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Learn more about the options below with in-depth analysis of popular options, like changes to the U.S. corporate income tax, policies to help low-income households, ways to boost economic growth, and the most economically efficient options for raising revenue.
The economic crisis caused by the coronavirus pandemic poses a triple challenge for tax policy in the United States. Lawmakers are tasked with crafting a policy response that will accelerate the economic recovery, reduce the mounting deficit, and protect the most vulnerable.
To assist lawmakers in navigating the challenge, and to help the American public understand the tax changes being proposed, we’ve assembled a collection of 70 Options for Reforming America’s Tax Code. Our team of economists has modeled the effects of each option on the U.S. economy, distribution of the tax burden, and federal revenue.
In tax policy there is an ever-present trade-off among how much revenue a tax will raise, who bears the burden of a tax, and what impact a tax will have on economic growth. Armed with the information in this guide, policymakers can debate the relative merits and trade-offs of each option to improve the tax code in a post-pandemic world.
Select an option below to explore its economic, budgetary, and distributional impacts, or access a printable version of the full Options guide at the link below.
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Tax Reform Option | Long-Run Change in GDP | Full-Time Equivalent Jobs | Wage Rate | Static 10-Year Revenue (billions) | Dynamic 10-Year Revenue (billions) |
|---|---|---|---|---|---|
| 1: Lower Individual Income Tax Rates Across the Board (Lower All Rates by 10%) | +0.9% | 975,398 | +0.1% | -$2,257.31 | -$1,713.77 |
| 2: Lower the Top Marginal Income Tax Rate (25% Top Rate) | +1.1% | 1,033,707 | +0.2% | -$2,209.23 | -$1,673.87 |
| 3: Consolidate Current Brackets into Three: 10 percent, 25 percent, and 35 percent | +1.3% | 1,336,191 | +0.1% | -$2,694.50 | -$2,167.24 |
| 4: Reduce Employer- and Employee-Side Payroll Tax by 1 Percentage Point Split (1 Percentage Point Split) | +0.2% | 179,340 | 0% | -$651.84 | -$545.44 |
| 5: Lower the Top Rate on Capital Gains and Dividends to 15 Percent | < +0.05% | 6,526 | < +0.05% | -$151.11 | -$148.73 |
| 6: Index Capital Gains Realizations to Inflation | < +0.05% | 8,615 | < +0.05% | -$143.65 | -$143.40 |
| 7: Make 100 Percent Bonus Depreciation Permanent | +0.5% | 86,457 | +0.4% | -$213.42 | -$110.19 |
| 8: Implement Neutral Cost Recovery for Structures | +1.2% | 230,766 | +1.0% | -$10.35 | $300.98 |
| 9: Cancel the Amortization of Research and Development Expenses | +0.1% | 19,550 | +0.1% | -$131.30 | -$107.90 |
| 10: Make Section 199A Deduction Permanent | +0.2% | 57,906 | +0.1% | -$438.70 | -$391.20 |
| 11: Lower the Corporate Tax Rate (Lower to 15%) | +0.5% | 100,937 | +0.4% | -$978.94 | -$847.71 |
| 12: Lower the Estate Tax Rate to 30 Percent | < +0.05% | 7,236 | < +0.05% | -$81.94 | -$79.47 |
| 13: Repeal Tariffs Imposed Under Sections 232, 201, and 301 | +0.1% | 82,960 | +0.5% | -$758.99 | -$664.85 |
