Tuesday, August 13, 2013
Neil H. Buchanan (George Washington), What Legal Scholars Need to Know About Economic Research on Taxation: The Evidence Thoroughly Debunks the Conventional Wisdom (Jotwell), reviewing Peter Diamond (MIT, Department of Economics) & Emmanuel Saez (UC-Berkeley, Department of Economics), The Case for a Progressive Tax: From Basic Research to Policy Recommendations (workshop here), 25 J. Econ. Perspectives 165 (Fall 2011):
Too often, policy research relies more on the misleadingly elegant results of economic theory than on actual evidence. Tax policy discussions, as I will describe below, are especially prone to being infected by this evidence-free approach to analysis. Fortunately, two of the best public finance economists in the world, Peter Diamond and Emmanuel Saez, have recently provided a much-needed antidote. ... [T]hey summarized the best available research and, based on that evidence, made three specific recommendations:
- “Very high earnings should be subject to rising marginal rates and higher rates than current U.S. policy for top earners,"
- “Tax (and transfer) policy toward low earners should include subsidization of earnings and should phase out the subsidization at a relatively high rate,” and
- “Capital income should be taxed.” ...
Diamond and Saez do not merely say that the evidence is lacking to support the conventional superstitions about taxes, but that the evidence supports the opposite conclusions: that marginal tax rates on high incomes should be increased, that lower incomes should be subsidized, and that capital income should be taxed.
Diamond and Saez are not writing on a blank slate. They are debunking received wisdom, exposing shibboleths that legal scholars need to un-learn if scholarship in taxation is to move forward, fulfilling its promise to guide policymakers toward wise decisions. For legal scholars with interests in tax policy, this is the essential article to read.
- Neil H. Buchanan (George Washington), The Affirmative Case for Significant Income and Wealth Redistribution