- Adam N. Michel at Cato Institute argues that tax policy's prominence in the presidential campaign is due to the impending expiration of the 2017 Tax Cuts and Jobs Act and the candidates' proposals for new special-interest tax breaks that complicate and increase the tax code's complexity.
- The report asserts that while there is bipartisan support for extending most of the expiring tax cuts, proposed targeted benefits for tips, families, homeowners, domestic production, and seniors will further complicate the tax system and pose significant fiscal challenges.
Overview:
This article was written by Adam N. Michel at Cato Institute.
- Lawmakers will soon confront the expiration of the 2017 Tax Cuts and Jobs Act.
- Both presidential candidates propose extensive new tax breaks, complicating efforts to simplify the tax code.
Key Quotes:
- "The prominence of tax policy makes sense. In the first year of the next administration, lawmakers will have to address the automatic expiration of almost all of the 2017 Tax Cuts and Jobs Act."
- "Despite the rhetoric, the 2017 tax cut was primarily a tax cut for typical Americans. Over three-quarters (77 percent) of the original tax cut went to individuals, with the largest tax reductions going to the lowest-income taxpayers."
What They Discuss:
- Trump and Harris propose tax exemptions for tipped income, risking up to $500 billion in lost revenue over ten years.
- Both candidates support significant increases in child tax credits, potentially decreasing revenue by trillions of dollars.
- Harris’s $25,000 subsidy for first-time homeowners could cost over $600 billion, mostly benefiting sellers and banks.
- Proposals for specific industries, like domestic production incentives, may reduce revenues and revive previously inefficient policies.
- Exempting Social Security income from taxes, as Trump suggests, could increase the budget deficit by $1.6 trillion over a decade.
What They Recommend:
- Maintain and extend the successful broad-based tax cuts from 2017.
- Avoid new complexity and special-interest tax breaks that undermine the simplified tax code.
- Focus on comprehensive tax reforms that reduce rates and eliminate targeted subsidies and deductions.
- Prioritize broad tax relief over hyper-targeted subsidies that skew economic incentives and increase overall tax complexity.
Key Takeaways:
- Extending the 2017 tax cuts is broadly supported but costly.
- Both candidates' proposals for tax breaks risk adding complexity and inequality to the tax system.
- Increased tax breaks for specific groups could exacerbate deficits and economic disparities.
- Comprehensive reform is needed to maintain lower tax rates and reduce special-interest provisions.
This is a brief overview of the article by Adam N. Michel at Cato Institute. For complete insights, we recommend reading the full article.
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