The American government is preoccupied with medium-term spending cuts in order to meet the perceived need to pull the country out of massive deficits. A modest part of this discussion has focused on possible new revenues. Obama, for example, recently backed a reform that would introduce a new minimum tax on people with very high incomes, and has suggested that Bush tax cuts for those earning more than $250,000 could be rolled back. These moves are resisted by the Republican Congress, who are largely opposed to new tax increases. This opposition has become so deep that some conservative organizations have suggested that even moves that lower rates must be opposed if they come with parallel moves to broaden the tax base by eliminating or reducing deductions. It's plausible that a comprehensive package, however, could be pushed through Congress if there were sufficient consensus in the changes, although likely only if the package were revenue-neutral (unless Democrats retake Congress in 2012).

One major area ripe for reform is corporate income taxation. Under Bush, large tax expenditures ("loopholes") were developed in the tax system for a wide range of behaviours and industries, but the federal rate was kept at 35%. While this was functional for Congress, economists prefer a broader tax base with a lower rate. Obama's team has talked up moves that would close many of the expenditures and reduce the general rate to somewhere like 28%. Republicans like John McCain (in 2008) and Mitt Romney (in 2011) have called for a 25% rate, which would cost the treasury about $80 billion a year.

There are good reasons to reduce the general rate, even at the cost of raising other taxes. The common center-left thinking on corporate taxes goes thus: Corporate profits bad, therefore corporate taxes good. Unfortunately, it doesn't really work that way - most corporate taxes are passed on quickly to labour through lower compensation or higher prices. In other words, corporations don't really end up paying the tax, although they do suffer due to the distortions the tax causes. This doesn't necessarily mean a good corporate tax is zero - you want measures to prevent people from sheltering income from taxes altogether. But a 35% general rate is probably not consistent with good policy.

One possible reform that could make up lost corporate revenue, other than broadening the corporate tax base, is to phase out a number of popular but problematic personal income tax expenditures. The most notorious of these is mortgage interest deductibility, which is a poorly targeted program designed to promote home-ownership. In reality, it is simply a tax break for upper-middle income families, who in turn pay higher rates elsewhere to make up the tax. It's estimated that phasing out MI deductibility could raise all the money needed to reduce the general corporate rate to 25%, for example. Given the needs associated with climate change, it makes sense to encourage urban structure that isn't dependent on large detached owner-occupied homes. The most likely reform in this area is changing the deduction into a tax credit, so that middle-income families still benefit but larger homes are not encouraged. This would build more equity into the credit, which currently subsidizes the well-off.

Another tax policy change related to climate change would be new carbon or fuel prices. Given the enormous amount of resources consumed by the US public, this could raise a lot of money. US gasoline taxes are very low, and contribute to a car-dependent culture. A 50-cent increase in fuel prices per gallon would raise approximately $700 billion over ten years. A small new carbon tax could raise at least $200 billion over ten years. Neither would be popular with Republicans and would be difficult to push through Congress, even if they were tied to business tax cuts or personal rate reductions (as their supporters tend to suggest).

If the current balance of forces remains in Congress, it seems unlikely that major tax increases will be allowed through. However, several moves that broaden the base of taxation and then reduce rates may be ushered through, largely by the leaderships of both parties, opposed by the fringes of both parties for various reasons.