Each combination below packages several of the guide’s individual reform options into a single scenario and models their combined effects on the economy, the deficit, and the distribution of after-tax income.
This option combination broadens the individual income tax base by tightening the itemized deduction limitation to 28 percent while lowering all individual income tax rates by 10 percent across the board.
This option combination narrows the individual income tax base by restoring the personal exemption while raising ordinary individual tax rates in each bracket by 10 percent across the board.
This option combination would encourage long-run economic growth in the United States by repealing tariffs imposed on US imports since 2017 and replacing the corporate income tax with a destination-based cash flow tax. By reducing marginal tax rates on work and investment, both policies would encourage greater long-run economic output.
This option combination raises taxes on high-income households and corporations by increasing the corporate income tax rate to 28 percent, the top individual income tax rate to 50 percent, and the top tax rate on long-term capital gains and qualified dividends to 30 percent.
This option combination imposes a 5 percent value-added tax (VAT) and uses the new tax revenue to reduce other individual and corporate taxes.
This option combination restructures the individual income tax. It consolidates the current individual income tax brackets into three rates of 10, 25, and 35 percent and eliminates the home mortgage interest deduction, the charitable deduction, the individual alternative minimum tax, and the state and local tax (SALT) deduction.
This option combination replaces the graduated individual income tax with a single flat rate, broadens the base, and expands refundable credits for low-income workers.
This option combination reforms the tax treatment of business income by repealing the Section 199A passthrough deduction, lowering the top marginal tax rate on ordinary income from 37 percent to 35 percent, providing full expensing for all capital investment, and flipping the tax treatment of interest to disallow deductions for interest expenses and not tax interest income received.
This option combination redistributes after-tax income toward lower-income taxpayers by expanding refundable credits while broadening the base at the top. It tightens the itemized deduction limitation, doubles the earned income tax credit for workers without qualifying children, and makes the child tax credit fully refundable.
This option combination increases the value of the standard deduction for all filers by 25 percent and raises the top ordinary individual tax rate from 37 percent to 50 percent. The standard deduction is adjusted for inflation annually.
Note: Reform options presented within Options for Reforming America's Tax Code 3.0 illustrate the economic, revenue, and distributional tradeoffs of each tax option and are not necessarily endorsed or opposed by Tax Foundation.