The latest analysis examines the Republican Study Committee’s (RSC) new policy blueprints—the 2026 Budget and the Reconciliation 2.0 Framework. While these documents aim to boost American prosperity, they present a paradox of both simplifying the tax code and adding new layers of complexity.
The Cost of Complexity
The federal tax code remains a massive administrative hurdle for the American economy. The sheer scale of the burden is staggering:
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Compliance Costs: Taxpayers spend $536 billion annually to comply with federal regulations.
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Time Lost: Last year, Americans spent 7.1 billion hours on tax compliance—the equivalent of 3.6 million full-time workers.
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Regulatory Weight: Tax compliance accounts for 73% of the total out-of-pocket costs Americans pay to comply with all federal regulations.
Progress and Pitfalls in Recent Reform
The 2025 reconciliation law made significant strides in some areas but introduced fresh complications in others.
Steps Toward Simplicity & Growth
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Permanence: Making the individual provisions of the Tax Cuts and Jobs Act (TCJA) permanent prevented a $4.5 trillion automatic tax hike.
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Business Investment: Permanent expensing for business equipment and R&D provides stability and encourages long-term economic planning.
New Complications
Targeted tax cuts—such as the elimination of taxes on tips, overtime, and auto loans, along with specialized deductions for seniors—create a maze of new rules. While they lower taxes for specific groups, they require heavy regulation to prevent abuse and are currently set to expire in 2028, creating future “cliffs.”
The Savings Account Dilemma
One of the most significant opportunities for reform lies in how Americans are encouraged to save. Currently, the U.S. has over a dozen different tax-neutral accounts for retirement, education, and health, each with unique eligibility rules.
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The Problem: The complexity of existing accounts (like 401(k)s or IRAs) discourages low-income earners. Less than 10% of those earning $10,000 or less contribute to these plans.
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The Solution (USA): The RSC Budget proposes Universal Savings Accounts (USAs). These are all-purpose, tax-neutral accounts with no penalties or restrictions, similar to successful models in Canada and the UK.
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The Contradiction: While the RSC Budget pushes for the simple USA, their Reconciliation 2.0 Framework suggests adding four more specialized accounts (for housing, healthcare, etc.), which would further fragment the system.
Recommendations for Lawmakers
As the targeted provisions from 2025 head toward expiration in 2028, policymakers have a window to clean up the code.
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Consolidate: Merge duplicative savings accounts into a single, flexible Universal Savings Account.
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Prioritize Neutrality: Focus on broad-based incentives rather than “carve-outs” for specific types of income (like tips or overtime).
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Ensure Stability: Move away from temporary tax provisions that create uncertainty for families and businesses.