Focus on Tax Policy

Focus on Tax Policy

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In a November 29 op-ed article, Harvard economist Martin Feldstein argued that restricting “tax expenditures” would be the best way to raise new revenue to stabilize the national finances. He suggests setting a cap of 2 percent of Adjusted Gross Income on the total amount of tax expenditures a taxpayer can utilize.

A November 29 Marist College poll asked voters whether they favored extending all the Bush tax cuts or only those affecting people with incomes below $250,000 per year. A bare majority favored the latter position with 45 percent favoring extension of the tax cuts for everyone.

On November 24, the Tax Policy Center posted new data on distribution of the Alternative Minimum Tax.

A November 23 Gallup poll asked people about their priorities for congressional action before year’s end. Surprisingly, the highest priority, people said, is action on the estate tax, which would affect fewer than 2 percent of decedents.

On November 22, I posted an article from Tax Notes magazine regarding the Simpson-Bowles proposal to abolish all tax expenditures and reduce statutory income tax rates. I think the idea is unwise.

In a November 19 commentary, University of Chicago economist Casey Mulligan discussed how the tax system affects even those who don’t pay any taxes.

In a November 18 commentary, economist Martin Sullivan said it was very unwise to combine tax reform with deficit reduction. Each would be hard enough to do individually; trying to do both simultaneously will reduce the chances of accomplishing either goal, he says.

Also on November 18, the World Bank released the latest edition of its annual report on Paying Taxes. It contains extensive data on tax rates and compliance burdens around the world.

And on November 18, American Action Forum, a Republican group, published a study which found that permanent extension of the Bush tax cuts would have only modest effects on economic growth. While real GDP would be almost a percentage point higher next year, the impact declines to 0.7 percent in 2012, 0.3 percent in 2013, 0.1 percent in 2014, and zero in 2015.

A November 17 study from the Institute for the Study of Labor found that workers frequently adjust their tax-favored consumption and saving in order to mitigate the effects of progressive tax rates when given a promotion or pay raise.

On November 16, University of Florida law professor Martin J. McMahon posted a paper on tax expenditures that responds to critics of the concept.

Also on November 16, incoming House Ways and Means Committee chairman David Camp gave a speech in which he detailed his plans for the committee regarding tax reform.

On November 15, the Progressive Policy Institute published a study by economist Michael Mandel which argued that it would be unwise to raise tax rates on capital gains and dividends.

On October 29, the Treasury Department’s Office of Tax Policy released a study of the economic impact of temporarily allowing businesses to deduct 100 percent of investments in capital equipment, as proposed by the Obama administration.

I last posted items on this topic on November 18.

Bruce Bartlett is an American historian and columnist who focuses on the intersection between politics and economics. He blogs daily and writes a weekly column at The Fiscal Times. Read his most recent column here. Bartlett has written for Forbes Magazine and Creators Syndicate, and his work is informed by many years in government, including as a senior policy analyst in the Reagan White House. He is the author of seven books including the New York Times best-seller, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006).

Bruce Bartlett’s columns focus on the intersection of politics and economics. The author of seven books, he worked in government for many years and was senior policy analyst in the Reagan White House.