The Tax Foundation’s Center for Federal Tax Policy takes a quantitative approach to analyzing the economic, budgetary, and distributional impact of important campaign, legislative, and other popular tax proposals using our General Equilibrium Model, known as our Taxes and Growth (TAG) Model.
The mission of our economic and tax modeling program is to educate lawmakers and the public about the key trade-offs in tax policy, the real-world impact of those trade-offs on taxpayers and our economy, and the best options for achieving principled and pro-growth tax reform.
The Tax Foundation uses and maintains a General Equilibrium Model, known as our Taxes and Growth (TAG) Model to simulate the effects of government tax and spending policies on the economy and on government revenues and budgets.
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The Tax Foundation models tax policy using our proprietary Taxes and Growth model, illustrating the economic, revenue, and distributional impacts of different changes to the federal tax code. We’ve recently implemented improvements to the model that have been underway for the past several years, and we will be detailing them further in our forthcoming model methodology update.
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This tax reform plan would boost long-run GDP by 2.5%, grow wages by 1.4%, and add 1.3M jobs, all while collecting a similar amount of tax revenue as the current code and reducing the long-run debt burden.
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Policymakers should have two priorities in the upcoming economic policy debates: a larger economy and fiscal responsibility. Principled, pro-growth tax policy can help accomplish both.
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A robust collection of 70 potential US tax reform changes and US tax reform options for reforming the tax code. See the comprehensive tax reform guide.
Lawmakers should use the most comprehensive analytical tools available to them—like dynamic scoring—to make informed decisions about policy changes.
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Using tariff policy to reallocate investment and jobs is a costly mistake—that’s a history lesson we should not forget.
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Estimating the economic effects of different types of taxes informs policymakers about the trade-offs of raising revenue in a given way.
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A new analysis finds that the tax increase would reduce average wages by as much as $597 per US worker each year. In some states, the drop in wages would exceed $700 per worker.
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The gap between statutory rates and average effective tax rates for personal income tax in the European Union varies significantly, affecting the efficiency and simplicity of the tax system.
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Exempting overtime would unnecessarily complicate the tax code, increase compliance and administrative costs, and reduce neutrality by favoring certain work arrangements over others.
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Allowing full deductibility of residential structures would mean more housing construction, particularly multifamily housing—a practical solution to address housing affordability challenges.
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Depending on the 2024 US election, the current corporate tax rate of 21 percent could be in for a change. See the modeling here.
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Exempting Social Security benefits from income tax would increase the budget deficit by about $1.6 trillion over 10 years, accelerate the insolvency of the Social Security and Medicare trust funds, and create a new hole in the income tax without a sound policy rationale.
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A 15 percent corporate rate would be pro-growth, but it would not address the structural issues with today’s corporate tax base.
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From President Biden calling the Tax Cuts and Jobs Act the “largest tax cut in American history,” to former President Trump claiming that Biden “wants to raise your taxes by four times,” the campaign rhetoric on taxes may be sparking some confusion.
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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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Universal savings accounts would boost savings for low-income households, allowing them to better withstand economic shocks, such as pandemics and recessions, and plan for major expenses, such as an expanded family, education, and housing needs.
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The Section 232 tariffs on imports of steel and aluminum raised the cost of production for manufacturers, reducing employment in those industries, raising prices for consumers, and hurting exports.
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Policymakers should have two priorities in the upcoming economic policy debates: a larger economy and fiscal responsibility. Principled, pro-growth tax policy can help accomplish both.
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Given that U.S. debt is roughly the size of our annual economic output, policymakers will face many tough fiscal choices in the coming years. The good news is there are policies that both support a larger economy and avoid adding to the debt.
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From a revenue standpoint, about $9 billion of the $11.7 billion in lost revenue would accrue to joint filers earning more than $200,000.
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Examining the revenue, economic, and distributional effects of a hypothetical deal with permanent tax policy changes shows the longer-run trade-offs policymakers would face.
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The House Ways and Means Committee has advanced a tax deal to the House floor that would temporarily—and retroactively—restore two major business deductions for cost recovery and expand the child tax credit through 2025.
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Lawmakers should prioritize creating a tax system that supports investment more broadly rather than subsidizing specific industries and allowing broad, neutral pro-investment provisions to expire.
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Lawmakers should use the year ahead to thoroughly review and debate lasting, fundamental tax reform and prioritize policies that best boost work and investment incentives in a fiscally responsible manner.
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