Properly Analyzing Tax Policy – Where to Start the Debate

The next few weeks will include much debate about President Trump’s economic plans with a primary focus on tax cuts. The typical question will be: “So, is this good?” The typical answer by policymakers and economists will be either “yes” or “no.” That’s it. Interview over. This doesn’t come close to the bare minimum discussion that is required. Here is my offering of where to start the debate.

Q: Are tax cuts generally good?

A: It depends. For example, the U.S. corporate income tax rate is far out of line with what is considered competitive. All else equal, economic gains will arise as a tax rate migrates from being too high to being competitive. The gains will diminish beyond a certain point though. This can be analyzed. Picking an arbitrary rate goal is not good policy.

Op Ed continued here…