economy
The abandoned goal of revenue neutrality
Tax policy is hard work. But the work becomes harder when tax reform is done in a vacuum, when what ultimately gets signed into law narrowly focuses on the next election cycle rather than the looming fiscal cliff.
TL;DR
- Three major tax packages have been enacted in the last decade: 2017 Tax Cuts and Jobs Act, 2022 Inflation Reduction Act, and the 2025 One Big Beautiful Bill Act.
- These recent tax packages have moved away from the principle of revenue neutrality.
- Revenue neutrality, which ensures tax plans do not increase the deficit, used to be a standard expectation across political parties.
- Former House Speaker Paul Ryan and former Sen. Ben Cardin supported revenue-neutral tax reform.
- Former President Barack Obama's administration also featured revenue-neutral business tax reforms.
- The current mindset in Washington is exacerbating fiscal crises by focusing on short-term election cycles rather than long-term fiscal health.