Forget Grand Bargains: Other Useful Tax Reforms

February 3rd, 2014 at 8:03 am

I wouldn’t bet on any of these breaking the gridlock, but they’re all good ideas that have varying degrees of bipartisan support.  Over at the NYT Economix blog.

Print Friendly, PDF & Email

6 comments in reply to "Forget Grand Bargains: Other Useful Tax Reforms"

  1. Larry Signor says:

    I would posit that their exist four types of income which should be taxed differently. Let us dispose of the easiest first: criminal gains, which are or should be taxed at %100 plus penalties. Labor income is the most basic income: a survivability income which should not be taxed, even enhanced a certain income levels (EITC). Now comes the sticky part: true investment income, which has positive community benefits, should be taxed much more lightly than speculative income. Speculative income: the root of income inequality, excessive political influence and market distortions, should be the most heavily taxed income. These ideas are not in the cards, as you pointed out. They should be part of the conversation.

  2. smith says:

    I’m totally not getting why a liberal Democratic economist would favor lowering corporate tax rates. The very well known Piketty and Saez studies show that lower corporate tax rates play a significant role in rising inequality (because the rich own the lion’s share of all corporate stock).
    I also don’t get why the EITC (which is the largest costliest anti-poverty program in the U.S.) should be expanded to assist single adults without children vs. using money to create jobs. I understand why very notable conservatives like Mankiw and Rubio support the EITC since the wage subsidies function as corporate welfare.
    I’d question targeting savings accounts vs. just raising rates on income to increase revenue, it’s just a sneaky way to adjust tax rates without you know, raising rates. Let’s have that fight out in the open.
    I’d question too why universal pre-k should be put on the back burner, since that can be very popular across all income groups, and could be linked to plain old increased marginal rates (in addition to cigarette tax). Note, economists agreement on pre-k is not so important, education researchers agreement is, and implementation can be tricky for optimal payoff.

    • Larry Signor says:

      I am not sure what you are saying. You seem to favor higher corporate taxes and higher marginal rates for labor. The EITC cannot be considered corporate welfare in conventional terms (farm subsidy bill, corporate energy subsidies and big bank bailouts). The EITC enhances demand and that is one of its functions, as well as decreasing income inequality and working class poverty. A robust minimum wage would diminish any marginal corporate welfare concerns. The remainder of your comment is confusing to me, i.e. its applicability to tax policy.

      • smith says:

        I favor higher corporate taxes and higher rates for high income, 90% on earnings over $2 million (Eisenhower era rates in 2013 dollars), 70% for say over $1 million, 50% for over $500,000, and restore Clinton rates for $250,000 + (meaning 39%). This lessens incentive for excessive pay, and generates needed revenue. Use this money to address needed infrastructure investment, more basic science research because corporate America spends less and government expenditures have also fallen. Create some temporary stimulus spending to help end high unemployment and drive wages up. Invest in education but for higher education, make them open the books, show where the money is going.
        The EITC can be considered corporate welfare because it subsidizes wages, especially low wages. Worst of all, it penalizes businesses paying fair wages. Moreover, a robust minimum wage is no good if a single parent can’t work full time because the government doesn’t have funding for affordable child care, and/or job training.
        The remainder of my comments address issues that this blog specifically tackles here

        • Larry Signor says:

          Tax rates are a moving target with constant congressional exceptions, but I agree with your basic precept, that corporate taxes should be progressive. As far as your view of the EITC being corporate welfare, I don’t find any conclusive evidence. Here is a chart which may help:

          WASCUR/GDP has fallen precipitously since 1970, while the minimum wage has risen marginally. The EITC could be seen as corporate welfare except that it has an impact that incremental wage adjustments don’t have…it is untaxed labor income. The major impact of the EITC is to enhance sub-poverty income by 30-50 %. This increases demand which is good for corporations, small business and individuals. Hardly a program targeted specifically to help corporations. I can see what you are saying, but correlation…causation, all that. I see more benefits accruing to labor than business, else I would agree with you.

          • smith says:

            To add clarification to my position, though I favor raising corporate rates, the more detailed outline I gave for higher rates for higher income was for personal income. 90% (top for Eisenhower pre 1960) for people earning $2 million, 70% for $1 million (top for pre Reagan, pre 1980). It is a return to a previous era, to reclaim our past, the old New Deal. Corporate rates could rise to effective rates of 40% or 45% vs current 15% (currently with top marginal rates of 35%, too low, and with too many loopholes)
            EITC effectively adds income only up to around $6,000/year (with three children) for incomes as low as $13,500/year (a huge impact for that income level, 50% more money). It tapers off slowly to nothing for incomes above $50,000.
            How is this an effective substitute for people to support themselves with their own income? It’s not. It does nothing to address low wages or inability of single parents to hold a full time job due to lack of affordable (or free?) child care. Instead it provides a disincentive to solve any of the difficult problems of poverty and/or single parenthood. It does allow businesses to continue this system of low wages and part time work without consequences because general revenues are used support underemployed or low paid single parents. Even with EITC, we have record breaking levels of child poverty. Just the fact conservatives endorse it should tell you something.