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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On tax policy, Harris carries forward much of President Biden’s FY 2025 budget, including higher taxes aimed at businesses and high earners. She would also further expand the child tax credit (CTC) and various other tax credits and incentives while exempting tips from income tax.
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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 government provides various services at the federal, state, and local levels. How are they paid for? Taxes.
While both President Biden and Vice President Harris aim their proposed tax hikes on businesses and high earners, key differences between their tax ideas in the past reveal where Harris may take her tax policy platform in the 2024 campaign.
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President Biden is proposing extraordinarily large tax hikes on businesses and the top 1 percent of earners that would put the US in a distinctly uncompetitive international position and threaten the health of the US economy.
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Short FormImproving the country’s fiscal situation won’t be comfortable, but economic growth can help cushion the blow.
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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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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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To address the more challenging parts of the budget, especially the unsustainable growth in mandatory spending, lawmakers should follow up on this debt ceiling agreement with a focus on long-term fiscal sustainability.
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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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As predicted, the Inflation Reduction Act’s misguided price-setting policy is already discouraging drug development. Rather than double down on it, as President Biden proposes doing in his budget, lawmakers ought to restore incentives to invest in the United States.
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Tax reform should be about increasing fairness. And the way to get there is by reducing complexity and double taxation, not by doubling down on them.
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President Biden’s new budget proposal outlines several major tax increases targeted at businesses and high-income individuals that would bring U.S. income tax rates far out of step with international norms.
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Different taxes have different economic effects, so policymakers should always consider how tax revenue is raised and not just how much is raised.
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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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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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