| 14: Raise Individual Income Tax Rates by 10 Percent | -0.9% | -960,735 | -0.1% | $2,103.78 | $1,515.02 |
| 15: Repeal the Tax Cuts and Jobs Act (TCJA) Individual Tax Changes | 0% | 0 | 0% | $829.72 | $648.75 |
| 16: Revert to Pre-2018 Individual Income Tax Rates on Income Over $400,000 | < -0.05% | 0 | < +0.05% | $107.29 | $85.43 |
| 17: Add a New Bracket of 45 Percent for Income Above $750,000 | -0.2% | -165,888 | -0.1% | $576.22 | $441.05 |
| 18: Create an Additional Flat Individual Income Tax of 5% | -2.1% | -2,220,324 | -0.1% | $6,485.00 | $5,007.21 |
| 19: Eliminate the Child Tax Credit | +0.1% | 99,527 | < +0.05% | $890.72 | $917.22 |
| 20: Reduce the Child Tax Credit to $500 | < +0.05% | 43,923 | < -0.05% | $593.35 | $585.22 |
| 21: Eliminate the Earned Income Tax Credit | +0.2% | 273,081 | < +0.05% | $607.79 | $772.99 |
| 22: Eliminate the Federal Income Tax Deduction for State and Local Taxes | -0.7% | -492,252 | -0.3% | $1,563.55 | $1,283.17 |
| 23: Eliminate the Home Mortgage Interest Deduction | -0.7% | -366,838 | -0.4% | $1,073.53 | $832.83 |
| 24: Lower the Home Mortgage Interest Deduction Cap to $500,000 in Principal | -0.1% | -29,557 | < -0.05% | $147.51 | $132.22 |
| 25: Eliminate the Charitable Deduction | -0.1% | -90,202 | < -0.05% | $747.40 | $694.52 |
| 26: Limit Tax Savings from Itemized Deductions to 28 Percent of Value | -0.1% | -63,819 | < -0.05% | $212.96 | $184.19 |
| 27: Eliminate the Tax Exclusion for Municipal Bond Interest | < -0.05% | -11,152 | < -0.05% | $192.84 | $191.84 |
| 28: Tax Carried Interest as Ordinary Income | < -0.05% | -9,347 | < -0.05% | $20.33 | $18.50 |
| 29: Raise the Top Capital Gains and Dividend Tax Rate to 30% | < -0.05% | -10,024 | < -0.05% | $67.00 | $61.82 |
| 30: Raise Top Capital Gains Rate to 39.6 Percent on Income Above $1 Million | -0.1% | -14,699 | -0.1% | -$123.51 | -$132.92 |
| 31: Eliminate the Exclusion of Capital Gains on Principal Residences | -0.3% | -65,000 | -0.3% | $661.90 | $617.30 |
| 32: Institute a Wealth Tax | -0.8% | -148,638 | -0.7% | $2,194.40 | $1,936.40 |
| 33: Increase Employer- and Employee-side Payroll Tax by 1 Percentage Point Split (1 Percentage Point Split) | -0.2% | -179,965 | 0% | $672.66 | $563.43 |
| 34: Eliminate the Social Security Payroll Tax Cap | -1.2% | -1,299,589 | 0% | $1,546.63 | $1,288.30 |
| 35: Apply the Social Security Payroll Tax to Wages Above $400,000 | -0.2% | -226,014 | 0% | $822.79 | $686.04 |
| 36: Raise the Corporate Income Tax (28% CIT Rate) | -0.7% | -138,309 | -0.6% | $886.27 | $693.90 |
| 37: Institute a Corporate Surtax of 5 Percent | -0.1% | -16,423 | -0.1% | $141.10 | $119.00 |
| 38: Eliminate the Section 199A Deduction | < -0.05% | 0 | < +0.05% | $208.23 | $200.28 |
| 39: Require Amortization of Advertising Expenses over 10 Years | -0.1% | -18,199 | -0.1% | $226.50 | $206.40 |
| 40: Return to Alternative Depreciation Schedule (ADS) | -0.6% | -108,511 | -0.5% | $603.40 | $421.25 |
| 41: Repeal Last-in, First-out (LIFO) Inventory Accounting | < -0.05% | -4,926 | < -0.05% | $60.20 | $56.04 |
| 42: Eliminate 1031 Like-Kind Exchanges | < -0.05% | -2,500 | < -0.05% | $13.84 | $13.63 |
