The $4.6 trillion in tax cuts set to expire next year present a unique opportunity to overhaul the U.S. tax system, a chance that should not be missed, according to more than 100 progressive and economic groups. “We urge you to use the expiration of these provisions as an opportunity to address long-standing problems with our tax code, not just to tinker around the edges,” the groups stated in an open letter to party leaders and key tax writers on Capitol Hill.
Call for Comprehensive Tax Reform
“Congress should pursue reforms — including corporate tax reforms — that stem the decades-long tide of tax cuts for the rich and corporations that have undermined fairness, eroded revenues needed for pro-growth investments, and stifled economic opportunity,” the letter continued. Signatories included influential organizations such as the AFL-CIO, the Center for American Progress, the NAACP, and Groundwork Collaborative.
The 2017 tax cuts enacted by a Republican Congress and then-President Donald Trump included both corporate tax cuts and individual household cuts. The Congressional Budget Office recently reported that extending these lower individual rates would result in a loss of $3.3 trillion in revenue over 10 years, with an additional $467 billion in interest costs. Adding other household provisions brings the total to $4.4 trillion, while extending two small expiring business breaks would bring the total to $4.6 trillion.
Due to congressional budget rules, the full package could not be made permanent, forcing Republicans to select some tax cuts to be temporary. This strategy was also employed by President George W. Bush, whose tax cuts were largely extended during the 2012 “fiscal cliff” episode.
In their letter, the groups emphasized that wealthy households and corporations should contribute more in taxes than they currently do. They also advocated for overall tax revenues to be increased by more than just the amount of the expiring provisions, aiming for a more sustainable and equitable tax code.
“The last 25 years have been a one-way trend down in terms of revenue. It has undermined fiscal sustainability. It has undermined our willingness to invest in the core things the American people want. It has called into question our commitments to things like Social Security and Medicare,” said Michael Linden, a former executive associate director at the White House Office of Management and Budget under Joe Biden.
Former President Trump has expressed a desire for further corporate tax cuts and has raised the prospect of deeper household tax cuts. Deficit hawks view the expiration of part of the 2017 tax law as an opportunity to boost revenues and reduce the government’s budget deficit, which remains high despite a vigorous economic rebound from the COVID-19 pandemic.
Bharat Ramamurti, former National Economic Council deputy director under Biden, noted that there is no consensus among the groups on whether all new revenues from a tax overhaul should fund new initiatives or if some should be allocated for deficit reduction. “There is broad agreement among this group that we do need to end this process with a higher percentage of GDP coming in in revenue than if we simply let these 2017 provisions expire,” he said.
