Center on Budget and Policy Priorities

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:

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

Joel Friedman

Reports | Bio
Robert Greenstein

Reports | Bio
Chye-Ching Huang

Reports | Bio
Chuck Marr

Reports | Bio

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.