Tax Policy

Tax policy determines how the federal government raises revenue — through income taxes on individuals and corporations, payroll taxes, capital gains taxes, estate taxes, and excise taxes — and how the tax code shapes economic behavior through deductions, credits, and incentives. The federal government collects approximately $4.9 trillion in revenue annually, primarily from individual income taxes (~50%) and payroll taxes (~35%). The Tax Cuts and Jobs Act (TCJA) of 2017 made sweeping changes: cutting the corporate tax rate from 35% to 21%, reducing individual income tax rates, roughly doubling the standard deduction, and limiting the state and local tax (SALT) deduction. Most individual provisions of the TCJA are set to expire at the end of 2025, creating a major legislative deadline — extending them is estimated to cost $4–5 trillion over a decade. The TCJA permanently reduced corporate taxes; debates continue about whether it paid for itself through growth (supply-side view) or whether it primarily benefited corporations and high-income individuals (progressive view). Proposals for a wealth tax — an annual levy on total net worth rather than income — have gained attention as a tool to address inequality but face constitutional and enforcement challenges. The international corporate tax system is being reformed: more than 140 countries agreed to a global minimum corporate tax of 15% under the OECD/G20 framework, aiming to reduce profit-shifting to tax havens. The U.S. has not fully implemented this agreement.