Extending the Legacy of the 2001, 2003, and 2017 Republican Tax Breaks, Part 2
After years of costly and regressive tax cuts, experts suggest a new direction is needed to create a fairer tax system that benefits all. Part 2
Steps to Building a Better Tax System
In a departure from the tax policies of the past, there are calls for a tax overhaul that raises essential revenues, promotes equity, and supports investments for economic prosperity. A crucial initial move involves allowing the 2017 tax law's provisions that mainly favor high-income households to lapse. Further actions include scaling back the large corporate tax cuts under the same law, ensuring more affluent households contribute annually, and limiting tax breaks that primarily benefit the wealthy.
Reforming Corporate Provisions
The permanent corporate provisions of the 2017 law have been criticized for favoring large corporations and their wealthy shareholders. There is a proposal to partially reverse the deep rate cut to 28 percent, making the tax system more progressive and generating significant revenue for national priorities. Moreover, international tax rules need reformation to discourage profit shifting and align with global tax standards.
Strengthening International Tax Rules
Experts argue that aligning international tax rules with the global minimum tax agreement will lead to more taxes being paid by U.S. multinationals on foreign profits. This adjustment aims to reduce incentives for profit shifting and ensure fair taxation for all companies operating within U.S. borders. Failure to update these rules could result in lost tax revenue for the U.S. economy.
Taxing the Wealthy
Wealthy households often benefit from special tax rates on capital income and other breaks that reduce their tax burdens. Policymakers are considering imposing a minimum tax on multimillionaires to address this imbalance. Additionally, proposals to tax capital gains and close loopholes benefiting high-income households are being explored to counter income inequality.
Challenging Critics
Critics who argue that taxing the wealthy will hinder economic growth are being challenged by research that suggests otherwise. By making the tax system fairer and closing loopholes that benefit the rich, the U.S. could generate substantial revenue to fund crucial investments and address fiscal challenges.
In conclusion, the proposed reforms to corporate and high-income tax provisions, along with the expiration of tax breaks benefiting the affluent, are crucial steps towards a fairer and more sustainable tax system. These changes could lead to significant revenue generation for critical investments, ultimately benefiting the economy as a whole.
For footnotes and references, visit cbpp.org.