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NPR has a recent podcast called "The No-Brainer Economic Platform" which includes changes to the tax codes that have a unanimous approval of economists across t

by avar 10y ago

NPR has a recent podcast called "The No-Brainer Economic Platform" which includes changes to the tax codes that have a unanimous approval of economists across the political spectrum (e.g. abolishing corporate tax), but which they show via focus groups would be impossible to present to the public: http://www.npr.org/sections/money/2016/10/26/499490275/episode-387-the-no-brainer-economic-platform http://www.npr.org/sections/money/2016/10/26/499490275/episo... Their other plans include things like abolishing housing and medical subsidies, which they claim just leads to price inflation in the longer term, but which are obvious political suicides to propose. A text summary of the podcast is available at: http://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate http://www.npr.org/sections/money/2012/07/19/157047211/six-p... They did a follow-up episode where they hired an actor to play a politician advocating these policies, and tried to convince focus groups of voters: http://www.npr.org/sections/money/2016/11/02/500413695/episode-413-our-fake-candidate-meets-the-people http://www.npr.org/sections/money/2016/11/02/500413695/episo... The point of these episodes was not to try to present some absolute truth about economic policies, but rather to demonstrate that while there are certain things experts universally or near-universally agree on, convincing voters of these policies can be a hard sell. E.g. they argue that eliminating mortgage tax deduction would have the counter-intuitive long-term benefit of making houses more affordable. But when you try to explain that to people you've lost most of them once they realize that in the shorter term their existing mortgage would go up.

