Tax Foundation's video: Taxes Spending and Addressing the U S Debt Crisis Senate Budget Testimony

𝗨𝗻𝘀𝘂𝘀𝘁𝗮𝗶𝗻𝗮𝗯𝗹𝗲: The latest Financial Report of the U.S. Government warns that if lawmakers fail to take action soon, the federal debt is projected to exceed 200 percent of GDP by 2046. 𝗣𝗼𝗶𝗻𝘁𝗶𝗻𝗴 𝘁𝗼 𝘁𝗮𝘅 𝗽𝗼𝗹𝗶𝗰𝘆: Many are pointing to tax policy as both the cause of and solution to the debt crisis. Some have suggested that prior tax policies like the Bush tax cuts and Tax Cuts and Jobs Act have contributed to the current debt crisis, and that returning to Clinton-era policies would close the deficit. However, our modeling finds that doing so would be regressive and harmful to the economy, which only makes the job of reducing the debt more difficult. 𝗬𝗲𝘀, 𝘀𝘁𝗿𝗲𝗮𝗺𝗹𝗶𝗻𝗲 𝘁𝗵𝗲 𝘁𝗮𝘅 𝗰𝗼𝗱𝗲: Reevaluating the more than 200 tax expenditures in the federal budget would be more effective than rate increases in altering the debt curve. 𝗕𝘂𝘁 𝗸𝗲𝗲𝗽 𝗶𝗻 𝗺𝗶𝗻𝗱: Successful fiscal adjustments primarily cut spending and modestly increase taxes. International experience cautions against tax-based fiscal consolidations, but modest tax increases may be part of a successful debt reduction package. 𝗡𝗼𝘁 𝗮𝗹𝗹 𝘁𝗮𝘅𝗲𝘀 𝗮𝗿𝗲 𝗰𝗿𝗲𝗮𝘁𝗲𝗱 𝗲𝗾𝘂𝗮𝗹: Not all taxes have the same effect on economic growth and, thus, will have varying impacts on bending the cost curve of the national debt, as our new modeling illustrates. 𝗧𝗮𝘅 𝗼𝗽𝘁𝗶𝗼𝗻𝘀 𝗼𝗻 𝘁𝗵𝗲 𝘁𝗮𝗯𝗹𝗲: • Biden’s budget plan depends entirely on net revenue increases from raising economically damaging taxes—an approach inconsistent with successful efforts to reduce debt. • In contrast, our revenue-neutral plan proposes a simplified tax code with base broadeners to help offset the costs of the reforms, including eliminating most tax expenditures. 𝗕𝗲𝗻𝗱𝗶𝗻𝗴 𝘁𝗵𝗲 𝗰𝗼𝘀𝘁 𝗰𝘂𝗿𝘃𝗲 𝗼𝗳 𝗱𝗲𝗯𝘁: A better-designed tax system should be a goal of any fiscal consolidation package. That said, our simulations suggest that even substantially higher tax increases are insufficient to curtail long-run debt-to-GDP growth. This video is the oral testimony of Scott Hodge, President Emeritus and Senior Policy Advisor at the Tax Foundation, prepared for a Senate Budget Committee hearing on May 17, 2023, titled, “The Rich Get Richer, Deficits Get Bigger: How Tax Cuts for the Wealthy and Corporations Drive the National Debt.” 𝗘𝘅𝗽𝗹𝗼𝗿𝗲 𝘁𝗵𝗲 𝗳𝘂𝗹𝗹 𝘄𝗿𝗶𝘁𝘁𝗲𝗻 𝘁𝗲𝘀𝘁𝗶𝗺𝗼𝗻𝘆: https://taxfoundation.org/taxes-spending-us-debt-deficits/