Tax reform in the United States
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| Tax reform in the United States | |
|---|---|
| Name | Tax reform in the United States |
| Date | Ongoing |
| Location | United States |
Tax reform in the United States explores legislative, administrative, and political efforts to change federal, state, and local taxation. Debates have involved presidents such as Abraham Lincoln, Franklin D. Roosevelt, Dwight D. Eisenhower, John F. Kennedy, Ronald Reagan, Bill Clinton, George W. Bush, Barack Obama, Donald Trump, and Joe Biden, and institutions including the United States Congress, Internal Revenue Service, Congressional Budget Office, Joint Committee on Taxation, and United States Department of the Treasury. Proposals span income, corporate, payroll, estate, and consumption taxes and intersect with landmark laws such as the Revenue Act of 1861, Revenue Act of 1913, Tax Reform Act of 1969, Economic Recovery Tax Act of 1981, Tax Reform Act of 1986, Tax Cuts and Jobs Act of 2017, and ongoing plans advocated by figures including Paul Ryan, Arthur Laffer, Janet Yellen, Lawrence Summers, and Elizabeth Warren.
History
The modern arc of American tax reform traces from the Revenue Act of 1861 under President Abraham Lincoln through the Sixteenth Amendment to the United States Constitution and the Revenue Act of 1913 during the administration of Woodrow Wilson; later milestones include the Revenue Act of 1924 under Calvin Coolidge, the Revenue Act of 1935 during Franklin D. Roosevelt's tenure, and the Internal Revenue Code of 1954 enacted under Dwight D. Eisenhower. Major twentieth-century shifts occurred with the Social Security Act payroll structure under Franklin D. Roosevelt, the Tax Reform Act of 1969 passed by Richard Nixon's Congress, the Economic Recovery Tax Act of 1981 signed by Ronald Reagan, and the Tax Reform Act of 1986 negotiated with leaders such as Tip O'Neill and James A. Baker III. In the twenty-first century, initiatives included the Economic Growth and Tax Relief Reconciliation Act of 2001 under George W. Bush, the American Recovery and Reinvestment Act of 2009 during Barack Obama's presidency, and substantive changes in the Tax Cuts and Jobs Act of 2017 enacted with leaders including Paul Ryan and Mitch McConnell.
Major Legislative Changes and Proposals
Legislative changes have addressed marginal rates, Alternative Minimum Tax, earned income tax credit, child tax credit, corporate taxation including the Tax Cuts and Jobs Act of 2017 reduction of the corporate tax rate, and estate taxation such as adjustments to the estate tax exemption. Proposals have ranged from comprehensive rewrites like the Bowles-Simpson Commission recommendations, the Wyden-Coats frameworks, and the Simpson-Bowles deficit-reduction ideas to targeted plans offered by Grover Norquist, Hillary Clinton, Bernie Sanders, Elizabeth Warren, and Marco Rubio. Structural proposals include a flat tax promoted by some conservatives, a value-added tax endorsed by certain budget commissions, a progressive consumption tax advanced by thinkers such as Alan Auerbach and Martin Feldstein, and universal tax reform ideas in policy circles including the Brookings Institution, American Enterprise Institute, and Tax Policy Center. Legislative vehicles have often involved reconciliation rules in the United States Senate and procedural maneuvers led by figures like Harry Reid and Mitch McConnell.
Political Debates and Stakeholder Positions
Political debates have pitted advocates for rate cuts such as Arthur Laffer and Grover Norquist against critics like Elizabeth Warren and Joseph Stiglitz; business groups including the U.S. Chamber of Commerce, National Federation of Independent Business, and Business Roundtable lobby alongside labor organizations such as the AFL–CIO and advocacy groups like Americans for Tax Reform and Citizens for Tax Justice. Think tanks including the Heritage Foundation, Tax Foundation, Center on Budget and Policy Priorities, and Urban-Brookings Tax Policy Center produce competing analyses, while congressional committees such as the House Ways and Means Committee and Senate Finance Committee shape legislative text. Electoral politics, exemplified by campaigns of Ronald Reagan, Bill Clinton, George W. Bush, Barack Obama, and Donald Trump, has reframed tax proposals as promises influencing voters in Midterm elections, presidential elections, and local ballot measures.
Economic Effects and Distributional Impact
Analyses by the Congressional Budget Office and Joint Committee on Taxation assess macroeconomic effects such as GDP growth, labor supply responses, investment incentives, and budget deficits; economists including Laurence Kotlikoff, Alan Blinder, Robert Barro, and Christina Romer have contributed models. Distributional studies examine impacts across income groups using data from the Internal Revenue Service and Bureau of Labor Statistics, highlighting changes to after-tax income, income inequality trends evaluated by researchers such as Thomas Piketty and Emmanuel Saez, and effects on middle-income households emphasized by advocates like Sarah Binder and critics like Dean Baker. Corporate tax changes influence multinational decisions tied to tax inversion cases involving firms like Pfizer and Medtronic and interact with international tax rules set by the Organisation for Economic Co-operation and Development and Base erosion and profit shifting initiatives.
Implementation, Administration, and Compliance
Administration requires rulemaking by the Internal Revenue Service and enforcement actions coordinated with the Department of Justice and Treasury Department; litigation over regulations engages courts including the United States Court of Appeals for the D.C. Circuit and the Supreme Court of the United States. Compliance costs affect preparers such as H&R Block, Intuit, and certified public accountants represented by the American Institute of Certified Public Accountants; tax filing systems involve debates over electronic filing standards and proposals for tax filing simplification championed by figures like Senator Elizabeth Warren and organizations including the National Taxpayer Advocate. Implementation of international provisions interacts with treaties negotiated by the United States Trade Representative and enforcement through the Foreign Account Tax Compliance Act and Bank Secrecy Act frameworks.
State and Local Tax Reform Interactions
State and local tax systems administered by entities such as the California Franchise Tax Board, New York State Department of Taxation and Finance, Texas Comptroller of Public Accounts, and Florida Department of Revenue respond to federal changes; the State and Local Tax (SALT) deduction cap enacted in the Tax Cuts and Jobs Act of 2017 influenced migration and fiscal choices in states like New York, California, and New Jersey. Local finance issues involve municipal bonds regulated under Securities and Exchange Commission rules and property tax debates in jurisdictions including Cook County, Illinois and Maricopa County, Arizona. Intergovernmental litigation over tax preemption and incentives has reached courts such as the Supreme Court of the United States and been litigated by state attorneys general including Letitia James and Gurbir Grewal.