Adam N. Michel
Last month, we kicked off the Cato Institute’s Congressional Fellowship in Tax & Trade Policy ahead of a year that has already been busy for both policy areas. The first four discussion sessions focused on tax policy, covering all the critical information you need to know as Congress decides how to address the year-end expiration of the 2017 tax cuts.
With our bipartisan cohort of senior congressional staff, Chirs Edwards and I covered tax code basics, major features of the Tax Cuts and Jobs Act (TCJA), the history of radical tax reforms, and international tax. Each discussion is summarized in four blog posts for those who want to follow along and learn about the US tax code. This post compiles all four of those blogs.
I’ve also shared these posts on my Substack, Liberty Taxed, where I cover the twists and turns of this year’s tax debate, share relevant links, and explain the complicated details of the US tax code.
Week 1: Tax Code 101
The first week started with an overview of federal revenue sources and the distribution of who pays taxes—the rich pay the lion’s share of federal taxes. The session also covered distinctions between income and consumption tax bases, the number and types of tax expenditures, and the economic inefficiency of high tax rates, which underlies the well-known Laffer Curve.
Read the full outline here: Tax Code 101.
Week 2: Everything You Need to Know About the TCJA
At the end of 2017, Republicans enacted the TCJA, making significant changes to nearly every major portion of the US tax code. Most of the 2017 reforms are set to expire at the end of this year. If no action is taken, taxes will automatically increase, affecting Americans at all income levels.
I gave our fellows an overview of the TCJA’s individual tax cuts and then reviewed the business changes and their economic benefits. The session wrapped up with a discussion of the bill’s fiscal consequences. The written outline ends with a summary of the biggest changes made in the TCJA and links to additional readings.
Read the full outline here: Everything You Need to Know About the TCJA.
Week 3: The Quest for Radical Tax Reforms
This session started with a brief history of major tax reform efforts, an overview of flat-rate consumption tax proposals from the past half-century, and the Estonian tax system as a real-world model of a simple, flat income tax. The discussion ended with a bit of self-promotion. The Cato Tax Plan offers lawmakers and their staff a detailed list of specific reforms to move the federal income tax to a flat tax with historically low tax rates on wages, investment, and business income.
Read the full outline here: The Quest for Radical Tax Reforms.
Week 4: An International Tax Primer
In our final tax discussion, we explored the complexity of the international tax system. I explained the competing goals of multinational taxes, outlined the three theoretical models of cross-border business taxes, examined how real-world rules align with these theories, and reviewed the extent of profit shifting, which is small and declining.
We concluded with an overview of the Organisation for Economic Co-operation and Development’s (OECD’s) two-pillar framework, introduced in 2020 as an attempt to curb profit shifting by raising taxes on American businesses and redistributing taxing rights away from countries like the US. President Trump distanced the US from the agreement early in his term, and his administration’s opposition is likely to stall its progress.
Read the full outline here: An International Tax Primer.
On to a Busy Year
This discussion series was an excellent way to kick off what promises to be a significant year for tax policy. The fellows asked insightful questions, demonstrating a strong understanding and interest in this important policy area. Bipartisan dialogues like these are essential for building a shared understanding and advancing better policy outcomes.
To stay updated as this year’s tax debate unfolds, subscribe to my Substack for tax analysis delivered directly to your inbox.
Congressional staff interested in participating in future Cato fellowship programming should contact GovAffairs@cato.org for more information.
Rachel Johnson contributed to this post.