TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, March 6, 2013

Thuronyi Presents Supplemental Expenditure Tax Today at NYU

VictorVictor Thuronyi (International Monetary Fund) presents Supplemental Expenditure Tax at NYU today as part of its Pathways to Tax Reform Series:

The U.S. urgently needs tax reform and substantial deficit reduction. The Supplemental Expenditure Tax (SET) can be an important building block of a tax reform package that reduces the deficit. The SET should have appeal to Democrats because it is a fair tax on upper-income individuals. It should appeal to Republicans because it is business- and investment-friendly. It should be attractive to anyone interested in a simpler and less distortionary tax system which will act as less of a drag on the economy and hence facilitate sustained economic recovery. Sure, there will be aspects of the SET that some people will not like, as there are with any tax. But in an environment where some tough choices need to be made, the downsides of the SET are far outweighed by the advantages. Because the SET is an additional tax, it will involve additional complexity and compliance burden. This is one of the major downsides of the SET. On the other hand, the SET will enable the AMT to be eliminated and will facilitate simplifications to the income tax. On balance, a package should be able to be designed that is substantially simpler than current law. 


  • David Miller (Partner, Cadwalader, Wickersham & Taft, New York)
  • Daniel Shaviro (Wayne Perry Professor of Taxation, NYU)

Update:  Dan Shaviro blogs the workshop here.

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I read the original paper at

It's the longest laundry list I have ever seen of ways to sock the affluent with large increases in their tax liability. I'm getting weary of reading one proposal after another about how the government can raise revenue by "closing loopholes".

First of all, these tax breaks are not accidental. They are not abuse of a poorly designed provision of the tax code. They are tax breaks intentionally placed in the tax code by Congress. How can a tax break being used as intended be a loophole? The term is tendentious.

Second, and much more importantly, the government cannot suck revenue out of taxpayers without harming the economy. Tax increases by any name are anti-stimulus. Academic authors write as if there will be negligible economic damage from huge increases in tax liability if only the tax changes are properly structured. That's nonsense. When you draw blood from a donor the aftereffects are the same regardless of where you placed the needle. Draw too much blood and the donor will faint or even die. Re-injecting the portion of the blood that you didn't spill or drink does not change the basic math.

Affluent voters are becoming alarmed at being treated as cash cows to be milked without consequence. Unless large and prominent reductions are made in government transfers, a few more years of tax increases on the not-really-rich will yield a tax revolt of the sort that brought Proposition 13 to California.

Posted by: AMTbuff | Mar 6, 2013 6:30:20 PM