The writing is on the wall: a revenue-neutral approach to tax reform – on either the corporate or individual side of the tax code – is not an option. However, with demographic shifts, the desperate need for job-creating investments, and the size of our current deficits, our revenue will need to be higher than even these historical levels to achieve balance. During these years of balance, federal revenue averaged 19.5% of GDP, substantially higher than the previous 40 year average (18% of GDP) and the pre-recession level (18.5% of GDP). Rather than use the 1986 tax reform as a model, we should be taking cues from our last five balanced budgets (19-2001), which all required above average revenue. Progressive tax reform is the only way that wealthy Americans can share significantly in that sacrifice.
Low- and moderate-income Americans are already contributing to deficit reduction through the Budget Control Act spending caps and are likely to be asked to sacrifice more. The primary goals of comprehensive tax reform should be to progressively raise sufficient revenue to (1) make investments that will grow the economy, and (2) set us on a path for long-term deficit reduction. Tax reform must be done in a way that raises significant revenue, protects working families and the vulnerable, and requires corporations and the wealthy to pay a fair share. We cannot afford to extend tax breaks for corporations or the wealthy that cripple our ability to invest in areas that expand economic growth, like infrastructure and education.
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