Despite considerable congressional interest in eliminating many of the tax breaks that favor some individuals over others, a new report by the Congressional Research Service (CRS) warns of a number of complexities in attempting to broaden the tax base.
“In a nutshell,” says Concord Coalition Chief Economist Diane Lim Rogers, “the report could be called ‘Base Broadening Is Hard to Do.’ ”
The CRS report says there are more than 200 “tax expenditures” that cost the government more than $1 trillion a year in revenue. The 20 largest ones account for 90 percent of that lost revenue.
CRS notes the political popularity of the largest tax subsidies and calls attention to the administrative challenges in taxing previously untaxed income.
The CRS study suggests it would be difficult for base-broadening efforts to produce more than $100 billion to $150 billion a year in additional revenue.
“I think we could actually do better,” Rogers writes in a blog posting this morning. For example, she says, “there are ways to substantially reduce the cost of the most expensive tax expenditures to make the reductions more palatable from a distributional perspective while still raising enough revenue to support a decent amount of rate reduction.”
Read more with New Report on Tax Reform: Base Broadening Is Hard To Do
External links:
The Challenge of Individual Income Tax Reform (CRS Report)
Joint Committee on Taxation Publications on Tax Expenditures
How Big Is the Federal Government? (Tax Policy Center)