Findeton 10y ago
No-brainer in the sense that it doesn't work and no one should support abolishing corporate taxes.
- deelowe 10y ago
  Good thing we got an expert to chime in and set those economists straight.
- avar 10y ago
  Ironically this entire podcast series is about how it's impossible for politicians to have an educated conversation with the public about certain policies, due to the prevalence of knee-jerk comments like yours.
77pt77 10y ago
> which includes changes to the tax codes that have a unanimous approval of economists across the political spectrum I seriously doubt the unanimous approval from the far the far left to the far right.
- notahacker 10y ago
  it was unanimous approval of a panel of just five people... Needless to say, you'll find other economists all across the political spectrum that think it's a jaw-droppingly awful policy prescription, rivalled only by the idea of replacing all income taxes with a consumption tax, which was also favoured by the five economists on the panel.
  - grinnbearit 10y ago
    A progressive consumption tax is less distortive (favours productivity over consumption) than a progressive income tax, its just harder to implement.
tomp 10y ago
Can you summarize why economists support abolishing corporate tax? AFAIK, corporate tax is optional anyhow. Any company could organize as unlimited partnership and not pay corporate taxes. But most companies chose not to, and I think that extra tax is a perfectly reasonable way of paying for extra protection (that of a limited company).
- Dove 10y ago
  From the linked transcript: BLUMBERG: But fortunately, as you know, plank three I think is something that people can get around - a massive tax cut. SMITH: OK. BLUMBERG: Are you ready? SMITH: Yeah. BLUMBERG: A tax cut that's an insidious tax. It's felt everywhere in the American economy. It destroys jobs, stops innovation. SMITH: I am all for it. OK. Who gets this tax cut? BLUMBERG: Not who - what. BAKER: If I'm being blue sky here, I would say the corporate tax is totally a waste. FRANK: The corporate income tax makes no sense whatsoever. SMITH: You are killing the voters here. So far we've got raised taxes on the middle class and eliminate taxes on corporations? BLUMBERG: Yeah. And those were the two most liberal members of our panel, Dean Baker and Robert Frank. And here's the reason that they and pretty much all our panelists hate the corporate income tax, which by the way is one of the highest in the world here in the United States at 35 percent. BAKER: It doesn't make sense really to tax the corporation as such. What we want to do is - I'm going to sound like a Mitt Romney here. What we care about is if the corporation is reinvesting the money. What's wrong with that? Why do we want them to prevent - why do we want to prevent the corporation from reinvesting the money? What we might want to prevent is giving the money to wealthy shareholders or them buying a second, a third, fourth home, getting a new Mercedes every six months, whatever it might be. That's where we want to have the taxes. We don't want to prevent Microsoft or General Motors or whoever it might be from investing more in improving their product line. That's a good thing in my view. BLUMBERG: So a lot of people, you know, when they think the corporate tax, they want to keep the corporate tax in place because they want rich people to pay more taxes. SMITH: And rich people own corporations. BLUMBERG: Right. But our panel agreed. If you want to tax rich people - and not all of our panelists agreed, by the way, that you should tax rich people more than others - but if you did, if that's what you wanted to do, just tax rich people - do that. Don't tax the corporation. tldr: Taxing corporations prevents them from reinvesting the money and doing such things as advancing technology and hiring workers. It is a terribly destructive tax, discouraging exactly the sort of activity that drives the economy. It's the people who own the corporation that you're trying to tax, so tax them when they get the money.
rwmj 10y ago
The UK got rid of mortgage interest tax deduction in 2000 without any problem.
- hackerboos 10y ago
  They picked a good time, right as the bubble was beginning[1]. [1] - http://www.economicshelp.org/wp-content/uploads/2014/12/nominal-house-prices-91--600x418.png http://www.economicshelp.org/wp-content/uploads/2014/12/nomi...
- crdoconnor 10y ago
  For sure. Buy to let landlords are definitely enjoying the 500% increase in house prices and skyrocketing rents that came after that. The shift in wealth from people who do things to people who own things has been palpable.
  - kemiller 10y ago
    Why would that be the result? I'd think that removing the deduction would depress prices, for single-family dwellings at least.
crdoconnor 10y ago
>unanimous approval of economists* * economists who were completely blindsided by the largest financial crisis of our time. In the UK there was near unanimous 'expert' support for the idea that Brexit would immediately trigger a level of uncertainty pre-article 50 that would crater the economy and employment. Growth and employment are now ever so slightly up. >experts universally or near-universally agree on, convincing voters of these policies can be a hard sell. Because voters are suspicious about the supposed expertise of elite economists and they have pretty good reason. They've been sold on a lot of policies over the last 30 years that have fucked them.
- dane-pgp 10y ago
  I don't think that growth and employment being "ever so slightly up" gives the full picture here. The value of Stirling hit a 31-year low after the vote, which obviously made the UK an attractive market for overseas buyers (such as Japan's SoftBank buying ARM) but wasn't so good for the people of Britain. This is before Article 50 has even been invoked, and any optimism in the market may reflect the belief that Britain might have second thoughts about leaving. The policies of the "elite" economists have lead to economic growth that Britain as a whole has benefited from. What did hurt people, though, is that in the last 30 years, UK governments haven't shared this growth fairly, nor have they sufficiently invested in public services, policies which the EU had no control over and will only get worse if Britain leaves.
  - crdoconnor 10y ago
    >The value of Stirling hit a 31-year low after the vote, which obviously made the UK an attractive market for overseas buyers ...and so why didn't the experts foresee this if it was so obvious? Why did they predict a cataclysmic decline in employment instead? >wasn't so good for the people of Britain. Depends whether you're concerned more about reviving jobs in depressed industrial areas or the value of your stock portfolio/holidaying in the riviera. Anyway, whether or not you think Brexit was good or not (I think personally probably not), there's no doubt that "project fear" was an apt description of the remain side's "expert" arguments.
Eridrus 10y ago
If we were to abolish corporate taxes, would this make it trivial to avoid paying taxes on any money above what you need for consumption by routing all your pay through a shell company where you keep it until you need it? Seems like it would be essentially the equivalent of removing contribution caps on 401ks. Interested to hear if there is a reason people couldn't do this, or why it doesn't matter.
- rebuilder 10y ago
  Wouldn't this be the same as simply not taking money out of the corporation in the first place? I'd be more concerned about losing tax income from personal consumption complexly disguised as corporate spending.
- josho 10y ago
  The moment the money is spent on something seen as personal benefit then tax is owed. During an audit, if you did something funny like repeatedly pay for dinners between you and your wife claiming it was a business meeting between corp x & y then I suspect the auditor will come down hard on that as an obvious abuse
  - Eridrus 10y ago
    This isn't what I meant. I meant using the corporation as an uncapped 401k which essentially lets you defer tax until years where you have less income, therefore paying less income tax.
  - kemiller 10y ago
    That's not what he's saying. He's saying you can just basically hoard your income there and pay yourself a smaller salary. You could invest tax-free until you take it out.
nathan_f77 10y ago
Thanks, that was very informative! They explained their reasoning very clearly, and it's sad that these policies will never see the light of day. I would be interested to hear their thoughts on a universal healthcare system. It seems like the benefits outweigh the drawbacks in countries such as Canada and New Zealand. But maybe there is an economic reason why it wouldn't work in the US.

