Options for Reforming America's Tax Code 3.0

The One Big Beautiful Bill Act (OBBBA) of 2025 made many expiring parts of the federal tax code permanent. But that does not mean tax reform is over.

As of this book’s publication, members of Congress are considering additional tax changes in 2026. The Trump administration imposed several rounds of tariffs in 2025, many of which were struck down by the Supreme Court’s Learning Resources decision, but it plans to impose additional tariffs in 2026. The OBBBA created several provisions that are scheduled to expire after 2028, which means another debate over extending tax cuts is already on the horizon.

However, the bigger issue for tax policy over the next several years will be how it balances with the other side of the budget equation: spending.

According to the Congressional Budget Office (CBO), the main Social Security trust fund will run out of reserves in 2032, forcing an automatic benefit cut of more than 20 percent without congressional action. Medicare spending is projected to almost double in nominal dollars within the decade, and the Hospital Insurance Trust Fund will likely reach insolvency in the 2030s. At the same time, rising geopolitical tensions have created a demand for higher levels of defense spending.

The CBO projects that, under current law, publicly held debt as a share of GDP will rise to a new record high of more than 107 percent within the next four years and continue rising to more than 175 percent of GDP by 2056. While revenues are projected to grow as a share of GDP, spending grows faster so that deficits rise to 9.1 percent of GDP by 2056.

All this spending must be paid for by American taxpayers through higher taxes either today or in the future, as the accumulating federal debt is eventually paid down. Higher debt burdens can reduce economic growth, as higher borrowing can raise interest rates and crowd out private investment. Taxes can also reduce economic growth, as higher marginal tax rates reduce incentives to work and invest.

Many of the solutions to America’s fiscal problems should come from the spending side of the federal budget, but revenues will be part of the toolkit too. Whether policymakers want to raise or lower taxes, they must consider how policy changes will impact not just federal tax revenue, but the US economy at large.

In this book, we present 86 potential changes to the federal tax code. We consider how the changes would impact federal revenue, the long-term debt trajectory, the distribution of after-tax income, and the US economy. With the information in this book, policymakers can weigh the trade-offs of each option.