Tag Archives: tax reform

Recap: What History Says about the New Tax Bill

Share Button

December 13, 2017 — Evidently House and Senate Republicans today agreed on a tax bill.  It is really awful.  If you want to understand why economists are confident that the tax cuts will not pay for themselves and why Republicans are disingenuous to claim otherwise, I recommend what Jason Furman and Larry Summers have been writing, e.g., in this column in the Washington Post.

The angle I have focused on over the last two weeks is the light shed on the tax plan by the historical precedents of several decades.  Here is a Table of Contents, with links for potential watching, listening or reading.

  • Podcast:Measuring the GOP’s Tax Plan,” Project Syndicate, Dec.12.
    The current tax bill strikes out by all five criteria: 1) Fiscal responsibility (it’s budget-busting); 2) Income distribution (the benefits go to the rich); 3) Process (rushed and partisan); 4) Economic efficiency (it widens more corporate tax loopholes than it cuts); and 5) Timing (both cyclically and otherwise).
  • Video (60 seconds):When is the Right Time to Cut Taxes?”  HKS, Dec. 3.
    This is probably the worst-timed major tax cut in history. At least the tax cuts of 1981 and 2001 came in a year when some fiscal stimulus was appropriate.
  • Written: To Understand the Tax Reform Bill, Use Good Old Math and History,” The Hill, Dec.10. 2017. Continue reading
Share Button

Slipping Out of the Political Handcuffs on Energy Taxes

Share Button

I was recently asked by the National Journal to comment on what I thought was a desirable path for tax reform, if one could wish away political constraints that normally handcuff politicians.   My answer was, of course, to tax energy, particularly carbon emissions, and use the revenue to reduce other taxes.  As I and many others have noted often in the past, taxes on oil or gasoline hit many birds with one stone.

Discussion of energy taxes has always been political suicide. But here are several twists that could potentially increase the ability of the electorate to swallow them politically:

1) The energy taxes would not go into effect until the economy fully recovers from the current recession, thereby avoiding an abortion of the recovery. But the plan would be announced in the near future (thereby sending desirable allocational signals to firms building power plants or pursuing renewable energy research).

2) Such measures could be on stand-by, to be enacted in the event of a major unfortunate geopolitical setback in the Middle East or a tragic terrorist event, which would galvanize public opinion to do something sensible for the first time about the extent of US dependence on oil imports.

3) A tax on, e.g, gasoline could be designed to put a floor under the current price. The status quo always generates less political resistance than a tax that raises the price.

4) The revenue from the first penny per gallon could be earmarked to fund the deficit in social security benefits of those retiring in 2027, for example. They were born in 1962, and know who they are. The revenue from the second penny could be used to finance the benefits of those retiring in 2028, and so on. (Numbers are illustrative. I haven’t done the actual calculations.) The result would be to create a constituency for keeping the tax in place, namely those whose retirement benefits are funded with the proceeds.

Share Button

US Tax Policy Will Be in Intensive Care This Year

Share Button

I am sometimes asked, “Okay, we know that most of the economy is in the tank.   But what are one or two sectors where you see potential for growth in 2009?”   The conventional response would be “green technologies.”   But another sector occurs to me:   Intensive Care Units. Continue reading

Share Button