$15 Trillion on the Table in 2029: Ordinary Taxes to Meet an Extraordinary Fiscal Moment
The US national debt passed 100 percent of GDP in March 2026 and is projected to reach nearly 130 percent by 2039. This worsening fiscal outlook comes at a time when income inequality remains high and advances in AI may drive widespread economic disruption. In $15 Trillion on the Table in 2029: Ordinary Taxes to Meet an Extraordinary Fiscal Moment, Kimberly Clausing and Natasha Sarin propose a suite of time-tested tax reforms that put the country on a sustainable fiscal path while improving tax progressivity and responding to the artificial intelligence revolution.
Clausing and Sarin focus on the tax side of the ledger because government spending today largely finances politically popular entitlement programs, national defense, and interest on prior debt, leading the authors to conclude that there are more politically feasible ways for raising revenue than there are for cutting spending. Furthermore, they argue that novel tax instruments, such as taxes on wealth and unrealized capital gains, face steep legal and implementation hurdles, and therefore policymakers should look to well-established tax mechanisms to raise revenue.
The authors divide their policy proposals into five buckets: corporate and international tax reform, investment in the IRS, a robust sin tax agenda, adjustment of individual income tax parameters, and personal capital income taxation reform. They estimate these reforms would altogether generate nearly $15 trillion over the 2030–2039 budget window.
Bucket 1: Reform corporate taxation to meet the challenges of the modern global economy. The corporate tax is a flexible and progressive policy lever that taxes excess profits wherever they arise, whether from AI deployment or other sources. The authors propose raising the corporate tax rate to 27 percent for the largest-profit taxpayers (less than 2 percent of firms), alongside a surtax of 2.7 percentage points for less than 0.5 percent of firms. They group this provision with a broadening of the corporate tax base to better tax pure profits and international tax reforms to prevent profit shifting. These changes would raise a combined $4 trillion over the ten-year budget window.
Bucket 2: Invest in the IRS. The IRS has lost nearly 28,000 employees since January 2025, including approximately 31 percent of its auditing staff, and is currently operating at a staffing level not seen since the 1960s. The agency’s enforcement capacity has also long been eroding, with audit rates for high-income taxpayers declining from 16.5 percent in 2010 to 2 percent in 2021. An $80 billion investment in IRS capacity over the ten-year budget window would raise an estimated $1.3 trillion in revenue that is already owed under current law.
Bucket 3: Expand tax efficiency and revenue through new “sin” taxes. While excise taxation of harmful activities such as gambling and pollution is often criticized for being paternalistic, the long-term internal and external harms of these activities ultimately justify their use. A gambling tax of 5 percent on the value of sports wagers, combined with a tax on prediction market winnings, would generate over $130 billion over the ten-year budget window. Additionally, a tax on carbon emissions that begins at $40 per metric ton and rises by 5 percent in real terms over the same window would raise roughly $1.2 trillion.
Bucket 4: Adjust income tax parameters. The authors consider a hybrid structure of returning individual rates to the 1997 levels for most taxpayers, while leaving the bottom two tax brackets at current levels. They also propose repealing the pass-through business income deduction under Section 199A. Repealing the Section 199A deduction would improve horizontal equity by treating labor and capital income more similarly and would reduce incentives for economically unproductive forms of tax planning. Together, this bucket of reforms would generate $6 trillion over the budget window.
Bucket 5: Reform capital income taxation. Capital income’s preferential tax status under current law is both regressive and inefficient, allowing much of the income accruing to the wealthiest Americans to escape taxation entirely. At the top of the income distribution, wages and salaries taxed at ordinary rates make up a small share of income. Capital gains and dividends, which make up the majority, enjoy lower statutory rates, benefit from deferral until realization, and can escape taxation altogether through step-up in basis at death. A menu of reforms that would reduce the preferential tax treatment of capital income, such as raising tax rates on long-term capital gains and dividends by 5 percentage points and lowering the estate tax exemption, would generate $2.1 trillion over the budget window.
The first three reforms would raise an estimated $7.5 trillion, while the five buckets would raise $14.6 trillion over the ten-year budget window. The authors find that the $7.5 trillion package would roughly stabilize the debt-to-GDP ratio through the mid-2050s, while the full set of reforms would bring the debt-to-GDP ratio down to approximately 57 percent by 2056.
Importantly, the distributional effects of the full five-bucket package remain highly progressive. Increased tax burdens at the bottom of the income distribution are largely driven by increases in sin taxes, as consumption-based taxes are regressive. However, there are numerous ways policymakers could offset this increased tax burden, including allocating revenue to poverty-reduction efforts such as the Earned Income Tax Credit and Child Tax Credit.
Suggested Citation: Clausing, Kimberly and Sarin, Natasha. 2026. “$15 Trillion on the Table in 2029: Ordinary Taxes to Meet an Extraordinary Fiscal Moment.” In The American Economy in a New Era, edited by Melissa S. Kearney and Luke Pardue. Washington, DC: Aspen Institute.