If Congress allows the Tax Cuts and Jobs Act (TCJA) to expire as scheduled, most aspects of the individual income tax would undergo substantial changes, resulting in more than 62 percent of tax filers experiencing tax increases in 2026.
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CBO data shows that the federal fiscal system—both taxes and direct federal benefits—is getting more progressive and redistributive in 2024.
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If lawmakers are convinced that new revenues must be part of any long-term effort to solve the budget crisis or offset the cost of extending the TCJA, they must choose the least harmful ways of raising new revenues or else risk undermining their efforts by slowing economic growth.
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The Treasury Department recently touted strong business investment in the years following the pandemic-driven recession and pointed to the Biden administration’s industrial policies in the Inflation Reduction Act and CHIPS Act as key drivers.
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As members of Congress prepare to address the expiration of the TCJA, they should appreciate how revenues have evolved since 2017.
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While neither full expiration nor a deficit-financed full extension of the TCJA would be appropriate, lawmakers should consider the incentive effects of whichever tax reform they pursue. Because taxes affect the economy, they also affect the sustainability of debt reduction.
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Creative options including changes in Social Security benefits growth for higher earners and reforms to how Medicare compensates for health services should be on the table, along with broad-based and well-structured tax reforms.
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The CBO projects deficits will be higher than historical levels, largely due to growth in mandatory spending programs While some recent legislation has reduced the deficit, the Inflation Reduction Act is proving to be more expensive than originally promised.
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The latest tax gap report from the IRS has generated much media attention—and much misunderstanding.
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Outside of the pandemic years, this year’s federal deficit is the highest in U.S. history. While tax revenue has increased about 28 percent since the pre-pandemic year 2019, spending has increased about 46 percent. Annual deficits are headed towards $3 trillion over the next few years.
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Now is the time for lawmakers to focus on long-term fiscal sustainability, as further delay will only make an eventual fiscal reckoning that much harder and more painful. Congressional leaders should follow through on convening a fiscal commission to deal with the long-term budgetary challenges facing the country.
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The price tag of the Inflation Reduction Act’s green energy tax credits is much higher than originally thought. Among other things, the updated analysis indicates the Inflation Reduction Act does not reduce deficits after all.
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Any serious proposal to tackle the emerging debt and deficit crisis must also address our largest mandatory spending programs: Social Security and Medicare. Together, these two programs will be responsible for nearly 80 percent of the deficit’s rise between 2023 and 2032, according to Congressional Budget Office (CBO) projections.
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Rather than continue down the path of growing debt, lawmakers should craft a comprehensive solution. International experience cautions against tax-based fiscal consolidations, but modest tax increases may be part of a successful debt reduction package.
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According to the International Monetary Fund (IMF), the U.S. federal government is among the most indebted governments in the world.
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As policymakers look to tackle America’s debt and deficit crisis, they should consider international experiences on successful fiscal consolidations.
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Immediately balancing the $20 trillion budget shortfall would take drastic, unwanted policy changes. Instead, lawmakers should target a more achievable goal, such as stabilizing debt and deficits with an eye toward comprehensive tax reform that can produce sufficient revenue with minimal economic harm.
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Newly published data from the CBO indicates in 2019, before the onset of the pandemic, American incomes continued to rise as part of a broad economic expansion. It also shows that, contrary to common perceptions, the federal tax system is progressive.
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New CBO data shows that the current U.S. fiscal system—both taxes and direct federal benefits—is very progressive and very redistributive.
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