October 28, 2012
CBPP: The Tension Between Reducing Tax Rates and Reducing Deficits
Center on Budget and Policy Priorities: The Tension Between Reducing Tax Rates and Reducing Deficits:
Over the past few months, a number of analyses have highlighted the difficulty of cutting income tax rates deeply, producing a significant revenue contribution to deficit reduction (as part of a larger deficit-reduction package), and maintaining the progressivity of the tax code. [Joint Committee on Taxation; Committee for a Responsible Federal Budget] ...
As policymakers assess the import of these analyses, we encourage them to be sure to include one important ingredient: a healthy dose of political reality. A finding that it is technically possible to achieve sufficient tax-expenditure savings to pay for sizeable reductions in tax rates is not the same thing as such a course being politically viable. Policymakers should avoid committing to a specific, lower top income tax rate until they know what measures to shrink tax expenditures Congress can actually pass and how much savings those measures will produce. Otherwise, the most critical goal of tax reform at this time — producing a significant contribution to deficit reduction (while maintaining or improving the progressivity of the tax code) — will likely be lost.
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