The Peter Peterson Foundation is one of many organizations in Washington that have been formed to build support for deficit reduction solutions. These groups, often called “deficit hawks,” issue papers and hold seminars on ways to reduce deficits and debt.
Unfortunately, the Peterson Foundation, like most of the other deficit groups, believes that a “key driver” of budget deficits is “insufficient revenues,” and that taxes should be increased to “cover federal spending.” What is worse, they support tax increases that would be most harmful to investment and productivity, and lead to lower economic growth and larger deficits.
On their website right now, they are promoting an essay by two so-called fiscal experts who write that one remedy to the debt problem is to increase the corporate tax rate from 21% to 25% or 26%, a remarkably uninformed proposal. An overwhelming body of economic research shows that increasing the corporate tax rate is the most economically damaging tax increase. Study after study show that a higher corporate tax rate harms U.S. competitiveness, reduces economic growth, and hurts working people’s wages and jobs.
Increasing the corporate tax rate to 26% would result in a combined average U.S. federal-state tax rate of 31%, one of the highest in the developed world. In many states, the new combined U.S. rate would be approaching 35%, doing major damage to investment, growth, and wages.
The deficit problem is not the result of not enough revenue. We have too much revenue, giving the federal government a growing flood of tax receipts to spend every year. Tax revenues have increased ten-fold since 1980, rising from $500 billion in 1980 to over $5 trillion in 2025. But instead of reducing deficits, this surge in taxes has fueled massive spending growth, with spending increasing from $590 billion in 1980 to $7 trillion in 2025 and heading for $10 trillion in 2035.
Increased government spending is a tax on the economy, draining trillions of dollars a year from private sector production and reducing economic prosperity. We do not need more revenue to cover federal spending . We need lower taxes and less spending to expand economic growth.
The best way to increase investment, productivity, and wages and jobs is to reduce tax rates on the private sector and slow the growth of government spending. That’s what the deficit hawks should be promoting.
The Peterson Foundation's Remarkably Uninformed Debt Proposal
December 10, 2025
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