalists looking for expert tax analysis, and for voters searching for an introduction to the tax reform debate. We hope that this book will further a detailed, honest, and engaged debate about tax reform.


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