by avar 10y ago

Findeton 10y ago

No-brainer in the sense that it doesn't work and no one should support abolishing corporate taxes.

deelowe 10y ago
Good thing we got an expert to chime in and set those economists straight.
avar 10y ago
Ironically this entire podcast series is about how it's impossible for politicians to have an educated conversation with the public about certain policies, due to the prevalence of knee-jerk comments like yours.

77pt77 10y ago

> which includes changes to the tax codes that have a unanimous approval of economists across the political spectrum I seriously doubt the unanimous approval from the far the far left to the far right.

notahacker 10y ago
it was unanimous approval of a panel of just five people... Needless to say, you'll find other economists all across the political spectrum that think it's a jaw-droppingly awful policy prescription, rivalled only by the idea of replacing all income taxes with a consumption tax, which was also favoured by the five economists on the panel.
- grinnbearit 10y ago
  A progressive consumption tax is less distortive (favours productivity over consumption) than a progressive income tax, its just harder to implement.

tomp 10y ago

Can you summarize why economists support abolishing corporate tax? AFAIK, corporate tax is optional anyhow. Any company could organize as unlimited partnership and not pay corporate taxes. But most companies chose not to, and I think that extra tax is a perfectly reasonable way of paying for extra protection (that of a limited company).

Dove 10y ago
From the linked transcript: BLUMBERG: But fortunately, as you know, plank three I think is something that people can get around - a massive tax cut. SMITH: OK. BLUMBERG: Are you ready? SMITH: Yeah. BLUMBERG: A tax cut that's an insidious tax. It's felt everywhere in the American economy. It destroys jobs, stops innovation. SMITH: I am all for it. OK. Who gets this tax cut? BLUMBERG: Not who - what. BAKER: If I'm being blue sky here, I would say the corporate tax is totally a waste. FRANK: The corporate income tax makes no sense whatsoever. SMITH: You are killing the voters here. So far we've got raised taxes on the middle class and eliminate taxes on corporations? BLUMBERG: Yeah. And those were the two most liberal members of our panel, Dean Baker and Robert Frank. And here's the reason that they and pretty much all our panelists hate the corporate income tax, which by the way is one of the highest in the world here in the United States at 35 percent. BAKER: It doesn't make sense really to tax the corporation as such. What we want to do is - I'm going to sound like a Mitt Romney here. What we care about is if the corporation is reinvesting the money. What's wrong with that? Why do we want them to prevent - why do we want to prevent the corporation from reinvesting the money? What we might want to prevent is giving the money to wealthy shareholders or them buying a second, a third, fourth home, getting a new Mercedes every six months, whatever it might be. That's where we want to have the taxes. We don't want to prevent Microsoft or General Motors or whoever it might be from investing more in improving their product line. That's a good thing in my view. BLUMBERG: So a lot of people, you know, when they think the corporate tax, they want to keep the corporate tax in place because they want rich people to pay more taxes. SMITH: And rich people own corporations. BLUMBERG: Right. But our panel agreed. If you want to tax rich people - and not all of our panelists agreed, by the way, that you should tax rich people more than others - but if you did, if that's what you wanted to do, just tax rich people - do that. Don't tax the corporation. tldr: Taxing corporations prevents them from reinvesting the money and doing such things as advancing technology and hiring workers. It is a terribly destructive tax, discouraging exactly the sort of activity that drives the economy. It's the people who own the corporation that you're trying to tax, so tax them when they get the money.

