Thursday, January 22, 2015
New York Times op-ed: Obama’s Bad Economic Ideas, by Glenn Hubbard (Dean, Columbia Business School):
[T]he president’s proposals do invite a case for a comprehensive tax and entitlement reform, one based not on redistribution but on growth, work and opportunity.
Our unwillingness to confront mounting inefficiencies in the nation’s tax code and growing obligations in entitlement programs has led to increasingly limited options. Corporate tax reform is held hostage to the misguided idea that tax cuts and tax increases must be balanced within the corporate sector alone, and to the faulty assumption that beneficial tax reform will not raise economic activity.
Piling up child tax credits and subsidies for health care over narrow household income ranges, as the president proposes, leads to high rates of taxation on earnings from work as assistance is phased out. Likewise, raising marginal tax rates on investment by the well-to-do reduces asset prices and is a threat to continued economic expansion.
So how can we enhance growth, work and opportunity? Four steps can help get us there.
The first is to move to a simple business tax system, with a lower marginal tax rate and no special industry preferences. ... The second step is to use the individual income tax to better reward work. ... The third step focuses on education and training. ... The fourth step is to strengthen retirement security, while acknowledging the need for fiscal consolidation in entitlement spending. ... These four steps offer a road map for growth, work and opportunity without sacrificing income security.