Congressional Research Service: Tax Reform - An Overview of Proposals in the 112th Congress

From the Congressional Research Service:

      The President and leading members of Congress have stated that fundamental tax reform is a major policy objective for the 112th Congress. These policymakers have said that fundamental tax reform is needed in order to raise a large amount of additional revenue, which is necessary to reduce high forecast budget deficits and the sharply rising national debt. Congressional interest has been expressed in both a major overhaul of the U.S. tax system and the feasibility of levying a consumption tax over the existing tax system. Some proponents of reform argue that the tax base should be broadened by reducing or eliminating many tax expenditures. “Tax expenditures are revenue losses resulting from federal tax provisions that grant special tax relief designed to encourage certain kinds of behavior by taxpayers or to aid taxpayers in special circumstances.” If tax expenditures are reduced substantially or a consumption tax is levied or both, then the marginal income tax rates could be reduced. An alternative to increasing tax revenues is cutting spending. Thus, members are faced with considering the best mix of tax increases and spending cuts in order to reduce deficits and slow the growth of the national debt.

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