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Feldstein revision SupportiveArgument1 #232794 A reply from Martin Feldstein

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Visualizing the Romney Tax Debate »Visualizing the Romney Tax DebateVisualizing the Romney Tax Debate☜Tax reform has emerged as a major bone of contention in the 2012 Presidential election campaign. While President Obama has identified some tax changes, Governor Romney proposes major systemic reform. But is his plan - especially the proposals for individual taxation - viable?☜F1CEB7

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Romney's plan stated »Romney's plan statedRomney's plan stated☜For individual taxation, Romney proposes rate cuts for all taxpayers to be funded by reducing or eliminating various tax preferences. His plan aims to do this without raising the tax burden on low and middle income taxpayers, defined as $200,000 or less. It also abolishes several other taxes.☜59C6EF

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But does it compute? »But does it compute?But does it compute?☜In early August the Tax Policy Center produced an analysis showing that achieving all the goals of the Romney plan is mathematically impossible. Romney cited six studies in reply. Economists, journalists, bloggers and others then joined in on both sides. So is the plan mathematically possible?☜FFB597

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Yes - it does compute »Yes - it does computeYes - it does compute☜In the Presidential debates Obama referred to the TPC finding that Romneys individual tax plan did not add up. Romney responded by citing six studies that, he claims, refute the TPC. As discussed in the parent But does it compute? node, we have decided to make the No case the main locus.☜59C6EF

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The cited studies »The cited studiesThe cited studies☜Each study cited by the Romney camp is added here, with each identified simply by author surname and item type (article, paper, simulation etc). No attempt is made here to parse their argumentation - that is done in the map of the No case - to relevant locations in which each item is linked.☜98CE71

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Feldstein revisionFeldstein revision☜A reply from Martin Feldstein☜98CE71

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Figure is arbitrary »Figure is arbitraryFigure is arbitrary☜Some have suggested the benchmark definition of high income set by the TPC (and in the general political debate) is too high and have called for analysis where it is set at lower levels. For example Martin Feldstein has defended a $100,000 since this only subjects the top 21% to base broadening.☜FFFACD

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Elasticity too high »Elasticity too highElasticity too high☜In his original paper Feldstein assumes that raising the after-tax share of earnings an individual keeps by 10% increases taxable income by 5% - the elasticity of the tax base is 0.5 - reducing the cost of rate reduction by $33 billion. Critics claim this elasticity is too high.☜FFFACD

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Revised Feldstein »Revised FeldsteinRevised Feldstein☜In response to objections, Feldstein produced a revised version of his analysis with assumptions closer to those of his critics. He stands by the core claim of his first paper - that the Romney scheme of cutting rates funded by base broadening without burdening the middle class - is viable.☜FFFACD

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Link[1] A reply from Martin Feldstein

Author: Martin Feldstein
Publication info: 2 September 2012 - posted in Greg Mankiw's blog
Cited by: Peter Baldwin 5:10 AM 31 October 2012 GMT
Citerank: (3) 231239Figure is arbitrarySome have suggested the benchmark definition of 'high income' set by the TPC (and in the general political debate) is too high and have called for analysis where it is set at lower levels. For example Martin Feldstein has defended a $100,000 since this only subjects the top 21% to base broadening.13EF597B, 232170Elasticity too highIn his original paper Feldstein assumes that raising the after-tax share of earnings an individual keeps by 10% increases taxable income by 5% - the elasticity of the tax base is 0.5 - reducing the cost of rate reduction by $33 billion. Critics claim this elasticity is too high.1198CE71, 232171Revised FeldsteinIn response to objections, Feldstein produced a revised version of his analysis with assumptions closer to those of his critics. He stands by the core claim of his first paper - that the Romney scheme of cutting rates funded by base broadening without burdening the middle class - is viable.13EF597B
URL:

http://gregmankiw.blogspot.com.au/2012/09/a-reply-from-martin-feldstein.html

Excerpt / Summary

2) The behavioral response (reducing the cost of rate reduction by $33 billion) is too large because the elasticity of the tax base would be lower than the 0.5 I assumed.

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Entered by:- Peter Baldwin
NodeID: #232794
Node type: SupportiveArgument
Entry date (GMT): 10/31/2012 4:53:00 AM
Last edit date (GMT): 10/31/2012 7:17:00 PM
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