Abstract
The chapter examines the case for cuts in corporate income taxes and for personal income taxes separately. The main argument for lowering corporate tax rates is they are well above the average of other advanced economies, which creates incentives for US businesses to shift production abroad. This is one area where the goals of the Trump administration overlap with the Obama administration, but where the approach to resolve the issue is very different. By comparison, the case for steep cuts in personal income tax rate is less compelling, as tax rates in the United States are in line with other countries, and the economy is close to full employment.
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Notes
- 1.
Marilyn Geewax , “JFK’s Lasting Economic Legacy: Lower Tax Rates,” NPR special series, November 14, 2013.
- 2.
Robert Schlesinger , “The Myth of JFK as Supply Side Tax Cutter,” US News and World Report, January 26, 2011.
- 3.
Jeanne Sahadi , “Taxes: What people forgot about Reagan,” CNN Money, September 12, 2010.
- 4.
Andrew Chamberlain , “Twenty Years Later: The Tax Reform Act of 1986,” Tax Foundation, October 22, 2006.
- 5.
William G. Gale and Andrew A. Samwick , “Effects of Income Tax Changes on Economic Growth,” Brookings Institution and Tax Policy Center, February 2016.
- 6.
Ibid.
- 7.
Eric Toder and Alan D. Viard , “A Proposal to Reform the Taxation of Corporate Income,” Tax Policy Center, Urban Institute and Brookings Institution, June 2016.
- 8.
See Martin H. Barnes, “U.S. Fiscal Policy: Facts, Fallacies and Fantasies,” BCA Research, April 5, 2017.
- 9.
Toder and Viard, op. cit., p. 9.
- 10.
The paper also notes that the current system penalizes corporations that pay dividends because shareholders are taxed on dividends, relative to corporations that reinvest corporate earnings.
- 11.
The name refers to the six leaders involved in drafting the proposal: Paul Ryan , Mitch McConnell , Orrin Hatch and Kevin Brady representing Congressional Republicans, and Steve Mnuchin and Gary Cohn representing the White House.
- 12.
Drew Desilver , “High-income Americans pay most income taxes, but enough to be fair/,” Pew Research Center, April 13, 2016.
- 13.
Ibid.
- 14.
Larry Bartels , Unequal Democracy: The Political Economy of the New Gilded Age, Princeton University, 2008.
- 15.
See “G.O.P.’s Next Step: Cutting the Safety Net for Millions,” The New York Times, December 3, 2017.
- 16.
See Goldman Sachs Portfolio Research Strategy, “2018 US Equity Outlook: Rational Exuberance,” November 21, 2017.
- 17.
See Martin Feldstein, “Corporate Tax Reform Is the Key to Growth,” Wall Street Journal, November 5, 2017, and Kevin Hassett, “Remarks Before the Tax Policy Center-Tax Foundation,” October 5, 2017 and “White House economic analysis of GOP tax reform plan—CNBC.com,” October 16, 2017.
- 18.
See Lawrence H. Summers, “The Trump administration’s tax plan is an atrocity,” Washington Post, October 8, 2017 and Paul Krugman, “The Biggest Tax Scam in History,” The New York Times, November 27, 2017.
- 19.
See Project Syndicate, Robert J. Barro, “How US Corporate-Tax Reform Will Boost Growth,” December 13, 2017, and Jason Furman and Lawrence H. Summers, “Robert Barro’s Tax Reform Advocacy: A Response,” December 15, 2017.
- 20.
See Mickey Levy, “Tax Reform Legislation Observations,” December 21, 2017.
- 21.
Ibid.
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Sargen, N.P. (2018). Tax Policy: Tax Cuts Versus Tax Reform. In: Investing in the Trump Era. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-76045-2_5
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DOI: https://doi.org/10.1007/978-3-319-76045-2_5
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