Paul L. Caron

Monday, March 14, 2016

Stiglitz:  Rewriting The Tax Code For A Stronger, More Equitable Economy

Roosevelt LogoJoseph Stiglitz (Columbia), Reforming Taxation to Promote Growth and Equity:

This white paper by Roosevelt Chief Economist Joseph Stiglitz outlines concrete policy measures that can restore equitable and sustainable economic growth in the United States, in the context of the country’s recurring budgetary crises. Effective policies are within our grasp because these budgetary crises are the result of political and not economic failings.

Tax reform in particular offers a path toward both resolving budgetary impasses and making the kinds of public investments that will strengthen the fundamentals of the economy. The most obvious reform is an increase in the top marginal income tax rates—this would both raise needed revenues and soften America’s extreme and harmful inequality. But there are also a variety of other effective possible reforms related to corporate taxation, the estate and inheritance tax, environmental taxes, and ensuring that the government gets full value when it sells public assets. This white paper describes the gravity of the economic situation in the United States, but also shows that there is a way out.

Eric Harris Bernstein (Roosevelt Institute) & Joseph Stiglitz (Columbia), Rewriting the Tax Code for a Stronger, More Equitable Economy:

Over the last 40 years, corporate influence and trickle-down ideology have pervaded the tax code, resulting in large tax breaks for corporations and the wealthy. These low rates have failed to deliver the widespread growth that was promised, and the results for the typical American have been disastrous: Wealth at the top skyrocketed with no equivalent boom in growth. At the same time, median wages have remained largely stagnant, and the United States now ranks 10th out of 13 OECD countries in upward mobility. To correct our current trajectory, America needs a wholesale reconsideration of tax incentives and their impact on various economic activities.

In this brief based on previously published work by Roosevelt Institute Chief Economist Joseph E. Stiglitz, we propose a new paradigm for thinking about the tax system: Rather than rewarding bad behavior and using the tax and transfer system to redress poor outcomes after the fact, the tax code should be structured to encourage productive economic activities and a more equitable pre-tax distribution. The tax code can be used to adjust incentives and curb shortsighted, risky, and otherwise undesirable economic behavior. Loopholes should be closed, high taxes should be levied on harmful activities, and tax cuts and subsidies should be focused on productive investment that promotes inclusive growth and general well-being.

Our proposal aims to bring about inclusive growth through tax reform built around progressivity and positive incentives.

Eric Harris Bernstein (Roosevelt Institute), The Party’s Over for Trickle-Down: It’s Time for Smarter Tax Policy

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