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The tax reform agenda

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  • Martin Feldstein

    (Harvard University)

Abstract

High tax rates that distort incentives and create large deadweight losses have been reduced, but there is still much more to be done to improve the tax system. It is useful to distinguish between tax rules that represent tax expenditures relative to a pure income tax from rules that represent tax expenditures relative to a consumption tax. I think it is important to focus on tax expenditures relative to a consumption tax base. It is possible that if there were no estate tax, the present value of the taxes paid by future heirs would exceed the revenue lost by abolishing the estate tax. On the corporate side, a shift to a territorial system of taxation would have very substantial favorable effects, while pass-through entities have a very weak case for a significantly lower tax rate. The net effect of such tax changes would be an increase in the budget deficit, though that increase is likely to be only temporary due to legislative rules. I am optimistic that there will be tax reforms enacted in the next twelve months holding great promise for improving our tax system and our economy.

Suggested Citation

  • Martin Feldstein, 2017. "The tax reform agenda," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(4), pages 208-215, October.
  • Handle: RePEc:pal:buseco:v:52:y:2017:i:4:d:10.1057_s11369-017-0056-y
    DOI: 10.1057/s11369-017-0056-y
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    References listed on IDEAS

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    1. repec:cbo:report:513612 is not listed on IDEAS
    2. repec:cbo:report:513613 is not listed on IDEAS
    3. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-572, June.
    4. Michael R. Strain, 2016. "The US Labor Market: Questions and Challenges for Public Policy," Books, American Enterprise Institute, number 903666, September.
    5. Congressional Budget Office, 2016. "The Distribution of Household Income and Federal Taxes, 2013," Reports 51361, Congressional Budget Office.
    6. Martin Feldstein & Daniel Feenberg & Maya MacGuineas, 2011. "Capping Individual Tax Expenditure Benefits," NBER Working Papers 16921, National Bureau of Economic Research, Inc.
    7. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-572, June.
    8. repec:cbo:report:513611 is not listed on IDEAS
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