On the Distributional Effects of Base-Broadening Income Tax Reform

A study by the Tax Policy Center on the Romney tax reform proposals

Summary

On the Distributional Effects of Base-Broadening Income Tax Reform

This paper examines the tradeoffs among three competing goals that are inherent in a revenue-neutral income tax reform—maintaining tax revenues, ensuring a progressive tax system, and lowering marginal tax rates—drawing on the example of the tax policies advanced in presidential candidate Mitt Romney’s tax plan. Our major conclusion is that any revenue-neutral individual income tax change that incorporates the features Governor Romney has proposed would provide large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers.

Click to expand...

Link to PDF of the paper

authors:
Adam Looney is the policy director of The Hamilton Project and senior fellow in Economic Studies at the Brookings Institution.
William G Gale is the Arjay and Frances Miller Chair in Federal Economic Policy at Brookings, previously he was a professor of Economics at UCLA, and a senior staff economist for the Council of Economic Advisers under President George H.W. Bush
Samuel Brown, Research Associate, Brookings Institution. previously worked at the Federal Reserve Board, where he analyzed federal receipts, federal outlays, and state budgetary conditions.

The internals of the report indicate that they assume that tax rates would return to pre-2001 levels, prior to examining any base-broadening proposals.

Since the Bush tax cuts of 2001 and 2003 contributed to the shrinking of the tax base through credits, any assumption of their elimination would immediately broaden the tax base.

It is worth noting that the Clinton era tax rates had more participation and better results. Bush took something that worked and "fixed" it.

If I am elected, we will return to those rates immediately. Everyone should pay some taxes, we have entirely too many "free lunchers" in our system. It looks like being poor gets you a nice break and being rich gets you a nice break and nobody seems to give a rat's ass about the center.

Our economic problems are not because of out taxes. The situation we have now is that we are undergoing a massive shift and America is asleep on its feet, in denial, as usual.

I was not around when the industrial revolution arrived but I bet there was a huge societal shift. Horses slowly went out and steam engines slowly replaced them (maybe thats why they call it horse-power). Then, we had another major shift as agriculture consolidated and somewhat automated and manufacturing became the key to our economic structure. Again, I think it must have been a difficult and disturbing time.

Now, we are in the midst of two enormous shifts. I'll call them Globalization and Robotics. Our Corporations are adapting but our population is not adapting as quickly. Manufacturing as we know it, lines of humans making repetitive actions, is going away. Computerized robots do the job more accurately and thy are tireless. What little human labor is needed can be bought anywhere in the world, usually for much less than American minimum wages. And just wait - look up 3D printing and you'll really see some scary stuff.

OK, I'm way off topic, I'm sorry. My point is that we certainly need a more responsible tax system and I think the Clinton era system is pretty good. We're going to have an increasing Welfare pool and we'll need more cash to pay for it unless we decide to just let them die on the streets, an unlikely scenario/ The rest of us will have to pay more.