Taxing Choices
This week on Facing the Future, Bob Bixby hosted Alex Brill, Senior Fellow at the American Enterprise Institute, to discuss the complexities of the U.S. tax code and budget challenges. Brill highlighted that for the first time in a long while, there was “a little bit of stability in the tax code,” thanks to last year’s One Big Beautiful Bill Act of 2025 that made many provisions permanent, providing taxpayers with greater predictability despite the significant costs associated with the bill.
But that stability comes with a significant budgetary cost. The legislation extended tax provisions that would otherwise have expired, adding to projected federal deficits. Some new provisions—such as tax relief on tips, overtime pay, and certain car loans—were enacted only temporarily and may face future debates about whether to extend them.
Brill expressed skepticism about several of these provisions, warning that targeted tax breaks can distort economic behavior. “I’m generally not favorable towards them,” he said. “They create distortions and winners and losers along the way.”
He emphasized the importance of broadening the tax base while lowering rates to stimulate economic growth, noting, “We’re going to get the most growth from an income tax if we tax as much income as we can at the lowest rate possible.”
The challenge is that the U.S. tax system contains numerous tax expenditures—credits, deductions, and exclusions that narrow the tax base while reducing revenue. These include familiar provisions such as the mortgage interest deduction and the exclusion of employer-provided health insurance from taxable income.
“These provisions sound reasonable on their own,” Brill explained. “But they come at a very large cost.” Tax expenditures now amount to trillions of dollars over time, complicating efforts to both simplify the tax code and reduce deficits.
Brill drew from his experience working on the Simpson-Bowles Commission to shed light on the fiscal challenges faced by the country, emphasizing that the growing federal deficit was driven primarily by rising outlays, especially in Medicare and Social Security. He stated, “The problem has gotten worse” since the commission’s work 15-16 years ago and stressed that “there is no way to solve this problem without making significant reforms” to mandatory spending.
On healthcare reform, Brill suggested that future retirees would need to “play a bigger personal role in covering the costs of their own benefits” and pointed to the premium support model as a promising, though politically challenging, option to control costs. He concluded with a warning about the consequences of inaction, reminding listeners that ignoring these issues would lead to “much, much higher interest costs to the federal budget,” which could spiral into a negative economic cycle.
The Public Lacks Confidence about Elected Officials Willingness to Address Debt Problem
During the 2nd half of this week’s episode, Bixby interviewed John McHenry, Vice President of North Star Opinion Research, about the Peter G. Peterson Foundation’s Fiscal Confidence Index. This index, modeled after the University of Michigan’s Consumer Confidence Index, measures public sentiment on the national debt using a scale where 100 is neutral.
McHenry explained that the index has consistently remained in negative territory over the past 12 years, currently standing at 43. He noted, “folks just don’t have much confidence that politicians are taking this seriously,” with the priority rating at a low 20 and the concern rating at 39. The index gauges voters’ concerns about the debt, their expectations of political action, and the priority they assign to the issue, revealing a persistent skepticism about politicians’ willingness to address the growing debt problem.
McHenry also discussed how the public is beginning to connect the national debt to their everyday lives, particularly through rising inflation and borrowing costs. He highlighted that “90% of voters in March said that they were concerned, including 55% who were very concerned, that the debt is leading to increases in the cost of living.” The interview also touched on the looming Social Security insolvency, which McHenry believed could become a “galvanizing event” for political action, with 95% of respondents wanting candidates to clearly explain their plans to prevent benefit cuts. However, he acknowledged a deep distrust in politicians, stating, “There’s a sense that your guys can do it, but we don’t trust the other guys,” reflecting the stark partisanship that colors public expectations on fiscal issues.
