Tax — Federal
Timing Gimmicks Pose Threat to Fiscally Responsible Tax Reform
Savings in First Decade Need to Continue in Second Decade
By using timing shifts or one-time tax savings, policymakers could assemble a tax reform package that meets the revenue targets for reform over the ten-year budget window but falls well short of those targets in subsequent decades. That would put greater pressure on future deficits. (It also would cause any revenue contribution to deficit reduction to dissipate in the long run, even as the contribution from entitlement cuts likely continued to grow.)
It is critical that policymakers hold tax reform to the same standard as major health and immigration reform proposals, so that the fiscal target that the proposal must achieve over the first ten years is also achieved during the subsequent decade.
The Problem With Deficit-Neutral Tax Reform
Given the nation’s long-term fiscal pressures, increases in revenues need to make a significant contribution to deficit reduction, alongside reductions in spending for mandatory programs. Deficit-neutral tax reform would, as a result, be highly problematic.
Related:
- The Ryan Budget's Tax Cuts: Nearly $6 Trillion in Cost and No Plausible Way to Pay for It
- Tax Expenditures: Ripe for Reform, Needed for Deficit Reduction
- Greenstein Testimony: Putting the Budget on a More Sustainable Fiscal Course Without Hindering Economic Recovery
- Greenstein Testimony: Deficit Reduction About Quality, Not Just Quantity
- The Perils of Achieving Further Deficit Reduction Solely Through Spending Cuts
- The Next Act: Further Deficit Reduction Must Include a Mix of Revenues and Spending Cuts
Topics
Basics
The income tax on individuals and the payroll tax, which is deducted from workers’ wages and used to help finance Social Security and Medicare, each made up about 40 percent of federal revenues in 2010. The federal government also collects revenue from corporate taxes, excise taxes, and other sources.
Policy Basics:
- The Child Tax Credit
- The 2001 and 2003 Tax Cuts
- Where Do Our Federal Tax Dollars Go?
- The Estate Tax
- The Earned Income Tax Credit
- Deficits, Debt, and Interest
Featured Experts
The Center analyzes major tax proposals, examining their likely effects on the economy and on the government’s ability to address critical national needs, especially over the long term. We place particular emphasis on the effects of tax proposals on households at different income levels. In addition, we analyze trends in the level of federal revenues, income distribution, and tax burdens.
New
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Excise Tax on Medical Devices Should Not Be Repealed
Updated September 28, 2013
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Averting a Budget Crisis Is Not Enough: Criteria for Evaluating Fall Budget Proposals
September 10, 2013
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Myths and Realities about the Estate Tax
Revised August 29, 2013
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Renters’ Tax Credit Would Promote Equity and Advance Balanced Housing Policy
Revised August 21, 2013
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Various Supports for Low-Income Families Reduce Poverty and Have Long-Term Positive Effects On Families and Children
July 30, 2013
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