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The economic crisis was caused by corporate greed and an unwillingness of the government to regulate them. We cannot dismiss the long history of Wall Street and corporate CEO-friendly economic policies that have led to an economy that is dangerously out of balance. Corporate executives continue to get rich and ensure the rules are written to favor them. America’s working people deserve a voice in the laws governing our economy.It is time for our corporations and our capital markets to be held to higher standards of responsibility and accountability. We will continue to campaign for increased corporate accountability, be the leading voice in reigning in executive pay and advocate for sensible tax policies. These steps make sure corporations pay their fair share.

We have taken up the responsibility for the American tax policy. The job of lawmakers is to develop a course of action that will hasten the economic recovery, cut down on the growing deficit, and safeguard the most vulnerable. Our team has modeled the effects of many options on the U.S. economy, distribution of the tax burden, and federal revenue. We acknowledge there is an ever-present trade-off among how much revenue a tax will generate, who bears the burden of a tax, and also identify what impact a tax will have on economic growth. Returning to Growth We don't only rely on measures meant to boost short-term economic growth and give consumers and companies access to cash. There is a risk in delivering only short-term effects and a weak long-term recovery, if this is done. Even while there is a need for immediate relief; long-term adjustments to tax laws can effectively encourage capital formation, investment, and work. To be effective in promoting economic recovery, federal tax policy changes must be made on a permanent basis to improve long-term incentives. Temporary improvements would not provide adequate time to recoup the cost of major investments, nor the certainty needed to engage in long-term decision-making. Moreover, short-term policy changes can increase uncertainty, which undermines capital spending and new investment as a general matter. Broadly speaking, permanent improvements to the tax code can clear the path to economic recovery through one of two main channels. First, tax policy can change people’s incentives to work, which impacts the supply of labor. Second, tax policy can change people’s incentives to save and invest, which impacts the supply of capital. More jobs and money lead to a larger economy. In most cases, such improvements would not require a new set of policies, rather the removal of obstacles that stand in the way of work and investment.

Reducing the Deficit Prior to the pandemic-induced recession, the federal budget faced structural deficits that would become unsustainable over the long term. The fiscal response to the pandemic and recession drastically increased the budget deficit in 2020 and 2021. Spending growth is set to well outpace revenue growth even after the fiscal response and short-term effects of the pandemic fade. This is due to structural deficits driven by demographics, entitlement spending, and interest costs. While the nascent recovery is not the appropriate time to engage in deficit-reduction efforts, particularly given that low interest rates imply ample room for a continuing fiscal policy response, lawmakers will eventually turn their attention toward addressing deficits. In general, taxes on more mobile factors of production, such as capital, cause more distortions to economic incentives than taxes on less mobile factors, such as labor. Protecting the vulnerable Individual tax compliance and complexity ishe full cost of a tax system, which is more than simply the amount of tax paid. It also includes the cost of tax planning and paperwork. Economists call these “tax compliance” costs, and the IRS estimates Americans spend 6.6 billion hours per year filling out tax forms—including 1.6 billion hours on the 1040 form alone. This is just another mother flipping scam and is designed to harm the vulnerable. While recessions usually hurt a broad swath of households, the pandemic-induced shutdowns and recession hit lower-income households disproportionately when compared to previous recessions. This especially impacted those with school-age children. At its height, approximately 20 million workers lost their jobs with losses heavily concentrated in tourism, food service, and related sectors. Though the ongoing recovery has seen more than half of jobs return, the gains have not been proportional across the income scale. Concerns about protecting low-income or other vulnerable populations are often conflated with broader concerns about increasing the overall progressivity of the tax code or raising the tax burden on wealthy households. Rather than take that approach, the options here outline changes to provisions targeted to the populations in need. For many low-income households, payroll taxes comprise a larger share of their tax burden than individual income taxes do. Further, many lower-income households face negative effective income tax rates, as refundable tax credits such as the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) fully offset tax liability and result in tax refunds. During the 2018 tax year, more than 39 million tax returns claimed the CTC and more than 26 million returns claimed the EITC.

While strong economic growth—fueled by higher levels of investment, productivity, and jobs—will lift after-tax incomes over time, policies that provide relief by immediately boosting after-tax incomes of lower-income households are also available. To that end, we illustrate the economic, revenue, and distributional implications of eight changes to tax provisions that affect vulnerable populations.

Simplifying the tax code

Our changes are aimed at returning to growth, reducing budget deficits, and aiding vulnerable households. The tax code has been simplified and improved. We have improved the horizontal equity of the tax code by applying the same set of rules for taxpayers that are in similar situations. Removing the individual alternative minimum tax (AMT) eliminates a second structure, under which certain taxpayers face different rules. Implementing full expensing for all capital investments would equalize tax treatment of the different types of costs businesses incur.

The tax code also no longer includes temporary provisions, which required taxpayers to frequently check the tax code for changes by improving the stability of the tax code by eliminating temporary tax expenditures and making other components of the tax code permanent.

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