Inside America’s Tax Battle

In Project Syndicate, Advisory Council member Laura D’Andrea Tyson discusses the challenges to achieving a balanced deficit-reduction plan that includes both increases in revenue and cuts to spending. Tyson says that despite the bipartisan support for a balanced approach, there has not been agreement on tax rates for high-income Americans. She highlights President Obama’s proposal to let 2001 and 2003 rate cuts for the top 2-3% of taxpayers be allowed to expire at the end of the year, while the rate cuts for other taxpayers are extended. She notes that Republicans want the rate cuts to be extended for all taxpayers, arguing that increases in top rates would discourage job creation. Tyson discusses recent research suggesting no link between tax cuts for high-income taxpayers and job creation, and highlights findings from a Hamilton Project paper, “A Dozen Economic Facts About Tax Reform,” which show that the federal tax system has become less progressive at the same time as the biggest tax cuts have gone to high-income Americans.