| 43: Enact a 5% Value Added Tax | -1.2% | -930,686 | -4.0% | $6,091.67 | $5,223.56 |
| 44: Return the Estate Tax to Clinton-era Levels | -0.2% | -41,415 | -0.2% | $887.40 | $823.90 |
| 45: Eliminate Step-Up in Basis on Capital Gains | -0.1% | -8,489 | -0.1% | $124.18 | $118.46 |
| 46: Lower the Estate and Gift Tax Exemption Amount to $2 Million | < -0.05% | -5,592 | < -0.05% | $337.20 | $332.10 |
| 47: Increase the Gas Tax by 15 Cents Per Gallon and Inflation Adjust Going Forward | -0.1% | -50,359 | -0.2% | $332.60 | $286.24 |
| 48: Increase the Gas Tax by 35 Cents Per Gallon and Inflation Adjust Going Forward | -0.1% | -103,204 | -0.5% | $758.34 | $653.12 |
| 49: Reinstate the Cadillac Tax | < -0.05% | -37,800 | -0.2% | $247.72 | $215.55 |
| 50: Institute a Carbon Tax ($25 per Ton) | -0.2% | -148,859 | -0.7% | $998.87 | $860.50 |
| 51: Double EITC for Workers without Qualifying Children to $1,075 | < +0.05% | 6,035 | < +0.05% | -$35.52 | -$34.32 |
| 52: Reform the EITC for Married and Unmarried Workers, with and without Children | +0.1% | 96,644 | 0% | -$164.04 | -$105.71 |
| 53: Make Child Tax Credit Fully Refundable | < -0.05% | -15,328 | < -0.05% | -$72.30 | -$92.29 |
| 54: Make Child Tax Credit First Dollar Refundable | < -0.05% | -14,698 | < -0.05% | -$37.00 | -$43.90 |
| 55: Restructure the Child Tax Credit and Earned Income Tax Credit | +0.1% | 86,986 | < -0.05% | -$1,414.40 | -$1,379.00 |
| 56: Increase the Standard Deduction by 25% for All Filing Groups | < +0.05% | 69,883 | < -0.05% | -$622.66 | -$558.51 |
| 57: Restore the Personal Exemption | 0% | 0 | 0% | -$774.40 | -$660.45 |
| 58: Make Charitable Deduction "Above-the-Line" | < -0.05% | 15,697 | < -0.05% | -$289.30 | -$285.42 |
| 59: Tax Individual Incomes at a Flat 30% Rate (20% Flat Tax) | +1.3% | 1,211,491 | +0.3% | $1,148.80 | $1,625.93 |
| 60: Eliminate the Individual Alternative Minimum Tax | -0.1% | -113,171 | 0% | -$395.08 | -$436.17 |
| 61: Permanently Eliminate the Pease Limitation on Itemized Deductions | +0.1% | 77,730 | < +0.05% | -$160.83 | -$125.58 |
| 62: Make the 2017 Tax Law Standard Deduction, Personal Exemption, and CTC Permanent | -0.3% | -167,663 | -0.1% | $154.91 | $71.62 |
| 63: Implement $2,500 per Year Roth-style Universal Savings Accounts | 0% | 748 | 0% | -$15.08 | -$14.99 |
| 64: Eliminate the Net Investment Income Tax | < +0.05% | 8,781 | < +0.05% | -$275.07 | -$271.17 |
| 65: Enact Full Expensing for All Capital Investment | +2.3% | 441,769 | +1.9% | -$1,707.41 | -$1,166.66 |
| 66: Maintain Limitation on Interest Deductibility at 30 Percent of EBITDA | +0.1% | 18,832 | +0.1% | -$65.84 | -$45.90 |
| 67: Eliminate Various Business Tax Expenditures | -0.2% | -33,000 | -0.2% | $985.60 | $926.43 |
| 68: Replace the Corporate Income Tax with a 5 Percent Value-Added Tax (VAT) | +0.4% | 122,000 | +0.5% | $2,772.55 | $2,349.32 |
| 69: Eliminate Estate and Gift Taxes | +0.1% | 21,930 | +0.1% | -$293.90 | -$267.10 |
| 70: Increase Alcohol Excise Taxes to $16 per Proof Gallon and Index to Inflation | < -0.05% | -22,718 | -0.1% | $136.07 | $129.14 |
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