WASHINGTON — With major provisions of the Tax Cuts and Jobs Act set to expire at the end of next year, the president and Congress elected less than two weeks from today will have a historic opportunity to craft a new tax code that is fairer, more pro-growth, and more fiscally responsible. The Progressive Policy Institute (PPI) today released a new report, “A Real Tax Cut for Working Americans: Repealing and Replacing the Payroll Tax,” that offers a bold proposal to do just that by repealing the regressive and anti-work payroll tax, which is the biggest tax 123 million American households pay on their hard-earned wages.
This new publication, which is authored by Ben Ritz, Vice President of Policy Development for PPI, and Laura Duffy, a Policy Analyst at PPI’s Center for Funding America’s Future, is a key output of PPI’s Campaign for Working America, launched earlier this year in partnership with former U.S. Representative Tim Ryan of Ohio. The Campaign aims to develop and test new themes, ideas, and policy proposals that help Democrats and other center-left leaders make a compelling economic offer to working Americans, bridge divides on cultural issues like immigration and education, and rally public support for the defense of democracy and freedom globally.
“Donald Trump has spent months pandering to workers by offering to exempt everything from tips to overtime pay from taxation. But these proposals would collectively add trillions of dollars to inflationary budget deficits while providing little benefit to the overwhelming majority of working Americans who earn most of their income through ordinary wages,” said Ritz. “PPI’s proposal, on the other hand, would increase most workers’ take-home pay while reducing our nation’s unsustainable deficits.”
The report proposes adopting a value-added tax to replace the revenue lost by repealing the payroll tax, which would spread the burden of taxation from workers’ wages to other forms of business income and previously accumulated wealth. PPI estimates that the swap could increase after-tax income for up to 90% of working families while also reducing annual budget deficits by up to $300 billion. It would also lower marginal tax rates on most workers’ wages, boosting individuals’ incentives to work and driving the innovations that grow our economy.
“Virtually all of the United States’ peer countries rely on value-added taxes to finance their social programs because they’re good at raising revenue in a relatively pro-work and pro-growth way,” Duffy added. “Transforming the U.S. tax code to tax consumption instead of payrolls would therefore be a progressive and fiscally responsible way to reward work and improve the lives of working families.”
Read and download the report here.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org. Find an expert at PPI and follow us on Twitter.
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Media Contact: Ian O’Keefe – iokeefe@ppionline.org