November 5, 2014

GOLDEN OPPORTUNITY:

A Growth Pact for America (Glenn Hubbard, 11/05/14, Project Syndicate)

The list of potential policy actions that could benefit the United States - trade liberalization, comprehensive regulatory reform, and immigration and education reform, among others - is long. But only two policies are particularly promising for such a "Pact for America": federal infrastructure spending and corporate-tax reform. Enactment of these reforms would generate a win for each side - and for both. [...]

Corporate-tax reform also offers a good opportunity for bipartisan agreement, especially given that Obama and congressional leaders of both parties have expressed interest. While gains from fundamental tax reform - say, replacing the current tax system with a broad-based consumption tax - are large, on the order of 0.5-1 percentage point per year of economic growth for a decade, corporate-tax reform would also boost growth.

Reducing the tax rate for companies substantially, while eliminating targeted business-tax preferences and broadening the corporate-tax base, would increase both investment and workers' wages. Allowing multinational companies to repatriate overseas profits without paying additional US tax would also bolster investment and job creation at home.

Given that recent research shows that much of the burden of corporate taxation is borne by workers in the form of lower wages, Democrats should embrace tax reform as a way to support income growth. One could add to such a reform further support for low-income Americans by increasing the Earned Income Tax Credit for single workers.

Posted by at November 5, 2014 5:20 PM
  

blog comments powered by Disqus
« WE CAN WIN THEIR BASE, THEY CAN'T WIN OURS: | Main | FAKE DISEASE: »