| Brill and Viard study SupportiveArgument1 #231212 The TPC cites a study by Alan Viard and Alex Brill indicating that lowering tax rates while broadening the base generally does not reduce work disincentives because it leaves effective tax rates unchanged. Elsewhere Brill has defended the Romney plan. |
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+Citations (1)
- CitationsAdd new citationList by: CiterankMapLink[1] On the Distributional Effects of Base-Broadening Income Tax Reform
Author: Samuel Brown, William Gale, Adam Looney - Tax Policy Center researchers
Publication info: 1 August 2012
Cited by: Peter Baldwin 2:41 AM 18 October 2012 GMT
Citerank: (9) 230959Growth effect smallIn replying to this criticism the TPC cites research by the CBO and the Treasury department indicating the growth effect of Romney's proposals is likely to be small because the base-broadening measures will provide opposing incentives to the rate cuts -and would be small even without broadening.1198CE71, 230964Conclusion is robustWhile maintaining the claimed growth increment from the Romney plan is likely to be slight, the TPC analysis does consider whether growth predicted by Mankiw (a Romney backer) and Weinzeri would rescue the plan. They conclude it makes little difference.1198CE71, 231214CBO and JCT studiesIn addition to the Brill and Viard study the TPC paper refers to additional studies from the Congressional Budget Office and Joint Committee on Taxation that it claims show that tax cuts even without base broadening would have a small effect.1198CE71, 231725The TPC defendsThe TPC has three lines of defense of its assumption on the growth effect of tax reform - firstly, they point to difficulties in estimating such effects; secondly they cite studies showing such effect will be small; thirdly they claim their analysis is robust even if some such growth is assumed.13EF597B, 232180Modelling difficultiesIn responding to the growth criticism the TPC remarks that to do this properly, all manner of other things would need to be included in the analysis - not just the impact of tax reform in isolation.1198CE71, 232648No - it does not computeThe Tax Policy Center argues in its analysis that the various elements of the Romney plan cannot all be achieved. The TPC paper has been invoked and/or defended by almost all of the critics of the Romney plan in the debate.959C6EF, 232649The TPC caseThe essence of the Tax Policy Center's argument is contained in the excerpt from their paper cited below. We have parsed the argument into a set of premises that must be true for the argument to hold and mapped the debate about each.1198CE71, 232650Available savings claimThe TPC set out a number of assumptions concerning the amount that could be raised by eliminating tax expenditures that benefit high income earners in the individual tax system (the analysis does not include corporate tax). These are enumerated in the cited section.22FF97FF, 232652Growth effect claimIn estimating the revenue effect of the Romney tax reform, the TPC authors needed to make some assumptions about how tax reform affects economic growth. They argue that Romney tax reform would have little effect on GDP growth - but that their conclusions are robust even if some growth eventuates.22FF97FF URL:
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| Excerpt / Summary In the context of revenue-neutral tax reform, any positive growth effects are likely to be small. While the lower tax rates under the reform would strengthen incentives for employment and savings, the base broadeners would increase the portion of income that is subject to tax and have incentive effects in the opposite direction. As Brill and Viard note “lowering statutory tax rates while broadening the income tax base generally does not reduce work disincentives because it leaves the relevant effective tax rates unchanged” (Brill and Viard 2011). Moreover, analysis by the CBO and JCT suggest that the revenue effects arising even from rate cuts that were not accompanied by base broadening would be small (CBO 2003, 2005; JCT 2005). |