The upcoming 2025 tax policy debate and strategies to prevent tax avoidance are a critical discussion that demands attention. As President and CEO of the Tax Foundation, I am honored to address the US Senate Committee on Finance on this crucial topic. The landscape is complex, with a stark 62 percent of households facing tax increases if no action is taken. The divide between proposed policies is extensive, with a trillion-dollar gap between the opposing parties’ stances. The roadmap ahead is fraught with challenges, but pivotal concepts of simplicity, neutrality, and deliberating trade-offs must guide our decisions.
Simplicity and ease of filing for taxpayers are paramount. With the shadow of looming expirations, the Tax Cuts and Jobs Act (TCJA) did create some relief through increased standard deductions and streamlined filing processes. However, more work is needed to eliminate redundant provisions and bolster tax simplification efforts. Consolidating brackets, reducing deductions, and targeting compliance costs are key components that can pave the way for a more efficient tax system.
The progressive nature of the US tax code underscores the fragile balance between extracting revenue and promoting growth. Contrasting perspectives on taxing high-income earners illuminate the limitations of targeted policies in addressing the deficit. A holistic view of the tax and transfer system reveals disparities in effective tax rates and calls for a reevaluation of tax bases for a fairer and more efficient system.
Neutral tax policies can stimulate business investments and drive economic growth. The Growth and Opportunity tax plan introduced in 2023 advocates for full and immediate expensing to level the playing field for businesses. Embracing neutrality in tax treatment is essential to empower businesses, boost productivity, and create new employment opportunities. The framing of tax policy, towards growth and away from micromanagement, is crucial for promoting economic vibrancy.
Balancing fiscal responsibility with growth agenda is a delicate dance. The “bang for the buck” analysis helps illuminate the effectiveness of tax provisions in achieving growth per revenue lost. As we chart a course forward, policymakers need to consider measures that deliver optimal economic outcomes while ensuring stable fiscal trajectories. The next phase of tax reform must draw from past lessons to create simplifications, orient towards growth, and lay a foundation for a prosperous future.
In conclusion, the US tax policy debate is at a crossroads, presenting opportunities for simplification, growth, and fiscal stability. With deliberate actions and strategic planning, policymakers can navigate the complexities ahead to create a tax code that serves the nation’s interests. Let us embrace this pivotal moment and commit to shaping policies that benefit all Americans. Thank you for the privilege to share these insights, and I look forward to your engagement in this critical dialogue.
