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Wednesday, November 17, 2010

"This Wasn’t the Plan We’ve Been Looking For"

The distributional properties of Bowles-Simpson are unattractive:

Yep, It’s Regressive, by Paul Krugman: Jon Chait takes another look at Bowles-Simpson, this time with numbers from the Tax Policy Center, and is disillusioned. As I surmised, it redistributes income upward: the bottom 80 percent of families would pay higher taxes than they did in the Clinton years, while the top 20 percent — and especially the top 5 percent — would pay less; not what you’d call shared sacrifice.
The only twist here is that the ultra-rich, the top 0.1 percent, who get a lot of their income from dividends and capital gains, would be hit by having these gains taxed as ordinary income. Even so, they would face a smaller tax increase than the bottom 60 percent.
This wasn’t the plan we’ve been looking for; on taxes, what on earth were they thinking?

One third of of the deficit reduction under Bowles-Simpson is from revenue increases, and two thirds is from spending cuts. The above is about tax cuts, but the spending cuts will, in the end, likely hit lower income households harder and end up being regressive as well.

    Posted by on Wednesday, November 17, 2010 at 02:52 PM in Economics, Income Distribution, Taxes | Permalink  Comments (13)


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