Tax policy is hard work. But the work becomes harder when tax reform is done in a vacuum, when what ultimately gets signed into law narrowly focuses on the next election cycle rather than the looming fiscal cliff.
Over the past decade, we’ve seen three major tax packages make it from Congress to a president’s desk: the 2017 Tax Cuts and Jobs Act, the 2022 Inflation Reduction Act, and the 2025 One Big Beautiful Bill Act. Each did some things right and other things wrong, but all moved away from a principle that used to be step one in designing a tax plan, regardless of party: revenue neutrality.
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No single bill is fully at fault for the fiscal crises facing our nation. But the mindset in Washington today will only make matters worse sooner than we think.
THE RIGHT’S TAX IDENTITY CRISIS
Revenue-neutral proposals, like many things in politics, have become a relic of the past. Former House Speaker Paul Ryan, to his credit, sought in 2017 through his Better Way agenda to have Republicans “envision tax reform that is revenue neutral.” Former Sen. Ben Cardin, in a bill to drastically reform individual and corporate taxation, put forth a plan that almost overemphasized revenue neutrality.
Paying for tax cuts was not a conservative litmus test or a progressive ploy to get bipartisan support for a bill — it simply used to be the expectation. Former President Barack Obama’s 2015 Green Book led with a section on revenue-neutral business tax reforms. Former President George W. Bush’s second-term Advisory Panel was required to submit only revenue-neutral options.
Does this mean that either party ever really embraced the point of revenue neutrality? No. Nor does it even necessarily mean every tax cut has to be fully paid for when it’s signed into law. Paying for tax cuts with a set of distortive tax hikes doesn’t leave the tax code in a better place overall, and tax changes that support investment and growth deserve to be scored in a way that reflects that growth during legislative debates.
But the debate has abandoned even considering revenue-neutral and pro-growth tax reform.
Last year, President Donald Trump unleashed the “no tax on…” agenda. Today’s discussions are no longer about how to lower rates and broaden the base, but rather about picking the sector or interest group that politicians think don’t need to pay taxes at all. Leading Democratic hopefuls for the White House, likewise, are spending time trying to find ways to eliminate taxes for all “middle-class” taxpayers, using whatever income cutoff they deem to fit that mold.
This is not to say that there are no ways left to lower tax bills. But because of lawmakers’ apathy toward the price tag that comes with tax cuts, there may be no time left to turn the tide on our national debt.
The Congressional Budget Office projects that the U.S. will have its largest sustained deficits in the country’s history over the next decade. Debt held by the public will top 100% of GDP this year and is expected to reach a new record high within the next four years. An increasing share of our tax dollars (more than 25% within a decade) will be used to simply pay interest on the national debt, while Social Security and Medicare accelerate their insolvency dates.
Two challenges, in particular, make the outlook daunting: the size of the primary deficit over the next 30 years exceeds every tax increase implemented since World War II by a wide margin, and revenues would need to grow faster than the economy to keep up with spending projections.
These are self-inflicted wounds. Making tough trade-offs in recent tax reforms would have put us in a better situation than we currently face. Even now, a greater focus on spending reductions and achieving deficit reduction through smarter pay-fors would make the challenges ahead more manageable.
THE RIGHT WAY FORWARD: THE ROLE OF THE STATE IN THE ECONOMY
D.C. is a town run on ideas, and we have no shortage of proposals to help slow the ascent of our debt. Unfortunately, they’re often swamped by proposals to spend the money faster than savings can be achieved.
A fiscally responsible mindset has to be advanced by the politicians who have the power of the purse. Revenue neutrality needs to be let back into the room so the custodians of our federal coffers can deliver a fiscally responsible agenda. Without it, we’ll need a measure far more drastic than revenue neutrality to save us from drowning in our own debt.
Daniel Bunn is president and CEO of the Tax Foundation.