Monday, November 26, 2012
Martin A. Sullivan (Tax Analysts),
Deduction Caps Can Raise Marginal Rates, Cut Economic Growth, 137 Tax Notes 939 (Nov. 26, 2012):
Long-run job creation through tax cutting is a
two-step process. The first step is to lower marginal
tax rates. Then those lower marginal rates increase
taxpayers’ willingness to invest and seek employment.
Most of the unending argument about the
effect of taxes on job creation centers on step two —
that is, the responsiveness of saving and labor
supply to changes in marginal tax rates.
Despite all the effort, there is still enough uncertainty
about the empirical research that both proand
antitax partisans can cite plausible estimates to
support their views. This article sidesteps the
highly politicized component of the debate about
the economic effects of taxes and instead focuses on
step one, the oft-neglected arithmetic of the effects
of tax reform on marginal rates.
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