Reducing the Budget Deficit: Tax Policy Options [August 8, 2011]   [open pdf - 434KB]

"Tax reform and deficit reduction are two issues being considered by the 112th Congress. In recent months, a number of groups have published various plans for tackling the nation's growing deficits. Other groups, such as the Senate 'Gang of Six' and a group led by Vice President Biden comprised of Members of Congress, have engaged in deficit reduction negotiations. This report analyzes various revenue options for deficit reduction, highlighting proposals made by the President's Fiscal Commission and the Debt Reduction Task Force. Others, such as House Budget Committee Chairman Paul Ryan and the Obama Administration, have noted the importance of tax reform as part of deficit reduction plans. These plans, however, do not provide the same level of detail as the Fiscal Commission and Debt Reduction Task Force, and are therefore not reviewed in detail as part of this report. […] There are other options for generating additional revenues outside of the current tax system. The federal government could raise revenues through additional consumption taxes, excise taxes, or by imposing a tax on carbon. The President's Fiscal Commission and the Debt Reduction Task Force took different approaches in the tax reform components of their fiscal sustainability plans. The President's Fiscal Commission raised additional tax revenues primarily through comprehensive income tax reform. The Fiscal Commission chose to broaden the tax base, allowing for both lower tax rates and increased federal revenues. The Debt Reduction Task Force's proposal also recommended individual income tax reform. The individual income tax reforms recommended by the Debt Reduction Task Force were designed to enhance efficiency and increase progressivity in the income tax system. Additional revenues in the Debt Reduction Task Force's plan originate from the proposed 6.5% debt-reduction sales tax."

Report Number:
CRS Report for Congress, R41641
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