« FRBSF Economic Letter: Uncertainty, Unemployment, and Inflation | Main | Who Receives 'the Disproportionate Share of Government Spending'? »

Tuesday, September 18, 2012

'How to Cut the US Deficit'

I really do need to get to jury duty, but one more quick one. Curious to hear what you think about this idea:

How to cut the US deficit by fixing taxes, by Laura Tyson, Commentary, Financial Times: One of the few issues on which Barack Obama and Mitt Romney agree is the need for tax reform. ... But tax reform should not come at the expense of progressivity. Income inequality is greater in the US than in the other developed countries of the OECD. ...
Proponents of greater progressivity often call for an increase in corporate taxes but this would lead to slower growth and fewer jobs. The US ... effective marginal corporate tax rate is one of the highest in the world. ... Of all taxes, corporate income taxes do the most harm to economic growth.
Both Mr Obama and Mr Romney advocate corporate tax reform that lowers the rate and broadens the base. The economic benefits could be significant. ...
A lower rate would stimulate investment, narrow the tax preference for debt over equity financing and weaken the incentives for international companies to move production to lower-tax locations. But lowering the corporate tax rate is expensive – each percentage point reduction would cut revenues by about $120bn over 10 years. ...
A more efficient and progressive way to pay for a lower corporate tax rate would be to increase taxes on dividends and capital gains. This would shift more of the burden towards capital owners and away from labor, which bears the burden in the form of fewer jobs and lower wages. ...
The US economy needs efficient and progressive tax reform and it needs more revenues for deficit reduction. Revenue increases have been a significant component of all major deficit-reduction packages enacted over the past 30 years. ...

    Posted by on Tuesday, September 18, 2012 at 08:01 AM in Budget Deficit, Economics, Income Distribution, Taxes | Permalink  Comments (137)

          


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.