Commentary Type

Risks and Opportunities in the 2025 Tax Debate

Prepared testimony delivered at the US Senate Joint Economic Committee hearing on "The Fiscal Situation of the United States"


Chairman Heinrich, Vice Chairman Schweikert, Members of the Committee: Thank you for inviting me to share my views on the U.S. fiscal situation. The time ahead marks an important moment in U.S. tax and budget policy. In my testimony today, I will make five key points.

  1. Our fiscal situation comes with important challenges. In an environment of rising deficits and debt, the looming expiration of many Tax Cuts and Jobs Act (TCJA) provisions will create pressures for lawmakers to extend these provisions. However, simply extending these unaffordable tax cuts without a broader rethink of tax policy principles would be unwise.
  2. In 2025, tax reform can be a key component of responding to fiscal pressures and building a tax system that is fairer, more efficient, and better suited to U.S. economic leadership.
  3. A suite of corporate and international tax reforms would help meet these challenges while reducing the offshoring and profit shifting incentives that are baked into current law. Such reforms are now more desirable than ever due to the adoption of the international tax agreement in many jurisdictions abroad, which is reducing tax competition pressures.
  4. Climate policy can help achieve both fiscal and environmental goals in 2025. Layering a modest carbon fee on top of the Inflation Reduction Act could reduce emissions, generate large streams of revenue, and facilitate cooperative efforts with our partners abroad to incentivize worldwide emissions reduction.
  5. Many other sensible revenue-raisers are available to finance fiscal priorities and reduce the deficit while simultaneously building a more fair and efficient tax system. At the same time, we can afford to better support workers and families. Toward that end, both the child tax credit and the earned income tax credit should be expanded.

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