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Sunday, December 16, 2012

Summers: How to Fix Our Costly and Unjust Tax System

Larry Summers:

How to fix costly and unjust US tax system, by Lawrence Summers, Commentary, Financial Times: Sooner or later the American tax code will be reformed. ...
So far, the debate has focused on scaling back provisions of the tax code that have favored activities traditionally deemed to be valuable..., reducing reliefs for charitable contributions, taxes paid to state and local governments, home mortgages, employer-provided health insurance and many less important provisions. There are reasonable arguments ... in each case. But taking only the “limit tax incentives” approach to tax reform has several major defects. [lists] ...
What is needed is an additional element, one that has largely been absent to date: the numerous exclusions from the definition of adjusted gross income... There are far too many provisions that favor a small minority of very fortunate taxpayers. ... it should not be possible to accumulate and transfer large fortunes while avoiding taxation almost entirely. Yet this is all too possible today. ... [lists several ways] ...
I believe it is plausible to raise $1tn over the next 10 years by going after provisions that cause what adds to wealth and spending not to be regarded as income.
It has been observed that the greatest scandals are not the illegal things that people do but the things that are fully legal. This is surely true with respect to a tax code in urgent need of reform.

[If you can't get to the article, it usually appears on the Washington Post's editorial page later in the day, though sometimes the editing is slightly different. Update: It's here.]

    Posted by on Sunday, December 16, 2012 at 12:36 PM in Budget Deficit, Economics, Equity, Taxes | Permalink  Comments (30)

          


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