2. Begin tax reform
Comprehensive tax reform – both individual and corporate – that limits tax breaks, reduces rates, and increases revenue would improve America’s economic competitiveness while reducing the deficit. Such a reform – recommended by the Bipartisan Policy Center’s Domenici-Rivlin Debt Reduction Task Force – won’t happen overnight, but smaller steps are possible.
One place to start might be to index tax brackets and other provisions in the code, such as eligibility for various tax credits, to the chained CPI, a more accurate measure of inflation. This provision would increase revenue relative to the current system by slightly raising the amount of individuals’ incomes that are subject to higher tax brackets, reducing the deficit.