Details view: Figure is arbitrary

Figure is arbitrary OpposingArgument1 #231239 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.

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Visualizing the Romney Tax Debate »

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Romney's plan stated »

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But does it compute? »

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No - it does not compute »

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The TPC case »

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High income threshold »

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Figure is arbitrary

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A different plan »

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Most benefit low/middle »

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High income threshold »

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Link[1] How the Tax Policy Center could improve its Romney tax study

Author: Matt Jensen - American Enterprise Institute
Publication info: 9 August 2012
Cited by: Peter Baldwin 6:19 AM 18 October 2012 GMT
Citerank: (2) 231146, 232796
URL:

http://www.aei-ideas.org/2012/08/how-the-tax-policy-center-could-improve-their-romney-tax-study/

Excerpt / Summary

The second aspect of the report that could be modified is that TPC defines the rich just like the Democrats have chosen to do, with those earning more than $200,000 being called “high income” and those earning below that being called middle-class or poor. This arbitrary definition matters a lot to this analysis. If the definition of “high-income” were placed at, say $150,000 rather than $200,000 (which to me seems quite fair since both are many times my income), then the plan might appear to be a transfer from rich to poor rather than the other way around, or at least closer to neutral. In my dream report, it would be nice to see the break-even point for each of the different combinations of base-broadeners that TPC analyzes.

Link[2] A reply from Martin Feldstein

Author: Martin Feldstein
Publication info: 2 September 2012 - posted in Greg Mankiw's blog
Cited by: Peter Baldwin 5:44 AM 25 October 2012 GMT
Citerank: (3) 232170, 232171, 232794
URL:

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

Excerpt / Summary

The final objection is to my use of the $100,000 level to show that the middle class (i.e., those below $100,000 AGI) would experience no tax increases. The $100,000 level corresponds to 21 percent of all taxable returns and a significantly smaller fraction of all households. I think it is very reasonable to say that people in that high-income group are not the “middle class.” The TPC focus on those with AGI over $200,000 limits that group to the top 4 million taxpayers who are three percent of all returns and five percent of all taxable returns.

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