Tag: Tax Policy

Must-Read: Yael T. Abouhalkah: Paging Gov. Sam Brownback’s Sycophants

Posted on by Brad DeLong

Must-Read: I must say: this amazes me. The old argument was that large Kansas-Missouri differences in AFDC payments back before 1995 did not lead single mothers to move across State Line Road into Kansas, so why should we expect even sharp state tax differentials to pull people across? The answer to that is: It was very, very clear that African-Americans in Kansas City were suppose to stay east of Troost. And non-African American AFDC recipients were much more geographically dispersed, hence it was not a short move.

Thus I thought business would be different.

I really did think that Brownback’s tax cuts would pull enough income across State Line Road to allow him to declare him non-defeat, and indeed to avoid utter defeat, when the rubber of his ideology met the road of reality and he had to make a Kansas state budget. Yet it is not so:

Yael T. Abouhalkah: Paging Gov. Sam Brownback’s Sycophants: “Kansas tax cuts still aren’t killing Missouri jobs in KC area…

…Jobs continue to grow more quickly on the Missouri side of the state line than on the Kansas side of the Kansas City metropolitan area. The Bureau of Labor Statistics reported that the Missouri portion of the region gained 2 percent in employment from September 2014 to September 2015. Meanwhile, the Kansas portion gained .9 percent…. This new report continues a recent trend in year-over-year superiority for the Missouri side…. This is not supposed to be happening, at least according to Brownback and his followers. He has stated that the income tax cuts he put in place in 2013 would generate more jobs especially in the Kansas City area, because it’s supposedly so easy just to hop the state line to reap tax benefits. Yet, month after month, that’s not happening…

Must-Read: Henry Aaron: Can Taxing the Rich Reduce Inequality? You Bet It Can!

Posted on by Brad DeLong

Must-Read: Henry Aaron: Can Taxing the Rich Reduce Inequality? You Bet It Can!: “Two recently posted papers by Brookings colleagues purport to show that…

…‘even a large increase in the top marginal rate would barely reduce inequality.’  This conclusion, based on one commonly used measure of inequality, is an incomplete and misleading answer to the question posed: would a stand-alone increase in the top income tax bracket materially reduce inequality?  More importantly, it is the wrong question to pose, as a stand-alone increase in the top bracket rate would be bad tax policy that would exacerbate tax avoidance incentives.  Sensible tax policy would package that change with at least one other tax modification, and such a package would have an even more striking effect on income inequality.  In brief:

  • A stand-alone increase in the top tax bracket would be bad tax policy, but it would meaningfully increase the degree to which the tax system reduces economic inequality.  It would have this effect even though it would fall on just ½ of 1 percent of all taxpayers and barely half of their income.
  • Tax policy significantly reduces inequality.  But transfer payments and other spending reduce it far more.  In combination, taxes and public spending materially offset the inequality generated by market income.
  • The revenue from a well-crafted increase in taxes on upper-income Americans, dedicated to a prudent expansions of public spending, would go far to counter the powerful forces that have made income inequality more extreme in the United States than in any other major developed economy.”

Morning Must-Read: James Kwak: Tax Policy Revisionism

Posted on by Brad DeLong

James Kwak: Tax Policy Revisionism: “In an otherwise unobjectionable article…

…the generally excellent David Leonhardt wrote… In the 1950s, the top rate exceeded 90 percent. Today, it is 39.6 percent, and only because President Obama finally won a yearslong battle with Republicans in early 2013 to increase it from 35 percent.”… The 39.6 percent tax rate… was lowered to 35 percent by the 2001 Bush tax cut, which had a sunset provision at the end of 2010…. The 35 percent rate was then extended for two years by the December 2010 tax cut, which was supported by President Obama…. It finally expired on January 1, 2013, at which point the 39.6 percent rate reappeared in its original form. A few hours later, Congress passed a new tax cut for just about everyone, except households with income over $450,000, who were left with the 39.6 percent rate…. President Obama didn’t fight a battle with Republicans. He fought a battle with himself. In 2010 and 2012 he could have restored the top tax rate to 39.6 percent simply by doing nothing and letting the Bush tax cuts expire. The January 2013 tax bill also locked in big tax preferences for capital gains and dividends…. President Obama talks a good game when it comes to inequality, but he hasn’t backed it up…. [In] tax policy, his main impact has been to make permanent most of the inequality-increasing tax cuts that were his predecessor’s most treasured legacy.