TAXING THE RICH
How much and how the rich should be taxed often plays a critical role in tax policy debates. It comes up with regard to incremental tax proposals, which are always scrutinized for how
much benefit goes to high-income individuals. It also figures
prominently in the debate about fundamental tax reform --
whether to abandon the income tax in favor of a value-added tax,
retail sales tax, or flat tax; while it is generally agreed upon
that any of these alternatives would reduce the tax burden on
the rich, there is much less agreement about whether the
economic benefits would be significant, and on how critical the
reduction of tax progressivity is to the economic benefits these
reforms promise. In his introductory chapter of
Does Atlas Shrug: The Economic
Consequences of Taxing the Rich, OTPR Director Joel
Slemrod discusses the issue of income tax rates on affluent
households.
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While policy
makers struggle with identifying and enacting the appropriate
short-term policy response to the recent financial crisis and
economic downturn, both academics and policy makers are
examining the causes of the crisis and what lessons this might
bring to bear on longer-term policy. With near unanimity
attention to both the causes and appropriate long-term policy
response has focused on the financial sector, although fiscal
policy, including tax policy, has certainly figured prominently
in countries’ short-term policy response to the economic
contraction. In recent months, though, officials from two
international organizations, the IMF and the OECD, have produced
reports addressing what aspects of the tax system may have
helped cause or exacerbate the crisis, and whether tax policy
needs to be re-evaluated in light of the recent events. In this
article OTPR Director Joel Slemrod offers some speculations
about the lessons for tax policy, and the analysis of tax
policy, from the Great Recession. What did we get wrong? What
did we underestimate the importance of? What do we need to
think more about?
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TAX REFORM FOR GROWN-UPS
On March 24 the
Obama administration announced the formation of a high-level
task force to review the U.S. tax system and make policy
recommendations by December 4, 2009. Former Federal
Reserve Chairman Paul Volcker will head the panel, and senior
economic adviser Austan Goolsbee will serve as staff director.
Is it déjà vu all
over again? Just four years ago President Bush formed a tax
review panel, The President's Advisory Panel on Federal Tax
Reform, whose report was delivered on November 1, 2005. To
see what that panel recommended, what became of their
recommendations, and what lessons the episode provides for
Obama's task force, read the article by OTPR Director Joel
Slemrod and Katherine Blauvelt, "Tax Reform
for Grown-Ups" that was published in the March 2006
issue of the Milken Institute Review.
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