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Friday, March 23, 2012

Buchanan: What Is Wrong With Incomplete Tax Policy Analysis?

Neil H. Buchanan (George Washington), What Is Wrong With Incomplete Tax Policy Analysis?:

My new Verdict column [Why Do We Simply Accept on Faith That Taxes Are Always Harmful? ] discusses some recent positive changes in the public debate about taxes. I have always been struck by the weakness of the empirical evidence regarding the supposed harms and dangers of taxes, yet even the more liberal big-name economists have always been rather passive on the issue. It is not surprising, I suppose, when Paul Krugman gets on the case; but I was pleased to see that Christina Romer and Uwe Reinhardt are also now beginning to push back against some of the conventional wisdom. They are both reliably center-liberal, of course, but at least we are finally seeing some fight from the mainstream non-conservative economists on taxes.

In part, my column is a continuation of my Verdict column last month, in which I discussed how unsurprising it is that economists are largely incapable of contributing usefully to the public debate. In today's column, I recount an incident from a few years ago, in which a highly prominent tax economist told me bluntly that he simply refused to believe the overwhelming weight of the evidence about the estate tax -- evidence that generally shows no effect of estate taxes on behavior. The economist's response -- essentially, "It does not fit my theory, so the evidence cannot be believed" -- captures the acquired mindset of far too many mainstream economists.

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