Making the Tax Cuts and Jobs Act Permanent: TWO REVENUE-NEUTRAL, PRO-GROWTH OPTIONS FOR TAX REFORM

The 2017 Tax Cuts and Jobs Act (TCJA) contained reforms geared toward increasing economic growth and making the tax code simpler, more efficient, competitive, and neutral. However, many key provisions were temporary, and some provisions were not ideal. Instead of simply extending the TCJA, lawmakers should make further pro-growth and fiscally responsible reforms while improving the tax code's stability and neutrality. This report proposes two options to extend the TCJA. The first option extends most features of the TCJA's individual and business provisions while making incremental reforms to the tax code. It would improve on the TCJA by reducing the cost of capital and mitigating distortions and complexities while maintaining revenue neutrality. The second option is more aggressive and builds on the structure of the TCJA by enacting significant pro-growth reforms. It would reduce tax rates for individuals, broaden the tax base, and replace business taxation with a tax on business cash flow. The report estimates the impact of each option on federal revenues, the distribution of the tax burden, incentives, and long-run economic output.
In 2017, Republican lawmakers passed the Tax Cuts and Jobs Act (TCJA). This law made significant reforms to improve the structure of individual and corporate income taxes while delivering sizable [...]