Falling federal revenue compared to 2022, and a stock market that has not been as robust as that year, means that Congress needs to find a way to raise taxes, some experts say, according to Quartz News.
Fiscal experts and policymakers argue that the United States needs a new commission to force Congress to consider debt reduction options, Quartz News reported. Such a bill was introduced last month by a bipartisan group of representatives and urged by the think tank the Center for a Responsible Federal Budget.
Rather than a commission, the article argued in favor of an approach suggested by the Committee for a Responsible Budget. That approach would aim for debt sustainability over the long term, or balancing spending and revenue without including the interest payments made on U.S. borrowing.
The Center for American Progress, another think tank, found that the driver of U.S. national debt in the 21st century has been the Bush- and Trump-era tax cuts. In 2023, it found, about 26 percent of the national debt was incurred in the spending approves during the pandemic recession. Another 40 percent is represented by all other borrowing, but 38 percent is represented by the Bush and Trump tax cuts.
But there is room to increase U.S. tax revenue. The United States ranked 32nd out of 38 Organisation for Economic Co-operation and Development (OECD) countries in national tax–to–GDP ratios in 2021 at 26.6 percent, compared to the OECD average of 34.1 percent, according to OECD data.
Other potential sources of revenue include closing tax loopholes, such as those providing preferential treatment for capital gains and charitable contributions, exemptions in Social Security taxation for high earners, or the exclusion of unrealized capital gains from taxation at death. These could be closed or capped, as the state and local tax (SALT) deduction was in 2017 as a provision of the Tax Cuts and Jobs Act.
Increased IRS enforcement, afforded by the Inflation Reduction Act of 2022, has already resulted in the collection of $160 million in back taxes this year, from some 275 people earning more than $1 million annually, Quartz News reported.
A key proposal of the E.U. Tax Observatory’s Global Tax Evasion 2024 Report is the institution of a global minimum tax on billionaires, equal to 2 percent of their wealth. The report estimated that such a tax would raise close to $250 billion (from fewer than 3,000 individuals) annually. “A strengthened global minimum tax on multinational companies, free of loopholes, would raise an additional $250 billion per year,” it stated.
Whatever measures are taken, “the numbers tell us something,” the article concluded: “The government can’t cut its way out of the debt problem.”