For Immediate Release
New Report Offers More Revenue Options for Super Committee
Revenue inadequacy a prime driver of budget deficits
WASHINGTON - Addressing the long-term budget deficit requires balancing spending cuts with additional revenue, especially given the singular focus on spending cuts in recent legislation. But an analysis released today by The Century Foundation and the Economic Policy Institute shows that the administration’s revenue proposals, though laudable, would nonetheless leave revenue well below needed levels. The report offers a menu of supplemental options to restore revenue adequacy.
For Joint Select Committee, many good options, by policy analyst Andrew Fieldhouse, analyzes the president’s revenue recommendations for the Joint Select Committee on Deficit Reduction (JSC) and offers a menu of alternative or supplemental progressive revenue options to reduce the deficit and finance job creation initiatives.
To adequately, equitably, and efficiently fund government, the report recommends some combination of additional progressive revenue options, including:
- enacting a millionaire surcharge ($383 billion);
- taxing capital gains as ordinary income ($168 billion);
- further limiting the tax benefit of itemized deductions ($888 billion);
- enacting a progressive estate tax ($73 billion);
- enacting a financial speculation tax ($821 billion);
- enacting a cap-and-trade program and a refundable climate dividend ($472 billion);
- enacting a sweetened beverage tax ($184 billion); and
- ending the deferral of foreign corporate income ($114 billion).
Combining all of these policies would raise $3.1 trillion over 2012-21 (excluding various interaction effects) relative to the president’s recommendations for the JSC, bringing projected revenue roughly in line with current law revenue levels and significantly improving the long-term fiscal outlook.
The report itemizes each of the president’s revenue recommendations for the JSC, including ending the Bush-era income tax cuts for upper-income households, reinstating the estate tax at its 2009 parameters, limiting tax preferences for upper-income households, taxing carried interest as ordinary income, and ending a host of business tax preferences and loopholes.
The president’s recommendations are distributionally progressive. Relative to current tax policy, over 95 percent of all the tax increases would be borne by the highest-income 5 percent of households—those with incomes above $227,000—and millionaires would absorb two-thirds of the tax changes.
The president’s recommendations represent an improvement relative to unsustainably low levels of revenue under current tax policies, raising $1.3 trillion over 2012-21 relative to current policy. Nonetheless, the recommendations fall $3.4 trillion below levels scheduled under current law. Even with the president’s recommendations, revenue inadequacy (largely driven by the Bush-era tax cuts) would remain a primary driver of budget deficits.
“Preserving most of the Bush-era tax cuts and shielding 98% of households from any form of tax increase, relative to our unsustainable tax policies, makes it exceptionally difficult to adequately fund our civil society,” said Fieldhouse.
The Economic Policy Institute, a nonprofit Washington D.C. think tank, was created in 1986 to broaden the discussion about economic policy to include the interests of low- and middle-income workers. Today, with global competition expanding, wage inequality rising, and the methods and nature of work changing in fundamental ways, it is as crucial as ever that people who work for a living have a voice in the economic discourse.