Thursday, March 17, 2011

Fun With Taxes

The WSJ bears tidings of a fancy new tax plan:
The chairman of the House Ways and Means Committee wants to cut the top U.S. tax rate to 25% for individuals and corporations, and cut or eliminate many popular deductions.

Tax experts said lowering tax rates to 25% might require Congress to find $2 trillion in new revenue over a decade if Mr. Camp wants to offset the entire cost, reflecting the magnitude of the rate changes. Aides said the rate reductions would be achieved by reducing or eliminating tax deductions and credits.

Aides didn't specify which ones would be targeted. The largest deductions include those for home-mortgage interest and state and local taxes, and the exclusion of employee health care from income. Big corporate breaks include accelerated depreciation deductions and a tax break for domestic production.

Tax reform done comprehensively is a good idea, but the article gives no indication whether it’s meant as a way to reduce everyone’s rates or just rich people’s. While economists aren’t huge fans of the home-mortgage deduction or the health insurance deductions, that pool of money doesn’t have to be exclusively devoted towards servicing the needs of the richest among us. (All of the rates must fall—but will people feel the effect anywhere near evenly? Here’s a reason to believe why not—from the NYT:

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