rwmj 10y ago

The UK got rid of mortgage interest tax deduction in 2000 without any problem.

hackerboos 10y ago
They picked a good time, right as the bubble was beginning[1]. [1] - http://www.economicshelp.org/wp-content/uploads/2014/12/nominal-house-prices-91--600x418.png http://www.economicshelp.org/wp-content/uploads/2014/12/nomi...
crdoconnor 10y ago
For sure. Buy to let landlords are definitely enjoying the 500% increase in house prices and skyrocketing rents that came after that. The shift in wealth from people who do things to people who own things has been palpable.
- kemiller 10y ago
  Why would that be the result? I'd think that removing the deduction would depress prices, for single-family dwellings at least.

crdoconnor 10y ago

>unanimous approval of economists* * economists who were completely blindsided by the largest financial crisis of our time. In the UK there was near unanimous 'expert' support for the idea that Brexit would immediately trigger a level of uncertainty pre-article 50 that would crater the economy and employment. Growth and employment are now ever so slightly up. >experts universally or near-universally agree on, convincing voters of these policies can be a hard sell. Because voters are suspicious about the supposed expertise of elite economists and they have pretty good reason. They've been sold on a lot of policies over the last 30 years that have fucked them.

dane-pgp 10y ago
I don't think that growth and employment being "ever so slightly up" gives the full picture here. The value of Stirling hit a 31-year low after the vote, which obviously made the UK an attractive market for overseas buyers (such as Japan's SoftBank buying ARM) but wasn't so good for the people of Britain. This is before Article 50 has even been invoked, and any optimism in the market may reflect the belief that Britain might have second thoughts about leaving. The policies of the "elite" economists have lead to economic growth that Britain as a whole has benefited from. What did hurt people, though, is that in the last 30 years, UK governments haven't shared this growth fairly, nor have they sufficiently invested in public services, policies which the EU had no control over and will only get worse if Britain leaves.
- crdoconnor 10y ago
  >The value of Stirling hit a 31-year low after the vote, which obviously made the UK an attractive market for overseas buyers ...and so why didn't the experts foresee this if it was so obvious? Why did they predict a cataclysmic decline in employment instead? >wasn't so good for the people of Britain. Depends whether you're concerned more about reviving jobs in depressed industrial areas or the value of your stock portfolio/holidaying in the riviera. Anyway, whether or not you think Brexit was good or not (I think personally probably not), there's no doubt that "project fear" was an apt description of the remain side's "expert" arguments.

Eridrus 10y ago

If we were to abolish corporate taxes, would this make it trivial to avoid paying taxes on any money above what you need for consumption by routing all your pay through a shell company where you keep it until you need it? Seems like it would be essentially the equivalent of removing contribution caps on 401ks. Interested to hear if there is a reason people couldn't do this, or why it doesn't matter.

rebuilder 10y ago
Wouldn't this be the same as simply not taking money out of the corporation in the first place? I'd be more concerned about losing tax income from personal consumption complexly disguised as corporate spending.
josho 10y ago
The moment the money is spent on something seen as personal benefit then tax is owed. During an audit, if you did something funny like repeatedly pay for dinners between you and your wife claiming it was a business meeting between corp x & y then I suspect the auditor will come down hard on that as an obvious abuse
- Eridrus 10y ago
  This isn't what I meant. I meant using the corporation as an uncapped 401k which essentially lets you defer tax until years where you have less income, therefore paying less income tax.
- kemiller 10y ago
  That's not what he's saying. He's saying you can just basically hoard your income there and pay yourself a smaller salary. You could invest tax-free until you take it out.

nathan_f77 10y ago

Thanks, that was very informative! They explained their reasoning very clearly, and it's sad that these policies will never see the light of day. I would be interested to hear their thoughts on a universal healthcare system. It seems like the benefits outweigh the drawbacks in countries such as Canada and New Zealand. But maybe there is an economic reason why it wouldn't work in the US.